CLA-2 CO:R:C:S 555817 KCC
Mr. Octavio Saavedra
Corrigan Dispatch Company
Box 3610
1350 Cheers Boulevard
Brownsville, Texas 78523-3610
RE: Foreign and domestic scrap metal subjected to a shredding
process in the U.S. and then shipped to Mexico for
sorting.19 CFR 10.12(e); substantial transformation
Dear Mr. Saavedra:
This is in response to your letter dated November 14, 1990,
to the District Director, Laredo, Texas, on behalf of Newell
International Inc., requesting a ruling concerning the
applicability of subheading 9801.00.10, Harmonized Tariff
Schedule of the United States (HTSUS), to scrap metal imported
from Mexico. Your request was forwarded to this office for the
preparation of a response.
FACTS:
Newell International Inc. intends to purchase old crushed
scrap cars and other miscellaneous metal items from junk and
salvage yards in the U.S. In the U.S., these metal items of
domestic- and foreign-origin are put in a high power shredding
machine to reduce the size of the pieces. The mixed shredded
scrap metal is then shipped to Mexico where it will be separated
into different piles by type of metal, such as copper, aluminum,
zinc, etc. Once a full trailer load of one type of metal is
accumulated, it will be imported into the U.S.
ISSUE:
Whether the scrap metal will qualify for the duty exemption
available under subheading 9801.00.10, HTSUS, when imported into
the U.S.
LAW AND ANALYSIS:
Subheading 9801.00.10, HTSUS, provides for duty-free entry
of U.S. products that are exported and returned without having
been advanced in value or improved in condition by any process of
manufacture or other means while abroad. Articles satisfying the
above conditions of the statute will be afforded duty-free
treatment, provided the documentary requirements of section 10.1,
Customs Regulations (19 CFR 10.1), are met.
According to section 10.12(e), Customs Regulations (19 CFR
10.12(e)), a "product of the United States" is an article
manufactured within the customs territory of the U.S. and may
consist wholly of U.S. components or materials, of U.S. and
foreign components or materials, or wholly of foreign components
or materials. If the article consists wholly or partially of
foreign components or materials, the U.S. manufacturing process
must be such that the foreign components or materials are
substantially transformed into a new and different article, or
are merged into a new and different article.
A substantial transformation occurs when, as a result of
manufacturing processes, a new and different article emerges,
having a distinctive name, character, or use, which is different
from that originally possessed by the article or material before
being subjected to the manufacturing process. See, Anheuser-
Busch Association v. United States, 207 U.S. 556 (1908), and
section 10.14(b), Customs Regulations (19 CFR 10.14(b)).
We have held that foreign-origin scrap subjected to
processes such as dismantling, shredding, and crushing, whether
or not accompanied by sorting, grading, or other similar
activities to promote the stability or utility of the scrap, was
not subjected to a process of manufacture in the U.S. so as to
make it an eligible article of metal for purposes of subheading
9802.00.60, HTSUS. See, Headquarters Ruling Letter (HRL) 554750
dated September 23, 1988, and HRL 555557 dated April 15, 1991.
We are of the opinion that shredding the scrap metal does
not result in a substantial transformation of the foreign-
origin metal into a "product of the U.S." The metal does not
undergo a name change during the shredding operation. Scrap
metal exists before and after the shredding operation.
Additionally, the character and use of the metal has not changed.
The shredding operation merely reduces the scrap metal from large
pieces into smaller pieces. Therefore, as the exported shredded
scrap consists of both U.S.- and foreign- origin metal, the
sorted scrap metal will not be entitled to duty-free treatment
under subheading 9801.00.10, HTSUS, when imported into the U.S.
HOLDING:
The foreign scrap metal is not substantially transformed
into a "product of the U.S." by the U.S. shredding process. As
the mixed foreign and domestic shredded scrap metal is not
totally a U.S. product, it is not eligible for duty-free
treatment under subheading 9801.00.10, HTSUS.
Sincerely,
John Durant, Director
Commercial Rulings Division