CLA–2 OT:RR:CTF:TCM H206081 AMM
Mr. John M. Gurley
Arent Fox, LLP
1050 Connecticut Ave. NW
Washington, DC 20036-5339
RE: Ruling Request; Classification of Titanium Scrap
Dear Mr. Gurley:
This is in response to your ruling request, dated January 11, 2012, filed on behalf of VSMPO-Tirus, U.S. (VSMPO-Tirus), regarding the classification of certain titanium scrap pieces imported from a Foreign Trade Zone (FTZ) under the Harmonized Tariff Schedule of the United States (HTSUS). In reaching our decision, Customs and Border Protection (CBP) has taken into consideration your original ruling request, a conference call held with representatives from CBP Headquarters on August 29, 2012, a supplemental submission dated September 18, 2012, and samples of the instant merchandise submitted for review.
FACTS:
On January 11, 2012, you filed a request for a binding ruling concerning the classification of certain titanium scrap pieces imported from an FTZ. The merchandise at issue results from trimming operations conducted in two FTZ locations; one in Ontario, Canada, and the other in Leetsdale, PA. VSMPO-Tirus uses saws to cut various wrought titanium products (such as plates, sheets, billets and bars) to size, to meet customer specifications. VSMPO-Tirus describes four categories of titanium left over from the cutting process: 1) Bulk: pieces greater than 5 lbs. and greater than 1/4” thick; 2) Feed Stock: pieces less than 5 lbs., but greater than 1/4” thick; 3) Clips: pieces less than 1/4” thick, no matter the weight; and 4) Saw Fines/Turnings: kerf loss generated as a result of saw cutting. The merchandise at issue is imported so that it may be melted down and reused for other manufacturing processes. It is not further processed before importation. It is ready for sale to remelters or scrap dealers.
VSMPO-Tirus submitted samples of Feed Stock, Clips, and Saw Fines for examination. The clip sample measured approximately 8 inches by 1.25 inches, with a thickness of 0.167 inches. One feedstock sample is rectangular, and measured 4 inches, by 3.5 inches, with a thickness of 0.25 inches. The other feedstock sample is cylindrical, with a diameter of 1.25 inches and a thickness of 0.75 inches. None of the pieces appear defective or damaged.
ISSUE:
Whether remnants and saw fines of titanium left over from the cutting process are classified as unwrought titanium of subheading 8108.20, HTSUS, waste and scrap of subheading 8108.30, HTSUS, or other titanium of subheading 8108.90, HTSUS.
LAW AND ANALYSIS:
Classification of goods under the HTSUS is governed by the General Rules of Interpretation (GRI). GRI 1 provides that classification shall be determined according to the terms of the headings of the tariff schedule and any relative section or chapter notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRI may then be applied.
The 2012 HTSUS provisions at issue are:
8108 Titanium and articles thereof, including waste and scrap:
8108.20.00 Unwrought titanium; powders
8108.30.00 Waste and scrap
8108.90 Other:
8108.90.60 Other
8108.90.60 31 Other bars, rods, profiles and wire
8108.90.60 45 Plates, sheets, strips and foil
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9817 Unwrought metal including remelt scrap ingot (except copper, lead, zinc and tungsten) in the form of pigs, ingots or billets (a) which are defective or damaged, or have been produced from melted down metal waste and scrap for convenience in handling and transportation without sweetening, alloying, fluxing or deliberate purifying, and (b) which cannot be commercially used without re-manufacture; relaying or rerolling rails; and articles of metal (except articles of lead, of zinc or of tungsten, and not including metal-bearing materials provided for in section VI, chapter 26 or subheading 8548.10 and not including unwrought metal provided for in chapters 72-81) to be used in remanufacture by melting or to be processed by shredding, shearing, compacting or similar processing which renders them fit only for the recovery of the metal content:
9817.00.90 Other
Note 8 to Section XV (which covers Chapter 81), HTSUS, states, in pertinent part:
In this section, the following expressions have the meanings hereby assigned to them:
(a) Waste and scrap
Metal waste and scrap from the manufacture or mechanical working of metals, and metal goods definitely not usable as such because of breakage, cutting-up, wear or other reasons.
* * *
Additional U.S. Note 1 to Section XV, HTSUS, states:
For the purposes of this section, the term “unwrought” refers to metal, whether or not refined, in the form of ingots, blocks, lumps, billets, cakes, slabs, pigs, cathodes, anodes, briquettes, cubes, sticks, grains, sponge, pellets, flattened pellets, rounds, rondelles, shot and similar manufactured primary forms, but does not cover rolled, forged, drawn or extruded products, tubular products or cast or sintered forms which have been machined or processed otherwise than by simple trimming, scalping or descaling.
