CLA-2 OT:RR:CTF:TCM H006327 EMS
Greenberg Traurig, LLP
800 Connecticut Ave., NW
Suite 500
Washington, DC 20006
ATTN: Donald S. Stein, Esq.
RE: The tariff classification of stainless steel forgings for BI-Lok tube fittings
Dear Mr. Stein:
This letter is in response to your correspondence, received on December 28, 2006 by U.S. Customs and Border Protection in New York, in which you requested a binding ruling pertaining to the classification of certain stainless steel forgings under the Harmonized Tariff Schedule of the United States (HTSUS). Your correspondence was referred to this office for a response. You provided a supplemental submission on March 30, 2007, and offered additional facts and legal arguments at a meeting in our office on April 30, 2007. Our response follows.
FACTS:
The merchandise at issue consists of stainless steel forgings in the shape of elbows, crosses, and tees. The manufacture of the subject merchandise begins in Japan with austenitic stainless steel bars that conform to Japan Industrial Standard (JIS) G4303. This bar material (also known as "bar stock") is cut into proper lengths and heated in a machine identified as a "billet heater." After heating, the bar material undergoes plastic deformation in an "open die forge" machine. This machine compresses the bar material between impression dies. The bar material is placed in the cavity of the lower die, and the upper die hammers the bar material with an air-stamp hammer. The hammer compresses the bar material between the upper and lower dies into the shape of an elbow, cross, or tee that is surrounded by flash. Flash is "metal in excess of that required to completely fill the finishing impression of the dies." Forging Industry Association, Forging Handbook 279 (Thomas G. Byrer 1985).
The flash is subsequently removed from the forgings by a machine referred to as a "trimming press." In addition, the stamp of the "BI-Lok" name is completed on the front flat of the forgings during the trimming process. The trimmed forgings are annealed through a process of heating and cooling for the purpose of "restor[ing] the original properties of the bar material such as corrosion resistance and ductility" to the forging. The annealed forgings conform to certain mechanical properties for stainless steel per JIS SUS304. After annealing, the oxidized scale on the surface of the forgings is removed in a shot-blasting machine. A passivation film, which increases resistance to corrosion, is applied to the forgings through immersion in an acid solution.
Upon completion of the aforementioned processes, the forgings are imported into the United States, where Generant maintains the forgings in its inventory. The forgings will be pulled from the stocking shelf when Generant intends to produce a specific type of BI-Lok tube fitting. According to Generant, each forging is a "parent" for "several different products." For example, a certain tee-shaped parent may be machined into thirteen different BI-Lok tee-shaped fittings, including male, female, and union tees, all of which vary based upon the sizes and shapes of one or more of the ends of the fittings.
The products into which a parent may be machined are made to exact specifications for certain types of BI-Lok tube fittings, and thus the subsequent manufacturing processes in the United States depend upon the type of fitting. However, there are certain commonalities among all of the subsequent manufacturing processes. One or more of the ends of each fitting will be reduced to a specific diameter by a "turndown machine." All ends are then hardened to meet BI-Lok specifications in a "rolling machine." To achieve precise dimensions and remove the solid-cross section, the tube fittings undergo machining processes that include cutting threads and boring to create a flow path. Upon completion of these processes and other surface finishing processes, the fittings are cleaned and undergo passivation. When a customer order is received, the fittings are assembled with ferrules and nuts, and then packaged for retail sale.
With respect to the classification of the parent forgings, in their condition as
imported into the United States, the HTSUS provisions under consideration are as follows:
7218 Stainless steel in ingots or other primary forms; semi-finished products of stainless steel:
*****
Other:
*****
7218.99.00 Other
*****
7218.99.0090 Other
7307 Tube or pipe fittings (for example, couplings. elbows, sleeves), of
iron or steel:
*****
Other, of stainless steel:
*****
7307.22 Threaded elbows, bends and sleeves:
7307.22.1000 Sleeves (couplings)
7307.22.5000 Other
7307.23.0000 Butt welding fittings
7307.29.00 Other
7307.29.0030 Nipples
7307.29.0090 Other
ISSUE:
Whether the imported stainless steel forgings are classifiable as semi-finished products under heading 7218, HTSUS, or as blanks for pipe or tube fittings under heading 7307, HTSUS.
LAW AND ANALYSIS:
Under General Rule of Interpretation (GRI) 1, HTSUS, goods are to be classified according to the terms of the headings and any relative section or chapter notes, and provided the headings or notes do not require otherwise, according to GRIs 2 through 6.
