CLA-2 CO:R:C:M 089934 KCC
Richard C. King, Esq.
Fitch, King and Caffentzis
116 John Street
New York, NY 10038
RE: Gold pellets; 858976 reconsidered; GRI 1; Additional U.S.
Note 1(a) and (b) to Chapter 71; unwrought;
semimanufactured; continuous casting; McGraw-Hill
Encyclopedia of Science and Technology; Metals Handbook 8th
Edition
Dear Mr. King:
This is in response to your letter dated July 16, 1991, on
behalf of Heraeus Precious Metals Management, Inc., requesting
reconsideration of District Classification Ruling 858976 dated
January 11, 1991, concerning the tariff classification of gold
pellets under the Harmonized Tariff Schedule of the United States
(HTSUS). Additional letters to the National Import Specialist in
New York and this office dated September 5, October 7, 28,
November 7, and December 4, 1991, July 8, August 11, and 20,
1992, were also considered in rendering the following decision.
FACTS:
The gold pellets are manufactured according to International
Business Machines Corporation (IBM) specifications and are known
as part number 67F1910. The gold pellets are 99.999 percent
gold. They are cylindrical in shape and measure 1/2 of an inch
in length and 1/4 of an inch in diameter.
The manufacturing process begins by melting gold in a
graphite crucible. When additional gold is needed during the
casting process, gold pre-melted in another apparatus is added to
the graphite crucible. The molten gold flows from the crucible
into the die. To initiate the process, a starter rod is inserted
into the die and clamped between the rollers on the apparatus
where the molten gold solidifies around the threaded end of the
starter rod within the die. The starter rod is then withdrawn
from the die, in a series of alternating rotations of the pinch
rollers, which pulls the rod out by a small increment, stops and
then pulls it out again. Once the starter rod has cleared the
pinch rollers and the rollers have grasped the gold rod itself,
the starter rod is unscrewed and the machinery continues its
process until the gold has been exhausted. The gold is molten as
it leaves the crucible, solidifies within the die, and leaves the
die in its final form, a 1/4 inch diameter rod. The solidified
gold rod is then coiled for convenience in handling and is,
thereafter, cut to the required 1/2 inch length to produce the
pellets at issue.
The gold pellets are then imported into the U.S. where they
will be remelted and used by IBM in an industrial high vacuum
evaporation operation to coat electronic parts. According to the
person at IBM responsible for the design of the gold pellets, the
price of the gold pellets is based on the PM fix of gold on the
London Metal Exchange plus a fixed fabrication cost of twenty one
dollars and forty six cents ($21.46) per troy ounce.
Additionally, he stated that the gold pellets are in pellet form
and size to assure the uniform measurement of gold added to the
melting crucible for the vacuum evaporation operation, for
convenience in handling, and not because of any other
manufacturing requirement. He also stated that the shape of the
gold is not important. But after he took charge of the vacuum
evaporation operation, he found that it would be cheaper to use
the pellets because they cost less to produce than the disks
which were in use at that time.
District Classification Ruling 858976 dated January 11,
1991, held that the gold pellets are classified under subheading
7108.13.50, HTSUS, which provides for "Gold (including gold
plated with platinum) unwrought or in semimanufactured forms, or
in powder form...Nonmonetary...Other semimanufactured
forms...Other." 858976 stated that the continuous casting
process does not create an unwrought product because the
continuous casting is not a true casting process. 858976 found
that the movement of the molten gold material through the die is
more than casting; the continuous casting is similar to
extrusion. Therefore, the gold pellets were considered to be
"semimanufactured" products pursuant to Additional U.S. Note 1(b)
in Chapter 71, HTSUS.
You contend that the gold pellets are properly classified
under subheading 7108.12.10, HTSUS, as "Gold (including gold
plated with platinum) unwrought or in semimanufactured forms, or
in powder form...Nonmonetary...Other unwrought forms...Bullion
and dore." You argue that pursuant to Additional U.S. Note 1(a)
to Chapter 71, the gold pellets are properly defined as
"unwrought" and that the gold pellets are bullion as their form
and shape impart no value to them. Jarrell-Ash Co. v. United
States, 60 Cust. Ct. 65, C.D. 3261 (1968).