Note 1 to Chapter 74, HTSUS, states, in pertinent part,
In this chapter the following expressions have the meanings hereby assigned to them:
* * *
(d) Bars and rods
Rolled, extruded, drawn or forged products, not in coils, which have a uniform solid cross section along their whole length in the shape of circles, ovals, rectangles (including squares), equilateral triangles or regular convex polygons (including “flattened circles” and “modified rectangles”, of which two opposite sides are convex arcs, the other two sides being straight, of equal length and parallel).
* * *
(e) Profiles
Rolled, extruded, drawn, forged or formed products, coiled or not, of a uniform cross section along their whole length, which do not conform to any of the definitions of bars, rods, wire, plates, sheets, strip, foil, tubes or pipes.
* * *
(g) Plates, sheets, strip and foil
Flat-surfaced products (other than the unwrought products of heading 7403), coiled or not, of solid rectangular (other than square) cross section with or without rounded corners (including "modified rectangles" of which two opposite sides are convex arcs, the other two sides being straight, of equal length and parallel) of a uniform thickness, which are:
- of rectangular (including square) shape with a thickness not exceeding one-tenth of the width[.]
* * *
Subheading Note 1 to Chapter 81 states, in pertinent part: “Note 1 to chapter 74, defining ‘bars and rods’, ‘profiles’, ‘wire’, and ‘plates, sheets, strip and foil’ applies, mutatis mutandis, to this chapter.”
U.S. Note 1 to Chapter 98, HTSUS, states: “The provisions of this chapter are not subject to the rule of relative specificity in general rule of interpretation 3(a). Any article which is described in any provision in this chapter is classifiable in said provision if the conditions and requirements thereof and of any applicable regulations are met.”
Statistical Note 1 to Subchapter XXII of Chapter 98 (which covers subheading 9817.00.90), HTSUS, states, in pertinent part:
For statistical reporting of merchandise under subheading[] … 9817.00.90 …:
(a) Report the 8-digit number (or 10-digit number, if any) found in this subchapter in addition to the 10-digit number appearing in chapters 1-97 which would be applicable but for the provisions of this subchapter; and
(b) The quantities reported should be in the units provided in chapters 1-97.
The Harmonized Commodity Description and Coding System Explanatory Notes (EN), constitute the official interpretation of the Harmonized System at the international level. While neither legally binding nor dispositive, the EN provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of the headings. It is CBP’s practice to consult, whenever possible, the terms of the ENs when interpreting the HTSUS. See T.D. 89–80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
The EN to heading 81.08 states, in pertinent part:
This heading covers titanium in all forms: in particular, sponge, ingots, powder, anodes, bars and rods, sheets and plates, waste and scrap, and products other than those articles covered by other Chapters of the Nomenclature (generally Section XVI or XVII), such as helicopter rotors, propeller blades, pumps or valves.
* * *
There is no dispute that the instant merchandise is properly classified under heading 8108, HTSUS, which provides for “Titanium and articles thereof, including waste and scrap”. Rather, the issue is the classification at the subheading level. As a result, GRI 6 applies.
GRI 6 states:
For legal purposes, 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 the above rules, on the understanding that only subheadings at the same level are comparable. For the purposes of this rule, the relative section, chapter and subchapter notes also apply, unless the context otherwise requires.
Until the year 2001, subheading 8108.10, HTSUS (2001) provided for “Titanium and articles thereof, including waste and scrap: Unwrought titanium; waste and scrap; powders”. Then, on December 18, 2001, Presidential Proclamation 7515 modified the HTSUS to conform it to changes made at the international level. See 66 Fed. Reg. 66549. Under this proclamation, subheading 8108.10, HTSUS (2001), was superseded, and replaced with subheadings 8108.20.00, HTSUS (2002) (which provides for “Titanium and articles thereof, including waste and scrap: Unwrought titanium; powders”), and 8108.30.00, HTSUS (2002) (which provides for “Titanium and articles thereof, including waste and scrap: Waste and scrap”). This change represents a clear indication that unwrought titanium is to be considered a separate commodity from waste and scrap. Articles classifiable under heading 8108, HTSUS, which are properly described by the term “unwrought,” as defined in Additional U.S. Note 1 to Section XV, HTSUS, cannot also be classified as “waste and scrap” under Note 8(a) to Section XV, HTSUS. Therefore, CBP must first consider whether the instant products satisfy the definition of “unwrought” in Additional U.S. Note 1 to Section XV, HTSUS.
In Headquarters Ruling Letter (HQ) H027436, dated April 16, 2009, CBP revoked HQ 966570, dated November 7, 2003, which considered the classification of titanium billets imported to be melted down for use in the manufacture of recreational equipment. CBP stated that “the term ‘unwrought’ is in no way tied to a particular manufacturing process (such as hot rolling or forging). Rather, it refers to a product at an intermediate stage of a manufacturing process.” See HQ H027436 (citing Anval Nyby Powder AB v United States, 927 F. Supp. 463, 471 (Ct. Int’l. Trade 1996)). Accordingly, CBP found that the titanium billets of HQ 966570 were classified under subheading 8108.20, HTSUS, as “unwrought” titanium because they had not been worked into a finished condition, even though they were forged. See HQ H027436.
