HQ 555322: Applicability of partial duty exemption under HTSUS subhead- ing 9802.00.60 to certain high performance race car parts processed in Mexico.Intelex Systems, Inc. (1972);anodizing; impregnation;555105; C.S.D. 79-290;554359;071147;094102; 555103;054271;067328;071396

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 555322

                        December 7, 1989
                  (abstracted as C.S.D. 90-16)

CLA-2 CO:R:C:V 555322 GRV

CATEGORY:  CLASSIFICATION

TARIFF NO.:  9802.00.60

Irving W. Smith, Esq.
George R. Tuttle, P.C.
1331 Pennsylvania Avenue, N.W., Suite 1200F
Washington, D.C.  20004

RE:  Applicability of partial duty exemption under HTSUS subhead-
     ing 9802.00.60 to certain high performance race car parts
     processed in Mexico.Intelex Systems, Inc. (1972);anodizing;
     impregnation;555105; C.S.D. 79-290;554359;071147;094102;
     555103;054271;067328;071396

Dear Mr. Smith:

      This is in response to your letter of March 2, 1989, on
behalf of Winters Performance Products, Inc., requesting a ruling
on the applicability of subheading 9802.00.60, Harmonized Tariff
Schedule of the United States (HTSUS), to certain high perform-
ance race car parts to be imported from Mexico following
processing.

FACTS:

     You state that U.S.-manufactured aluminum/magnesium
castings and steel barstock will be exported to Mexico for
processing into high performance parts, e.g., calipers, for
racing cars.  The castings will be heat treated by the foundry
before they are exported.  The steel barstock will be exported in
10-12 and 20-22 foot lengths.  In Mexico, the castings will have
any flashings removed and they will be machined to very fine
tolerances on lathes, milling and drilling machines.  The
barstock will be sawed to appropriate part length, turned by
lathe operations, and hobbed by gear cutting equipment.  The
articles will then be exported to the U.S.

     Upon return to the U.S., the castings will be subjected to
a process referred to as "impregnation," which serves to seal the
pores in the castings, thus making them leakproof.  The castings
will then have holes drilled in them, after which they will be
burnished with steel ball bearings to impart a high polish to
them.  In addition, some of the castings will be anodized.  The
barstock will be further heat treated to relieve stress (process
annealed), straightened by a final precision grinding, and
anodized to add color, a protective finish and to inhibit
corrosion.

     Regarding the "impregnation" process, you state that it is a
production method used for sealing parts which operate at
elevated temperatures from 465-1,000 degrees fahrenheit.  The
porous castings are loaded into a basket which is submerged in a
vacuum chamber charged with a liquid resin sealing material.  The
chamber is sealed and the air drawn off to create a vacuum.  When
the chamber is returned to ambient pressure, the resultant
increased air pressure forces the resin into the porosity of the
castings, thus sealing the parts.  A rinse cycle follows the
impregnation process to remove excess resin from the parts.  A
catalyst activator solution is then applied to the castings to
cure the sealant at the surface of each part, and a final rinse
removes excess activator from the parts.

ISSUE:

     Whether the high performance race car parts will be
eligible for the partial duty exemption available under HTSUS
subheading 9802.00.60 when returned to 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
     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 articles of metal--one foreign, and when
returned, one domestic.  However, not all "processing" taking
place upon return of an article to the U.S. suffice to bring the
article within the purview of HTSUS subheading 9802.00.60.
Intelex Systems, Inc. v. United States, 59 CCPA 138, C.A.D. 1055,
460 F.2d 1083 (1972), aff'g, 65 Cust.Ct. 306, C.D. 4093, 318
F.Supp. 515 (1970).  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., upon compliance with section 10.9, Customs Regulations (19
CFR 10.9).

     In this case, the foreign operations performed on the
aluminum/magnesium castings are flash removal, grinding and
drilling, while the operations performed on the steel and
aluminum barstock are sawing to length, turning, and hobbing by
gear cutting equipment.  We have previously ruled that grinding
and metal cutting steps, e.g., "flash removal," and other steps
that impact the metal itself constitute "further processing"
within the ambit of the statute.  See, Headquarters Ruling Letter
(HRL) 555105 (October 31, 1988).  We have also held that hole
drilling operations that constitute a significant process meet
the requirements of further processing under HTSUS subheading
9802.00.60.  See, C.S.D. 79-290, 13 Cust.Bull. 1424 (1979).
Accordingly, the castings and barstock are found to be subjected
to "further processing" abroad for purposes of HTSUS subheading
9802.00.60.

     When the metal articles are imported into the U.S., the
castings are subjected to "impregnation," hole drilling and
burnishing, and some are anodized; the barstock is subjected to
heat treating, straightening and anodizing operations.  We have
previously ruled that anodizing--an electrically-induced process
that imparts a corrosion-resistant oxide coating on certain
metals that is a permanent and integral part of the original base
metal--constitutes a "further processing."  HRL 554359 (December
5, 1986), 071147 (January 31, 1983) and 094102 (June 2, 1966).
Thus, inasmuch as the anodizing step is common to the barstock
and some of the castings, these articles of metal are found to be
subjected to "further processing" in the U.S.

     Regarding the barstock articles, we have also ruled that a
heat treating process denominated "Solution (water) Quench,
Annealed," which consisted of reheating and water quenching
stainless steel bars and wire rod to relieve rolling stresses,
constituted a "further processing" within the meaning of HTSUS
subheading 9802.00.60.  Headquarters Ruling Letter 555103
(February 2, 1989).

     Regarding the "impregnation" process performed on the
castings, we understand that this step is essentially a coating
process which seals the pores in the castings.  We have previ-
ously held that surface coating or painting, standing alone,
does not constitute a "further processing" for purposes of HTSUS
subheading 9802.00.60.  HRLs 054271 (January 6, 1978), 067328
(June 30, 1981), and 071396 (July 19, 1983).  Accordingly, we do
not believe the "impregnation" process performed on the
castings, standing alone, constitutes a "further processing."
However, in conjunction with the anodizing and hole drilling
operations, we find that the U.S. processing to which the
castings are subjected satisfy the domestic "further processing"
requirement.
HOLDING:

     On the basis of the information submitted, the high perform-
ance race car parts to be imported are subjected to sufficient
"further processing" operations both abroad and on return to the
U.S. to be eligible for the partial duty exemption available
under HTSUS subheading 9802.00.60, upon compliance with the
documentary requirements of 19 CFR 10.9.

                              Sincerely,





                              John Durant, Director
                              Commercial Rulings Division