ISSUE:
Does the processing abroad cause the gold to be
semimanufactured or is the imported gold considered to be
bullion?
LAW AND ANALYSIS:
The classification of merchandise under the HTSUS is
governed by the General Rules of Interpretation (GRI's). GRI 1,
HTSUS, 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...."
The gold pellets are classified under heading 7108, HTSUS,
which provides for "Gold (including gold plated with platinum)
unwrought or in semimanufactured forms, or in powder
form...Nonmonetary." Classification to the six digit subheading
level is dependent upon whether the gold pellets are unwrought or
semimanufactured articles as defined in the chapter notes.
Additional U.S. Note 1 to Chapter 71, HTSUS, states that
"[f]or the purposes of subchapter II, unless the context
otherwise requires:
(a) The term "unwrought" refers to metals, whether or not
refined, in the form of ingots, blocks, lumps, billets,
cakes, slabs, pigs, cathodes, anodes, briquettes, cubes,
sticks, grains, sponge, pellets, 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;
(b) The term "semimanufactured" refers to wrought metal products
in the form of bars, rods, sections, plates, sheet, strips,
wire, tubes, pipes and hollow bars and to powder (other than
primary metals in powder form);....
The term "unwrought" defined in Additional U.S. Note 1(a) to
Chapter 71, HTSUS, refers to pellets and similar manufactured
primary forms, but does not cover "...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." McGraw-Hill Encyclopedia of Science and
Technology, Vol. 11, p. 24, states that metal casting is
generally described as "the introduction of molten metal into a
cavity or mold where, upon solidification, it becomes an object
whose shape is determined by the mold configuration. There are
two broad categories of metal-casting processes, ingot casting
which includes continuous casting and casting to shape. The
ingot casting is stated to make up the majority of all metal
castings. McGraw-Hill describes continuous casting as a process
where molten material is delivered to a permanent mold which has
a movable base mounted on a long piston. After solidification
has progressed from the mold surface so that a solid "skin" is
formed, the piston is moved down and more metal continues to fill
the reservoir of the mold. The process is continuous as the
solidified bar or strip is removed from the casting machine and
sheared or cut into lengths as rapidly as it is being cast. Id.
at 25.
Based on this information, we are of the opinion that the
gold pellets are manufactured by a continuous casting operation.
However, this continuous casting process also involves a cutting
operation separate from the casting operation. After the gold
rod is formed, it is coiled and removed from the casting machine.
Thereafter, the solidified gold rod is cut into 1/2 inch lengths.
This cutting operation excludes the pellets from classification
as unwrought gold. This type of cutting operation is not one of
the allowed process, "simple trimming, scalping or descaling",
which are associated with unwrought metal. Trimming in metal
casting is described as follows:
Trimming is used to remove gate and riser pads, chaplets,
wires, parting-line flash, or other appendages to the
casting that are not a part of its final dimensions.
Chipping hammers and grinders are used for these operations.
Metals Handbook 8th Edition, American Society for Metals (1970),
p. 179. In relation to metal casting, trimming does not include
cutting a continuous rod into specified shorter lengths pursuant
to a blueprint for a specific part number. The continuous cast
coiled gold rod at issue is cut into 1/2 inch lengths according
the IBM specifications in their blueprints for part number
67F1910. Additionally, IBM pays the value of the gold plus an
additional price of $21.46 per troy ounce to have the gold
manufactured into pellet form for use in its own manufacturing
processes. The continuous cast rod has been "...processed
otherwise than by simple trimming, scalping or descaling."
HOLDING:
The gold pellets are properly classified under subheading
7108.13.50, HTSUS, which provides for "Gold (including gold
plated with platinum) unwrought or in semimanufactured forms, or
in powder form...Nonmonetary...Other semimanufactured
forms...Other", dutiable at the rate of 8.2 percent ad valorem.
858976 is affirmed.
Sincerely,
John Durant, Director
Commercial Rulings Division