The instant merchandise is generated during the cutting process of imported titanium material (slabs, sheets, bars, and billets) to size. Imported titanium material is cut to specific customer specifications. The remnants of the cutting process are captured, so that they can be remelted and reused for other purposes. The instant remnants are sold to scrap processors who will remelt the titanium scrap. Titanium plates and billets which are cut to the shapes and sizes required by the customer are considered a semi-manufactured product. See, e.g., HQ 967354, dated January 26, 2005. VSMPO-Tirus’ cutting process also results in the creation of a smaller remnant of the plate or billet. These remnants (the instant titanium bulk, feed stock, and clips) also exist in a semi-manufactured condition, in that no further working is to be done to them. Therefore, the instant merchandise cannot be considered “unwrought” within the definition given in Additional U.S. Note 1 to Section XV, HTSUS.
The term “waste and scrap” is defined, in pertinent part, as: “Metal waste and scrap from the manufacture or mechanical working of metals[.]” See Note 8(a) to Section XV, HTSUS. EN 81.08 does not provide a more detailed discussion of titanium waste and scrap. CBP also notes that the Court of International Trade (CIT) has previously stated that ““[i]t is not enough that an article be called a tariff term in the trade vernacular. There must be a showing that the article embodies the salient characteristics of the tariff term claimed.” Clipper Belt Lacer Co., Inc., v. United States, 14 CIT 146, 153 (Ct. Int’l. Trade 1990).
CBP has considered the classification of waste and scrap from the manufacture or mechanical working of titanium products which were found not to meet the relevant definition of “waste and scrap.” CBP found that titanium waste and scrap which had been subjected to further processing such that it became a new product was no longer considered waste and scrap. See HQ 964189. CBP has also found that “titanium scrap fines,” which are a byproduct of the titanium sponge manufacturing process, are a titanium sponge product in and of themselves, and thus could not be considered waste or scrap. See HQ 957139; HQ 956655; HQ 951469. Therefore, if the result of a manufacture or mechanical working operation is a product which has the “salient characteristics” of another tariff term, then it would not be considered waste or scrap. See Informed Compliance Publication “Waste & Scrap as it Relates to Base Metals of Chapter 81,” March 2010.
With regard to the feedstock product, one of the samples submitted by VSMPO-Tirus was a flat, rectangular piece of titanium, measuring approximately 4 inches, by 3.5 inches, with a thickness of 0.25 inches. This sample meets the definition of “plates, sheets, strip and foil” contained in the HTSUS, in that it is a flat-surfaced product of solid rectangular cross section of a uniform thickness, of rectangular shape with a thickness not exceeding one-tenth of the width. See Subheading Note 1 to Chapter 81, HTSUS, and Note 1(g) to Chapter 74, HTSUS. The other feedstock sample submitted was a cylindrical piece of titanium, with a diameter of 1.25 inches and a thickness of 0.75 inches. This sample meets the definition of “bars and rods” contained in the HTSUS, in that it is a rolled, extruded, drawn or forged product, not in a coil, with a uniform solid cross section along its whole length in the shape of a circle. See Subheading Note 1 to Chapter 81, HTSUS, and Note 1(d) to Chapter 74, HTSUS. Because the samples submitted for the feedstock product have the salient characteristics of another tariff term, they are not considered waste or scrap. Instead, the feedstock product is properly classified under subheading 8108.90.6031, HTSUSA (annotated), which provides for “Titanium and articles thereof, including waste and scrap: Other: Other: Other bars, rods, profiles and wire”, or under subheading 8108.90.6045, HTSUSA, which provides for “Titanium and articles thereof, including waste and scrap: Other: Other: Plates, sheets, strips, and foil”, depending on its shape.
With regard to the clip product, the sample submitted by VSMPO-Tirus was a flat, rectangular piece of titanium, measuring approximately approximately 8 inches by 1.25 inches, with a thickness of 0.167 inches. This sample does not meet the definition of “plates, sheets, strips, and foil”, because its thickness is more than one-tenth of its width. However, it does meet the definition of the term “profiles” contained in the HTSUS, in that it is a rolled, extruded, drawn, forged or formed product, of a uniform cross section along its whole length, which does not conform to any of the definitions of bars, rods, wire, plates, sheets, strip, foil, tubes or pipes. See Subheading Note 1 to Chapter 81, HTSUS, and Note 1(e) to Chapter 74, HTSUS. Because the sample submitted for the clip product has the salient characteristics of another tariff term, it is not considered waste or scrap. Instead, the clip product is properly classified under subheading 8108.90.6031, HTSUSA, which provides for “Titanium and articles thereof, including waste and scrap: Other: Other: Other bars, rods, profiles and wire”.