It is Generant's position that, pursuant to GRI 1, the stainless steel forgings produced in Japan are classifiable under heading 7218 as "semi-finished products of stainless steel." Chapter 72, Note 1(ij), HTSUS, defines the term "semifinished products" as "[c]ontinuous cast products of solid section, whether or not subjected to primary hot-rolling; and other products of solid section, which have not been further worked than subjected to primary hot-rolling or roughly shaped by forging, including blanks for angles, shapes or sections. These products are not presented in coils."
Consistent with Note 1(ij), the subject merchandise is a product of solid section produced by forging between matrices in an open die forge. However, the Note also requires, in relevant part, that the subject merchandise "have not been further worked than ... roughly shaped by forging." Generant's position that the subject merchandise meets the definition of "roughly shaped by forging" is grounded in the language of the Harmonized Commodity Description and Coding System Explanatory Notes (ENs) to heading 7207, which apply mutatis mutandis to heading 7218. The ENs constitute the official interpretation of the HTSUS. While not legally binding, the ENs provide a commentary on the scope of each heading of the HTSUS and are thus useful in ascertaining the classification of merchandise under the Harmonized System. CBP believes the ENs should always be consulted. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (Aug. 23, 1989).
Subpart B of the ENs to heading 7207 defines "pieces roughly shaped by forging" as follows:
These are semi-finished products of rough appearance and large dimensional tolerances, produced from blocks or ingots by the action of power hammers or forging presses. They may take the form of crude recognisable shapes in order that the final article can be fabricated without excessive waste, but the heading covers only those pieces which require considerable further shaping in the forge, press, lathe, etc. The heading would, for example, cover an ingot roughly hammered into the shape of a flattened zig-zag and requiring further shaping to produce a marine crankshaft, but it would not cover a crankshaft forging ready for final machining. The heading similarly excludes drop forgings and pressings produced by forging between matrices since the articles produced by these operations are ready for final machining.
(emphasis in original). In Cummins Inc. v. United States, the Court of Appeals for the Federal Circuit (CAFC) addressed the plaintiff's contention that "[b]ased on this note ... the product ... require[d] considerable further shaping, and ha[d] therefore only been roughly shaped by forging." 454 F.3d 1361, 1365 (Fed. Cir. 2006). Despite the extent of the further shaping required to make the product suitable for retail sale, the CAFC found that the product was precluded from classification as a "semi-finished" product under heading 7224, to which the EN cited above also applied mutatis mutandis, because the product was "further worked" per Note 1(ij) to Chapter 72. Id.
The CAFC construed the term "further worked" when qualified by "than ... roughly shaped by forging" as meaning "to form, fashion, or shape an existing product to a greater extent." Id. In Cummins, the CAFC distinguished the act of forging from subsequent operations performed on the product, specifically the processes of trimming, coining, and milling. The CAFC specifically determined that "forging is a discrete process from the[se] additional steps" and that a product that is trimmed, coined, and milled is precluded from classification as a semi-finished product of other alloy steel under heading 7224. Id. Likewise, the subject merchandise in this case is not classifiable as a semi-finished product of stainless steel under heading 7218 if any of the subsequent operations performed after forging and prior to importation into the United States constitutes "further working" per Note 1(ij) to Chapter 72.
The subject merchandise undergoes trimming, shot blasting, and acid washing after forging in Japan. The trimming process described in your submission is consistent with the description of trimming set forth by the Court of International Trade (CIT) in its decision in Cummins v. United States, as affirmed by the CAFC.
"[t]rimming" removes flash - the excess material that comes out of dies in the forging process" ... "accomplished through cutting hot, malleable flash with a die," ... and that "before the article in question enters the trimming machine, it is in one shape. As a result of trimming[,] the flash [ ] comes out of the trimming machine a different shape.
Cummins Inc. v. United States, 377 F. Supp. 2d 1365, 1379 (Ct. Int'l Trade 2005) (citations omitted). The CIT concluded in Cummins that based on this description, the product was "further worked" as a result of the trimming process that formed and shaped it after forging. Id. Likewise, in the instant case, the forgings removed from the open die forge are formed and shaped after forging because the trimming press removes the flash. In addition, the completion of the stamping of the "BI-Lok" name on the front flat of the forging is also discrete from the forging process.
