CLA-2 CO:R:C:M 088161 JMH
Chief, Customs Information Exchange
U.S. Customs Service
Room 450
6 World Trade Center
New York City, NY 10048-0945
RE: Difference of opinion; ferrous scrap and waste; chapter 72;
chapter 98; Customs Regulation 54; merchandise processing
fees; unconditional duty free status; conditional duty free
status; 9817.00.90; 7204.00
Dear Madam or Sir:
This is in response to a October 24, 1990 request for the
resolution of a difference of opinion between the National Import
Specialist ("NIS") at the New York Seaport and the Field Import
Specialist ("FNIS") in the Detroit District. The difference of
opinion concerns ferrous scrap and whether it is properly
classified in heading 7204, Harmonized Tariff Schedule of the
United States Annotated ("HTSUSA") or subheading 9817.00.90,
HTSUSA.
FACTS:
The NIS at the New York Seaport and the FNIS in Detroit
disagree on the classification of certain ferrous scrap. Ferrous
iron or steel scrap is classifiable under heading 7204, HTSUSA,
as "Ferrous waste and scrap; remelting scrap ingots of iron or
steel..." This heading provides for unconditional duty free
entry. However, scrap entered under this heading is subject to
Merchandise Processing Fees. Additionally, ferrous scrap is also
classifiable in subheading 9817.00.90 which provides conditional
duty free entry. Metal scrap classified under subheading
9817.00.90 is not subject to Merchandise Processing Fees. See
Headquarters Telex 01018, dated March 5, 1990.
The FNIS in Detroit believes that articles which are
classified under heading 7204 should not also be classified under
subheading 9817.00.90. The FNIS believes that articles cannot be
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both unconditionally duty free and conditionally duty free.
Thus, the FNIS's opinion is that such articles are entitled to
duty free entry, but must also pay the Merchandise Processing
Fee.
The NIS's position is that the ferrous waste and scrap
classified under heading 7204 is also classified under subheading
9817.00.90. Chapter 98, U.S. Note 1, HTSUSA, states that any
article described in a provision of Chapter 98 is classified in
that provision if all the applicable conditions and requirements
are fulfilled. The NIS believes that when a good is
classifiable in both heading 7204 and subheading 9817.00.90, the
Chapter 98 provision is controlling. Thus, ferrous scrap is not
subject to Merchandise Processing Fees.
ISSUE:
Whether ferrous scrap that is properly classified under
heading 7204 and unconditionally duty free but subject to
Merchandise Processing Fees, may also be classified under
subheading 9817.00.90 and conditionally duty free and ultimately
not subject to Merchandise Processing Fees.
LAW AND ANALYSIS:
The HTSUSA consists of 99 chapters. The first 97 chapters
form the international portion of the tariff that is utilized by
all countries which have adopted the tariff. Chapters 98 and 99
of the HTSUSA are United States chapters which have been added to
the international portion by Congress. Any item that is imported
into the United States will receive a classification from within
the first 97 chapters. Chapters 98 and 99 provide an additional
classification that subjects the article to special treatment.
The classification of merchandise under the HTSUSA is
governed by the General Rules of Interpretation (GRI's). GRI 1,
HTSUSA, states in part that "for legal purposes, classification
shall be determined according to the terms of the headings and
any relative section or chapter notes..." Articles which meet
the terms of heading 7204 and are not excluded by any Section XV
or chapter 72 notes are classified in heading 7204. This is the
international classification.
However, if an article is described by a provision of
chapter 98 and all applicable requirements are met, then the
chapter 98 provision and its duty rate prevail over the
classification and tariff rate from the international portion of
the tariff. See Chapter 98, U.S. Note 1. The chapter 98
provision would then be the ultimate classification for purposes
of importation into the United States.
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Before an article can be classified in subheading 9817.00.90
a three part test must be met: (1) the terms of the heading
must be met in accordance with GRI 1; (2) the goods must not be
excluded by a Chapter 98 subchapter note; and (3) the goods must
meet the conditions set out under Customs Regulation 54. The
terms of subheading 9817.00.90 describe three different types of
goods. These types are as follows:
(1) 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 remanufacture
(2) relaying or rerolling rails
(3) articles of metal (except articles of lead, or
zinc or of tungsten, and not including metal-
bearing materials provided for in section VI or in
chapter 26 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.
If the article being imported meets the terms of one of the
three parts to subheading 9817.00.90, then the article passes the
first test concerning duty free entry in subheading 9817.00.90.
The second part of the test which must be met for an article
to be eligible for duty free entry under subheading 9817.00.90 is
that the article cannot be excluded from that subheading under
the chapter 98 notes and subchapter notes. Subheading 9817.00.90
is within chapter 98, subchapter XVII, HTSUSA. The chapter 98
notes and subchapter XVII notes do not exclude articles from
classification under subheading 9817.00.90. Therefore, if an
article has met the terms of the subheading 9817.00.90, then the
possibility continues that the article will receive special
treatment.
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The final part of the eligibility test is that the
conditions of Customs Regulation 54 must be met. Customs
Regulation 54 gives temporary duty free status under 9817.00.90
to certain metal articles that are imported for use in
remanufacturing by melting, or for processing by shredding,
shearing, compacting or some other similar processing that
renders the metal only fit for recovering the metal content.
This regulation excludes three types of articles: (1) articles
of lead, zinc, or tungsten; (2) metal-bearing materials provided
for in Chapter 26, HTSUSA; and (3) unwrought metal provided for
in Section XV, HTSUSA. Since the duty free status granted by
9817.00.90 is conditioned upon compliance with Customs Regulation
54, and these three categories of articles are excluded from
Customs Regulation 54, then the three types of goods will never
obtain duty free eligibility under 9817.00.90.
Therefore, if an article meets the terms of subheading
9817.00.90 and the conditions and requirements of Customs
Regulation 54, then the article is properly classified under
subheading 9817.00.90. This is the classification even when the
article in question, in this instance ferrous scrap, is also
classified under heading 7204. Chapter 98, Note 1 states that
the provisions of chapter 98 prevail over a provision from the
international portion of the tariff. Thus, ferrous scrap which
is unconditionally duty free but subject to Merchandise
Processing Fees under the international portion of the tariff,
may be conditionally duty free and not subject to the fees under
the United States chapters.
HOLDING:
Chapter 98, Note 1 requires that when an article is
described by a provision in chapter 98, it is to be classified in
that provision as long as all conditions and requirements are
fulfilled. A three part test must be met for an article to be
classified in subheading 9817.00.90. The three steps in the test
are: (1) the terms of the heading must be met in accordance with
GRI 1; (2) the goods must not be excluded by a Chapter 98
subchapter note; and (3) the goods must meet the conditions set
out under Customs Regulation 54. If a good fulfills all three
parts of this test, then it is properly classified in subheading
9817.00.90. Subheading 9817.00.90 will take precedence over a
heading from the international portion of the tariff when the
article is imported into the United States.
Ferrous scrap is classified in the international portion of
the HTSUSA under heading 7204. Heading 7204 provides for
unconditional duty free entry, but the scrap is subject to
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Merchandise Processing Fees. If ferrous scrap meets the terms
of subheading 9817.00.90 and the requirements of Customs
Regulation 54 then it is conditionally duty free and not subject
to the fees under the United States chapters.
Sincerely,
John Durant, Director
Commercial Rulings Division
cc: Director, Detroit District
Director, New York Seaport Area