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HQ 555322

December 7, 1989

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


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

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.


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.


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.


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 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." Headquarters Ruling Letters 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. Headquarters Ruling Letters 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.

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.


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