We note that even if the subject forgings require trimming in order to be commercially viable, this consideration would be no more persuasive here than it was before the CIT in Cummins. The CIT declined to ascribe a "commercial meaning ... in which trimming and coining are included within the umbrella (or penumbra) of the term 'forging.'" The CIT determined that no evidence suggested that this interpretation of "forging" was "universal" and that permitting such leeway in the Cummins case would "require the court to create an exception [to the general meaning of the phrase 'not further worked'] for its product." Id. at 1379-80. In no uncertain terms, the CIT concluded that "where the language does not mandate an exception, none will be permitted" and that the need for an exception was "clear evidence that its [Cummin's] imports do not fall under heading 7224, HTSUS." Id. at 1380.
The same rationale applies for the classification of the subject merchandise as "semi-finished products of stainless steel" under heading 7218, HTSUS. In Cummins, classification of the product under heading 7224, which covers "semi-finished products of other alloy steel," was precluded because the CIT declined to find an exception (on the basis of commercial viability) to the language of Note 1(ij) to Chapter 72. Id. The Note requires that "semifinished products" cannot be further worked ... than roughly shaped by forging." There is no evidence proffered for our review that would suggest that Generant's imported merchandise is not commercially viable unless trimmed. But, even if such evidence did exist, we would follow the CIT's reasoning in Cummins, thereby declining to create an exception for further worked products within the meaning of "semi-finished products" for the purposes of heading 7218 in this case.
In addition to our finding that the subject forgings are "further worked," we note that this merchandise is not otherwise "semi-finished" for purposes of heading 7218, HTSUS, because it is not "roughly shaped by forging" as required by Legal Note 1(ij) to Chapter 72. The interpretive criteria for "pieces roughly shaped by forging" are set forth in the ENs to heading 7207, which apply mutatis mutandis to heading 7218. The first criterion from EN 7207 requires that "pieces roughly shaped by forging" must be of "rough appearance." In HQ 088116, dated February 27, 1991, CBP explained that in terms of the EN to heading 7207, "rough appearance" means the following: the products are not rolled "exactly to size" or, in other words, are not rolled to cross-sectional or other dimensional tolerances required for flat-rolled products; the surfaces may be convex or concave; and the surfaces may have obvious roller marks or imperfections which require secondary hot-working to produce flat-rolled products. Applying this standard to forgings, the subject merchandise appears to have been forged and subsequently trimmed to specific dimensional tolerances required for the parent fitting. There are no obvious imperfections in the surface of the subject merchandise, given that it has undergone shot blasting and is covered in a passivation film. The fact that the BI-Lok brand name is stamped onto the forging prior to importation also suggests that the appearance is not "rough," because this stamp remains visible on the finished product even after processing in the United States.
The second criterion of EN 72.07 indicates that a semi-finished good must be of large dimensional tolerances. The information provided for our review does not demonstrate that the subject forgings are of large dimensional tolerances when imported into the United States. Table 2 of the original submission by Generant contains data that appears to indicate that the forgings are of fixed dimensions prior to undergoing any manufacturing processes in the United States. These fixed dimensions result from the shape of the matrices in which the forgings are formed. Dimensional variation that might be attributable to the presence of flash is eliminated prior to importation when the forgings are trimmed in a press. As a result of trimming, the shapes of the forgings are less rough than upon removal from the open die forge machine, and that shape closely approximates the shape of the finished fitting. Further, only the ends of the subject forgings undergo rolling, turning, and cutting in the United States. In their entirety, the forgings do not undergo additional further shaping on the forge or in a press after importation into the United States. In significant part, the forgings maintain their dimensions as of the time of importation through the production of the fitting for retail sale. We find no evidence of "large dimensional tolerances" for the imported forgings.
The third criterion of EN 72.07 indicates that a semi-finished good is "produced from block or ingots." The subject forgings are produced from austenitic stainless steel bar material that conforms to specific Japanese specifications. Bar is a steel product that is usually produced by the rolling or forging of semi-finished steel mill products commonly known as billets or blooms. When composed of stainless steel, these semi-finished products are classifiable in heading 7218. According to the ENs for heading 7214, HTSUS, which cover bar products, bar is a product with a more accurate and finished appearance than the blooms or billets from which it is made. The bar material (or stock) utilized by Generant as the first step in its manufacturing process appears to be distinguishable from block and ingots, which are primary forms of metals that are not considered semi-finished. See General Notes III and IV to Chapter 72, HTSUS. Based on the information provided by Generant, the subject forgings are not produced directly from block or ingots, but rather from a bar material that is cut to length and heated in a billet heater prior to the shaping of the forgings in the open die forge machine.