With regard to the bulk product, no sample was submitted. Therefore, CBP is unable to make a classification determination for this product.
Finally with regard to the saw fines/turnings product, VSMPO-Tirus submitted two bags of what appear to be metal shavings and filings. This product consists of the metal shards flung from the saw blade during a cutting operation. None of the aforementioned tariff terms (bars, rods, profiles, wire, plates, sheets, strip or foil) apply to this product, and they are produced from the mechanical working of metal. Therefore, the saw fines/turnings product meets the definition of “waste and scrap” contained in Note 8(a) to Section XV, HTSUS, and is properly classified under subheading 8108.30.00, HTSUS.
Subeading 9817.00.90, HTSUS, provides in pertinent part for “articles of metal (… not including unwrought metal provided for in chapters 72-81) to be used in remanufacture by melting or to be processed by shredding, shearing, compacting or similar processing which renders them fit only for the recovery of the metal content”. Because the instant merchandise is “a manufactured thing or product,” it is an “article” within the meaning of that term. See HQ 967354, dated January 26, 2005. As discussed above, the instant merchandise falls outside the definition of “unwrought.” Finally, VSMPO-Tirus alleges that the instant product is to be used in remanufacture by melting. Therefore, the instant merchandise is prima facie classifiable under subheading 9817.00.90, HTSUS. See U.S. Note 1 to Chapter 98, HTSUS.
Procedures for compliance with this subheading are specifically provided for in the Customs Regulations. See HQ 960800, dated November 17, 1998. Specifically, under 19 C.F.R. §54.6, merchandise meeting the above-identified provision of subheading 9817.00.90, HTSUS, shall be admitted duty-free subject to the following conditions, as applicable:
(1) In connection with the entry there shall be filed a statement of the importer that the intended use of the merchandise is one of the uses provided for in the subheading;
(2) A bond, as required in 19 CFR 54.6(b) and 113.62, is filed;
(3) Liquidation of the entry shall be suspended pending proof of use or other disposition of the merchandise within 3 years from the date of entry;
(4) Within 3 years from the date of entry, the importer shall submit to the director of the port of entry a statement from the superintendent or manager of the plant at which the articles were used in remanufacture by melting, or were processed by shredding, shearing, compacting, or similar processing showing the information listed in 19 CFR 54.6(c)(1) through (4).
(5) If satisfactory proof of use of the articles in remanufacture as required is furnished within 3 years from the date of entry, the entry shall be liquidated without duty on the covered articles; if not, the entry shall be liquidated without any exemption from duty under subheading 9817.00.90, HTSUS.
See HQ 960800; See also 19 C.F.R. §54.6.
HOLDING:
By application of GRI 1 and GRI 6, the Saw Fines/Turnings product is properly classified under heading 8108, HTSUS, specifically under subheading 8108.30.00, HTSUS, which provides for “Titanium and articles thereof, including waste and scrap: Waste and scrap”. The 2012 general, column one rate of duty is free.
By application of GRI 1 and GRI 6, the Feed Stock and Clip products are to be classified according to their size and shape. Product which meets the definition of “plates, sheets, strip, and foil” contained in Note 1(g) to Chapter 74, HTSUS, is properly classified under heading 8108, HTSUS, specifically under subheading 8108.90.6045, HTSUSA, which provides for “Titanium and articles thereof, including waste and scrap: Other: Other: Plates, sheets, strips, and foil”. Product which meets either the definition of “bars and rods” contained in Note 1(d) to Chapter 74, HTSUS, or the definition of “profiles” contained in Note 1(e) to Chapter 74, HTSUS, is properly classified under heading 8108, HTSUS, specifically under subheading 8108.90.6031, HTSUSA, which provides for “Titanium and articles thereof, including waste and scrap: Other: Other: Other bars, rods, profiles and wire.” The 2012 general, column one rate of duty is 15% ad valorem.
With regard to the Bulk product, a determination of the correct classification cannot be made at this time.
By operation of GRI 1 and U.S. Note 1 to Chapter 98, HTSUS, the instant merchandise is classifiable under heading 9817, specifically under subheading 9817.00.90, HTSUS, at the importer’s option. Should the importer choose to classify the instant merchandise under this subheading, it must comply with the requirements of 19 C.F.R. §54.6 and Statistical Note 1 to Subchapter XXII of Chapter 98, HTSUS, to qualify for duty-free treatment.
Duty rates are provided for your convenience, and are subject to change. A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Ieva O’Rourke, Chief
Tariff Classification and Marking Branch