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HQ 557828

August 2, 1994

CLA-2 CO:R:C:S 557828 MLR


TARIFF NO.: 9802.00.50

Mr. Michael Edwards, Sr.
Radix Group International, Inc.
4202 East Elwood Street
Phoenix, AZ 85040

RE: Applicability of HTSUS subheadings 9801.00.10, 9802.00.50 and 9802.00.60 to refined selenium; dissolving; filtering

Dear Mr. Edwards:

This is in reference to your letter of February 16, 1994, requesting a ruling regarding whether selenium ("Se") is considered a U.S. product after being refined in the Philippines, and whether it will qualify under the North American Free Trade Agreement (NAFTA) for preferential treatment when entering Mexico. The NAFTA issue will be addressed in a separate letter.


You state that Phelps Dodge mines Se in the U.S. {classifiable under subheading 2804.90.00, Harmonized Tariff Schedule of the United States (HTSUS)}. The Se is then sent to the Philippines where it is refined. The refinery process involves dissolving the Se in acid and filtering the impurities out of the product. You indicate that the Se leaves the U.S. at 97 percent purity and returns at 99.9 percent purity. The Se is then imported back into the U.S. The product will then be sold to another party who exports the Se into Mexico.


Whether the refined Se qualifies for free entry under subheading 9801.00.10, HTSUS, a partial duty exemption under subheadings 9802.00.50, or 9802.00.60, HTSUS, when returned to the U.S.


Chapter 98, Subchapter II, Note 2(a), HTSUS, provides that any product of the U.S. which is returned after having been advanced in value or improved in condition abroad by any process of manufacture or other means shall be treated as a foreign article and shall be dutiable unless exempted.

Subheading 9801.00.10, HTSUS, provides for the free entry of products of the United States that have been exported and returned without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, provided the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1), are met. See 59 Fed. Reg. 25563 (May 17, 1994), for recent amendments to 19 CFR 10.1 (copy enclosed). Some change in the condition of the product while it is abroad is permissible. However, operations which either advance the value or improve the condition of the exported product render it ineligible for duty-free treatment upon return to the United States. Border Brokerage Company, Inc. v. United States, 314 F. Supp. 788 (1970), appeal dismissed, 58 CCPA 165 (1970). It is clear that refining the Se abroad advances its value or improves its condition, thereby precluding its entry into the U.S. for the duty exemption available under this tariff provision.

Articles returned to the United States after having been exported to be advanced in value or improved in condition by repairs or alterations may qualify for the partial duty exemption under HTSUS subheading 9802.00.50, provided the foreign operation does not destroy the identity of the exported articles or create new or commercially different articles through a process of manufacture. See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956), aff'g C.D. 1752, 36 Cust. Ct. 46 (1956); Guardian Industries Corp. v. United States, 3 CIT 9 (1982). Accordingly, entitlement to this tariff treatment is precluded where the exported articles are incomplete for their intended purpose prior to the foreign processing. Guardian; Dolliff & Company, Inc. v. United States, 455 F.Supp. 618 (CIT 1978), aff'd, 599 F.2d 1015 (Fed. Cir. 1979). Articles entitled to this partial duty exemption are dutiable only upon the cost or value of the foreign repairs or alterations when returned to the United States, provided the documentary requirements of section 10.8, Customs Regulations (19 CFR 10.8), are satisfied. See 59 Fed. Reg. 25563 (May 17, 1994), for recent amendments to 19 CFR 10.8.

In Headquarters Ruling Letter (HRL) 082425 dated December 1, 1988, we considered whether refining U.S.-origin crude oil in Canada, and returning it to the U.S. in the form of gasoline was considered an alteration. It was held that the refining of crude oil was more than a mere alteration, since it involved a process which turned the crude oil into an entirely new and commercially different product. Furthermore, the crude oil was incomplete for its intended use and the processing was held to be a necessary step in the production of gasoline.

In regard to the Se, the Customs Office of Laboratories and Scientific Services informs us that there are four grades of Se: (1) a standard-grade which contains over 99.5 percent of Se, and which is adequate for chemical and metallurgical use; (2) a pigment-grade containing over 99.8 percent of Se; (3) an electronic-grade containing over 99.99 percent of Se; and (4) an ultrahigh purity grade containing over 99.999 percent of Se. The impurities present in Se powder greatly influence the final use of the merchandise. It, therefore, appears that the 99.9 percent grade of Se returned to the U.S. after being refined in the Philippines from 97 percent grade Se, has different chemical and physical properties that are important to the intended use of the product. Consequently, we find that the imported Se is a new and commercially different article of commerce which is the result of processing that exceeds the scope of an alteration, thereby precluding tariff treatment under subheading 9802.00.50, HTSUS.

Another tariff provision is subheading 9802.00.60, HTSUS, which 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.

U.S. Note 3(d), Subchapter II, Chapter 98, HTSUS, includes Se as a metal eligible for subheading 9802.00.60, HTSUS, treatment. However, 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 of the U.S., provided there is compliance with the documentary requirements of section 10.9, Customs Regulations (19 CFR 10.9). See 59 Fed. Reg. 25563 (May 17, 1994), for recent amendments to 19 CFR 10.9. Since your ruling request does not mention any "further processing" operations to be performed in the U.S. after the refined Se is returned from the Philippines, it will not be eligible for subheading 9802.00.60, HTSUS. Consequently, the Se will be dutiable upon its full value when it is returned to the U.S.


On the basis of the information provided, it is our opinion that refining Se in the Philippines is beyond the scope of an alteration. Therefore, the duty exemption or partial duty allowances under subheadings 9801.00.10, and 9802.00.50, HTSUS, are inapplicable. Furthermore, the Se also does not qualify for subheading 9802.00.60, HTSUS, treatment because the Se is not further processed in the U.S. Consequently, the refined Se will be dutiable upon its full value when it is returned to the U.S.


John Durant, Director

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