The fourth criterion of EN 72.07 indicates that a semi-finished product "may take the form of crude recognizable shapes in order that the final article can be fabricated without excessive waste, but the heading covers only those pieces which require considerable further shaping in the forge, press, lathe, etc." The further shaping of the merchandise that occurs subsequent to importation is not considerable in this case. The essential shapes of the fittings are forged from bar stock and then trimmed to more precise dimensions in Japan. Aside from boring the flow path, only one or more ends of the fitting are modified in the United States. The fact that the "BI-Lok" name is stamped into the forging prior to importation suggests that the processing in the United States is not considerable because this stamp remains visible on the finished fitting. In this regard, we note that in Cummins, where operations touched over 95 percent of the surface and resulted in the removal of up to one third of the material by thickness on some surfaces, the turning, milling, and drilling of the crankshaft were not found to be "considerable further shaping" by CBP. HQ 964019, dated December 13, 2000. In NY I89213, dated December 31, 2002, CBP classified forgings for pipe fittings under heading 7307 even though after importation the forgings were to be drilled, bored, machined, faced, chamfered and ground and threads were to be cut.
It is noteworthy that the subject merchandise is distinguishable from other goods that CBP has found to be classifiable as "semi-finished products of stainless steel" under heading 7218, HTSUS. For example, in NY I86054, dated September 27, 2002, CBP classified certain round extrusion billets of stainless steel under heading 7218, HTSUS. After importation, those extrusion billets were to be "cut to various short lengths, reheated, and extruded into a variety of tubular products, solid shapes, and structural profiles. Another example is NY G87410, dated March 14, 2001, in which stainless steel billets rough-forged from ingots were found to be classifiable under heading 7218, HTSUS. After importation, those billets were to be reheated and further forged. See also HQ 088116 (finding that "[s]emifinished products, such as sheet bar, are intended for further hot-working"). These previous decisions suggest that goods classified as semi-finished products of stainless steel in accordance with GRI 1 are those which will be subjected to significant reshaping in the United States and which are not destined to result in a specific type of finished article.
In contrast, the subject forgings are classifiable as incomplete or unfinished articles in accordance with GRI 2(a), HTSUS. Under GRI 2(a), "[a]ny reference to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article."1 EN (II) to GRI 2(a) further defines a "blank" as "an article, not ready for direct use, having the approximate shape or outline of the finished article or part, and which can only be used, other than in exceptional cases, for completion into the finished article or part." The EN establishes two criteria for articles that are "blanks" for GRI 2(a) purposes: approximate shape or outline and sole use for completion into the finished article or part. The EN instructs that irrespective of the degree of processing a good has undergone, its specific size and shape and dedication to use can dictate whether it has assumed the essential character of the article or part it will become after importation. Therefore, it is CBP's position that articles qualifying as "blanks" per se are said to possess the essential character of the complete or finished good. HQ 967908, dated January 24, 2006.2 This determination is made without regard to the cost and intricacy of the subsequent manufacturing in the United States.
The subject forgings satisfy the definition of a blank under EN (II) to GRI 2(a). They are not ready for direct use, given their solid cross-section and the absence of threading in their condition as imported. The forgings are incapable of performing the function of a tube fitting, i.e. "connecting the bores of two tubes together, or for connecting a tube to some other apparatus, or for closing the tube aperture." See ENs to Heading 7307, HTSUS. Contrary to Generant's position, this inability does not preclude the subject forgings from classification as a blank under GRI 2(a). The forgings have the approximate shape and outline of the finished tube fitting. Other than the ends, which will be sized and threaded in the United States, the size and shape of the forgings remains the same as between the time of importation and after subsequent manufacturing. There is no evidence to suggest that the forgings can be used for completion into anything other than a finished tube fitting. While parent forgings may be processed into different types of fittings based on the subsequent manufacture of its ends, all are nonetheless tube fittings. Tube fittings are classifiable in heading 7307, which covers: "[t]ube or pipe fittings (for example, couplings, elbows, sleeves), of iron or steel." Per GRI 2(a), this heading covers incomplete or unfinished tube fittings of stainless steel, including blanks thereof.
We note that the "lack of important performance requirements ... at importation is not deemed legally relevant" when determining whether a good constitutes a blank under GRI 2(a). See HQ 967908. CBP has previously held that certain goods were classifiable as blanks in heading 7307, HTSUS, even though the goods were incapable of performing their essential function in their condition as imported. For example, in HQ 962368, dated August 26, 1999, CBP examined whether unfinished ductile cast iron connectors were classifiable as blanks for tube or pipe fittings on the basis of GRI 2(a). Upon importation, "the fittings consist[ed] of cast metal couplings without threads, sealing rings, insulating nuts, lock nuts or cones." It was the protestant's position in that case that the absence of threads and the other components meant that the goods were substantially incomplete, not having the "essential shape of the finished articles." However, CBP determined that the goods were "readily recognizable as fittings and connectors of electrical conduit" and were "sufficiently complete in their most basic form to have the essential character of connectors for electrical conduit."
