HQ 555695: Applicability of HTSUS subheading 9802.00.60 to saw chain created by stamping and shortening.Further processing; Intelex; C.S.D. 84-49

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 555695

                        October 15, 1990

CLA-2 CO:R:C:V  555695 KCC

CATEGORY:  CLASSIFICATION

TARIFF NO.:  9802.00.60

Mr. B.B. Nelson, Jr.
President
Nelson International, Inc.
201 E. City Hall Avenue, Suite 501
Norfolk, Virginia  23510

RE:  Applicability of HTSUS subheading 9802.00.60 to saw chain
     created by stamping and shortening.Further processing;
     Intelex; C.S.D. 84-49

Dear Mr. Nelson:

     This is in response to your letter dated June 4, 1990, to
the District Director, Norfolk, Virginia, on behalf of STIHL
Inc., requesting a ruling concerning the applicability of
subheading 9802.00.60, Harmonized Tariff Schedule of the United
States (HTSUS), to saw chains imported from Switzerland.  Your
request was forwarded to this office for a reply.  A sample of
the saw chain was submitted for examination.

     A memorandum dated June 29, 1990, from the Chief, National
Import Specialist Division, Branch 1, New York Seaport, was also
considered in connection with this ruling.

FACTS:

     STIHL will export U.S.-origin strip tool steel in coils to
Switzerland for foreign processing operations.  In Switzerland,
the strip tool steel will be loaded into a stamping machine to
create the Drive Link and Tie Strap 25 to 100 foot reels of saw
chain.  U.S.-origin steel will not be used in the production of
the remaining two parts of the saw chain--the cutters and rivets.

     The saw chain will be returned to the U.S. where it will be
sold to distributors, who will resell it to dealerships.  Each
dealership will shorten the saw chain according to their
customer's specifications by removing the rivet between the chain
links.





ISSUE:

     Whether the saw chain will be eligible for the partial duty
exemption available under subheading 9802.00.60, HTSUS, when
imported into the U.S.

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 subject 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 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 there is compliance with the
documentary requirements of section 10.9, Customs Regulations (19
CFR 10.9).

     Not all "processing" to which articles of metal can be
subjected are significant enough to qualify as "further
processing," within the purview of subheading 9802.00.60, HTSUS.
Intelex Systems, Inc. v. United States, 59 CCPA 138, C.A.D. 1055,
460 F.2d 1083 (1972), aff'd, 65 Cust.Ct. 306, C.D. 4093, 318
F.Supp. 515 (1970).  In Intelex (a case decided under paragraph
1615(g)(2) of the Tariff Act of 1930, as amended, the precursor
provision of item 806.30, Tariff Schedules of the United States
(TSUS), and HTSUS subheading 9802.00.60), copper wire and
insulating paper were foreign processed into lead-covered
telephone cable and imported on cable rolls.  The cable then was
merely strung on poles after a wire stripping and splicing
operation.  The issue presented was whether the imported
telephone cable was "returned to the U.S. for further
processing," within the meaning of paragraph 1615(g)(2)(B).  The
court considered the words "process" and "processing" and stated
that:

     ...its meaning [processing] must be controlled by the
     particular context in which it is used here and the
     legislative intent.  (Citation omitted).  When we look to
     the context of [paragraph] 1615(g)(2), we do not think that


     Congress had in mind that any and all kinds of 'processing'
     taking place upon return of an article to the United States
     would suffice to bring the article within the purview of
     that paragraph.  Instead, we believe that the words 'further
     processing' relate to the kind of processing to which the
     article had been subjected before--namely, 'a process of
     manufacture,' as expressed in [paragraph] 1615(g)(2)(A).  We
     continue of the view that Congress used the expression
     'subjected to a process of manufacture' as synonymous with
     'processing' (citation omitted), and that the 'further
     processing' referred to in [paragraph] 1615(g)(2) is a
     further manufacturing process.

The court stated that it did "...not think that processes to
which an already completed article were subjected, incident to
using it for the purpose intended, were necessarily part and
parcel of manufacturing processes performed on that article."
(Court's emphasis).  Therefore, finding no evidence that the
operations performed in the U.S. on the imported telephone cable
constituted a process of manufacture in any common or commercial
sense, the court determined that the partial duty exemption was
inapplicable to the imported cable.

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

     [f]or purposes of item 806.30, TSUS, 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.

     We are of the opinion that the domestic operation to be
performed on the returned saw chain does not constitute
"further processing" within the meaning of the statute, as the
saw chain imported is a completed article ready for its intended
use as saw chain.  In our opinion, taking the completed saw chain
from a large reel and shortening it by removal of the rivet
between chain links to conform to customers' specifications is
not a process of manufacture in any common or commercial sense,
but, rather, is performed incident to using the chain for the
purpose intended.  See, C.S.D. 84-49.  As the saw chain does not
satisfy the domestic "further processing" requirement of
subheading 9802.00.60, HTSUS, it is not entitled to the partial
duty exemption provided under this tariff provision.



HOLDING:

     On the basis of the information and sample submitted, we
conclude that the saw chain to be returned to the U.S. will not
be subjected to "further processing" in the U.S., as required by
subheading 9802.00.60, HTSUS, and, therefore, will not be
eligible for the partial duty exemption provided for under this
tariff provision.


                              Sincerely,




                              John Durant, Director
                              Commercial Rulings Division