HQ 556421: Applicability of partial duty exemption under HTSUS subheadings 9802.00.50 and 9802.00.60 to certain components of oil field equipment from Mexico

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 556421

                         March 19, 1992

CLA-2  CO:R:C:S 5556421 RAH

CATEGORY:  Classification

TARIFF NO.:  9802.0050; 9802.00.60

Mr. Philip Freeman
Cain Customs Brokers, Inc.
421 Texano
P.O. Box 150
Hidalgo, Texas  78557

RE:  Applicability of partial duty exemption under HTSUS
     subheadings 9802.00.50 and 9802.00.60 to certain components
     of oil field equipment from Mexico

Dear Mr. Freeman:

     This is in response to your letter of November 20, 1991,
requesting a ruling on the eligibility of certain components of
oil field equipment from Mexico for a partial duty exemption
under subheading 9802.00.50 or 9802.00.60, Harmonized Tariff
Schedule of the United States (HTSUS).

FACTS:

     You state that your client plans to begin importing from
Mexico several types of components of oil field equipment to be
used in packers, bridge plugs, and other down-hole equipment.  

     The products in question are made from steel tubing, bars,
or rods which are manufactured in the United States and exported
to Mexico for processing.

     The processing procedures performed in Mexico on these
various steel components include: shaping and/or cutting to
length on lathe or saw; heat treating; drilling holes; deburring
machined pieces on the grinder; marking pieces with order and
item numbers; slotting machined pieces (milling operation);
drilling and tapping machined pieces (milling operation); dry-
holing pieces (an operation similar to sandblasting) to texture
the threads and to remove thread burrs.   
                             - 2 -

     You specifically seek a ruling on the applicability of
subheading 9802.00.50 or 9802.00.60, HTSUS, to the following
components of oil field equipment processed from United States
steel:

1.   Mandrel 12 N 4527
2.   Snap Ring P 702417
3.   Cap 70 U 5705
4.   Element Mandrel 12 P 70235
5.   Core Service Tool 40 G 379
6.   Core Service Tool Assembly 40 G 370
7.   Collet Wedge 12 P 70233
8.   Collet Wedge 12 P 5926
9.   Support Ring 12 P 5923
10.  Support Ring 12 P 70232 Components of PLS Packer
11.  Spring Housing 12 P 70312
12.  Spring Housing 12 P 5976
13.  Wedge 12 P 70254
14.  Inner Sleeve 70 U 5706 Subsurface Assembly
   
ISSUE:

     Whether the above described components qualify for the
partial duty exemption available under subheading 9802.00.50 or
9802.00.60, HTSUS, when returned to the United States. 
 
LAW AND ANALYSIS:

     HTSUS subheading 9802.00.60 provides a partial duty
exemption for:

     [a]ny article of metal (as defined in U.S. note 3(d) of this
     subchapter) manufactured in the United States or
     subjected to a process of manufacture in the United
     States, if exported for further processing, and if the
     exported article as processed outside the United
     States, or the article which results from the
     processing outside the United States, is returned to
     the United States for further processing.

     This tariff provision imposes a dual "further processing"
requirement on eligible U.S. articles of metal; one foreign, and
when returned, one domestic.  Metal articles satisfying these
statutory requirements may be classified under this tariff
provision with duty only on the value of such processing
performed outside the U.S., provided the documentary requirements
of section 10.9, Customs Regulations (19 CFR 10.9), are met.
                             - 3 -

     In C.S.D, 84-49, 18 Cust. Bull. 957 (1983) we stated that:

     [f]or purposes of item 806.30, TSUS [the predecessor
     tariff provision to HTSUS subheading 9802.00.60], the
     term 'further processing' has reference to processing
     that changes the shape of the metal or imparts new and
     different characteristics which become an integral part
     of the metal itself and which did not exist in the
     metal before processing; thus, further processing
     includes machining, grinding, drilling, threading,
     punching, forming, plating, and the like, but does not
     include painting or the mere assembly of finished parts
     by bolting, welding, etc.
     
     In the instant case, only one of the fourteen items in
question satisfies the dual "further processing" requirement of
subheading 9802.00.60, HTSUS.  First, the operations performed in
Mexico to item one (Mandrel 12 N 4527) include shaping the cut
pieces of steel tubing according to specifications on the lathe,
drilling holes in the pieces and deburring with the grinder. 
These procedures clearly constitute "further processing" as
enumerated in C.S.D. 84-89, supra at 963.  Secondly, the mandrels
are returned to the United States for chromium plating. 
Electroplating with nickel, brass or chrome is an operation
sufficient to comply with the "further processing" requirements. 
Headquarters Ruling Letters (HRL) 553860 dated October 22, 1985,
and 556080 dated August 27, 1991. 

     With regard to items two through fourteen, we find that only
the first part of the dual "further processing" requirement is
satisfied.  The processing performed in Mexico on those items
comprises "further processing" steps which are specifically
outlined in C.S.D. 84-49, supra.  This processing is performed on
unfinished goods (steel tubing cut to length and/or heat treated
in the United States) which leads to completed oil field
equipment (mandrels, snap rings, caps, core service tools, collet
wedges, support rings, spring housing and inner sleeve). 
Nevertheless, the partial duty exemption under subheading
9802.00.60 is not afforded to those items because the second part
of the dual "further processing" criteria is not met.  The record
reflects that no "further processing" of items two through
fourteen is performed upon their return to the United States from
Mexico. 

     You also inquire regarding the applicability of subheading
9802.00.50, HTSUS, to the items in question.  That subheading
provides a partial duty exemption for articles returned to the
U.S. after having been exported to be advanced or improved in
condition by means of repairs or alterations.  Such articles are
dutiable only upon the value of the foreign repairs or altera-
tions, provided the documentary requirements of section 10.8,
Customs Regulations (19 CFR 10.8), are satisfied.  However,








                             - 4 -

entitlement to this tariff treatment is precluded in circum-
stances where the operations performed abroad destroy the
identity of the articles or create new or commercially different
articles.  See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D.
631 (1956); Guardian Industries Corp. v. United States, 3 CIT 9
(1982).  Tariff treatment under subheading 9802.00.50, HTSUS, is
also precluded where the exported articles are incomplete for
their intended use prior to the foreign processing.  Guardian;
Dolliff & Company, Inc. v. United States, 81 Cust. Ct. 1, C.D.
4755, 455 F. Supp. 618 (1978), aff'd, 66 CCPA 77, C.A.D. 1225,
82, 599 F.2d 1015, 119 (1979).

     In applying the above criteria to this case, we conclude
that the exported steel components (steel tubing rods and bars
cut to length and/or heat treated) are not "completed articles"
since they were clearly unsuitable for, and, in fact, incapable
of their intended use in the United States as various types of
oil field equipment for use in packers, bridge plugs and other
down-hole equipment.  Accordingly, none of the fourteen items is 
eligible for the partial duty exemption under subheading
9802.00.50, HTSUS, when returned to the United States. 
 
HOLDING:

     Item one is entitled to the partial duty exemption available
under subheading 9802.00.60, HTSUS, when returned to the United
States, upon compliance with the documentation requirements of 19
CFR 10.9.  Items two through fourteen do not qualify for sub-
heading 9802.00.60, HTSUS, treatment as they are not subjected to
"further processing" when returned to the United States. 
Moreover, none of the items is entitled to the partial duty
exemption under subheading 9802.00.50, HTSUS, as the exported
steel components are incomplete for their intended use.

                                   Sincerely,

     
                                   John Durant, Director
                                   Commercial Rulings Division