In HQ 732883, dated August 1,1990, the imported articles consisted of "unfinished malleable cast iron components of pipe fittings which as imported ha[d] no threading, beveled edges or other features beyond their rough shape. In their condition as imported the components [could] not be joined together to function as a pipe fitting." The pipe fittings at issue in that case were unions, the castings for which consisted of a nut, a head, and a tail between 1/4 and 3 inch diameter. CBP also noted that the "U.S. manufacturing process after importation ... is extensive.3 Despite post-importation machining operations, including boring and threading, CBP determined that the three-piece castings used to produce the unions constituted blanks within the meaning of GRI 2(a) because the castings for the unions had the approximate shape or outline of the finished unions. Accordingly in that case, CBP classified the goods under heading 7307, HTSUS.
CBP's decisions in HQ 967908 and HQ 732883 demonstrate that a blank classified pursuant to GRI 2(a) need not be able to perform its essential function in its condition as imported. Like the goods at issue in the those decisions, the subject forgings may be incapable of meeting the performance requirements of finished BI-Lok tube fittings, but they are nonetheless classifiable as blanks under GRI 2(a) because they have the approximate shape and outline of the finished fittings. Classification at the subheading level is controlled by GRI 6, which provides that the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related subheading notes and, mutatis mutandis, to GRIs 1 through 5, on the understanding that only subheadings at the same level are comparable.
In their condition as imported, the subject forgings do not meet the terms of the specific subheadings of heading 7307.22 (threaded elbows, bends and sleeves) or 7307.23 (butt welding fittings), HTSUS. These forgings are blanks for tube fittings, with ends that have not yet been machined. They are properly classifiable, in accordance with GRI 1, under subheading 7307.29, HTSUS, which provides for "Other" fittings.
HOLDING:
Under the authority of GRI 2(a), the imported forgings are provided for in heading 7307, HTSUS, as blanks for tube fittings. They are specifically classifiable in subheading 7307.29.0090, HTSUS, in accordance with GRIs 6 and 1, as other tube fittings of stainless steel because the solid cross-section at the time of importation is not indicative of the internal form of the finished fitting (i.e. threaded, butt welding, etc.). The 2007 column one, general rate of duty is 5 percent ad valorem.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the Internet at www.usits.gov/tata/hts/.
Sincerely,
Gail A. Hamill, Chief
Tariff Classification and Marking Branch
1 We note that EN (II) to GRI 2(a) explains that "[t]he provisions of this Rule also apply to blanks unless these are specified in a particular heading." Note 1(ij) to Chapter 72 indicates that semifinished products of stainless steel include blanks for angles, shapes, and sections. Angles, shapes, and sections are defined under Note 1(m) to Chapter 72, in relevant part, as "[p]roducts having a uniform solid cross section along their whole length." Consistent with this definition, the subject merchandise is not a blank for an angle, shape or section because, after importation into the United States, the solid cross-section will be removed so that it may properly function as a tube fitting through which liquid will flow.
2 In HQ 967908, CBP determined that the GRI 2(a) discussion of "blanks" at EN (II) to GRI 2(a), "provides an independent, objective criteria for determining whether an incomplete or unfinished good is to be classified as if complete or finished." CBP explained that "[i]f this were not the case, the 'blanks' language would be unnecessary and superfluous as the classification of articles having the approximate shape or outline of the finished good would in all cases be governed by the principal of essential character."
3 In HQ 723883, the cost and intricacy of the post-importation manufacturing processes were extensive. Cost data demonstrated that the processing done in the United States added between 216 percent and 910 percent in direct manufacturing costs to the cost of the imported castings, depending upon the size of the fitting. Also, the information provided indicated that "[t]o manufacture the union a multistation dial index boring and threading machine and a lathe are used. The inside diameter of the casting for the tail piece is bored, trued and threaded. Then the outside diameter of the tail piece is trued. The raised portion of the tail (the hub) is rounded and a groove created to accommodate a molded-on nylon gasket. The end of the tail piece is faced to create a flat surface at a right angle to the plane created by the machined inside diameter, and one end is beveled. The head piece is processed by boring, facing, threading and tapping. The nut is finished by boring and threading."
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