CON-9-04/9-12-CO:R:C:E DH
John S. Rode, Esq.
Rode & Qualey
295 Madison Avenue
New York, N.Y. 10017
RE: Temporary importation under bond (TIB) for processing of
uranium hexafluoride; Temporary importation under bond for
containers for compressed gases; Subheading 9813.00.05, HTSUS;
Subheading 9813.00.45, HTSUS; Application of antidumping duties
to TIB entries; Utilization of FIFO accounting method for
commingled fungible merchandise to cancel the TIB
Dear Mr. Rode:
This is in response to your letter of September 10, 1992,
regarding the application of: subheading 9813.00.05, of the
Harmonized Tariff Schedule of the United States (HTSUS), to
uranium hexafluoride imported for processing in the U.S.;
subheading 9813.00.45, HTSUS, to containers used to import this
merchandise; the application of dumping duties to the bond
covering the temporary importations and the FIFO procedures to
satisfy the TIB exportation requirement.
FACTS:
The Nuclear Division of Siemens Power Corporation (importer)
has in the past imported, as a consumption entry, uranium
hexafluoride for conversion into uranium oxide nuclear fuel
pellets. The pellets are exported to the importer's foreign
affiliate for fabrication into fuel assemblies and delivery to
the customer abroad.
On June 3, 1992, the Department of Commerce published a
preliminary determination of sales at less than fair value for
uranium from Kazakhstan, et al., 57 Fed. Reg. 23380, et seq..
This finding will affect the importation of uranium hexafluoride
from several customers of the importer. Therefore, as a means of
avoiding the deposit of cash to cover the estimated dumping
margins from these customers, you request, on behalf of the
importer, treatment under the TIB provisions.
You have provided the following explanation of the
procedures for retaining inventory and processing the uranium
hexafluoride. Cylinders, each containing approximately 1500 kg.
of uranium hexafluoride in the form of a compressed gas are
imported and delivered to be processed in accordance with the
terms of the Nuclear Regulatory Commission License Number SNM-
1227, to the Richland, Washington, facility. The receipt,
storage, and processing of the uranium hexafluoride, the
intermediate materials produced during the processing of the
hexafluoride and the finished uranium oxide in pellet form, are
strictly controlled to comply with the requirements of the
Nuclear Regulatory Commission.
Upon arrival of the imported uranium hexafluoride, the
uranium hexafluoride is inspected, the cylinder weights and
serial numbers as well as the enrichment levels of the uranium
hexafluoride are verified and compared with the shipping
documents and the results are recorded on DOE/NRC Form 741 and
filed with the NRC. The cylinders are stored until time of
processing.
The uranium hexafluoride is changed into its final form by a
wet "ADU" process, in which the uranium hexafluoride is contacted
with water to form uranyl fluoride, reacted with ammonium
hydroxide to produce ammonium diuranate (ADU) crystals,
centrifuged, dried to remove liquids, and calcinated in an
hydrogen-nitrogen-steam atmosphere to convert the ADU solids to
uranium oxide in the form of a dry powder.
Following the calcination operation, the uranium oxide
powder produced from the imported uranium hexafluoride gas is
blended with approximately 20% uranium oxide from the importer's
working stock. The uranium oxide powder drawn from the working
stock is fungible with the uranium oxide powder derived from the
imported uranium hexafluoride with which it is blended,
particularly with respect to the level of enrichment. The
blending operation results in the commingling of the import-
based uranium oxide with the uranium oxide from the client's
working stock.
After blending, the uranium oxide powder is milled to the
requisite granulation and transferred to a powder storage
facility, from which the powder is withdrawn for pressing into
pellets, and sintering. After sintering, the pellets are ground
to precise outside diameter, inspected, and packaged for shipment
to the importer's foreign affiliate.
The addition of the uranium oxide powder from the importer's
working stock prior to the production of the uranium oxide
pellets is necessary to ensure that the total number of pellets,
which meet the requisite specifications at the conclusion of the
manufacturing operations of the batch, is sufficient to account
for the total quantity of uranium, at the same level of
enrichment, that was contained in the cylinder of uranium
hexafluoride supplied by that customer, as well as, to provide
for any loss which might occur during processing the uranium
oxide powder into pellets, the transportation from the U.S. and
processing at the importer's foreign affiliate. The residue from
cleaning the cylinders and the uranium from the damaged pellets
will be returned to the working stock and therefore, not
exported.
ISSUES:
Whether the imported uranium fluoride and the processing it
undergoes in the U.S. qualify for temporary importation under
subheading 9813.00.05, HTSUS?
Whether the imported cylinders qualify for temporary
importation under subheading 9813.00.45, HTSUS?
Are antidumping duties charged to the bond covering
merchandise entered under a TIB?
Can the TIBs be cancelled on a First-In-First-Out (FIFO)
basis upon exportation of the finished product when a portion of
the finished product is manufactured from commingled merchandise?
LAW AND ANALYSIS:
All merchandise imported into the United States is subject
to duty unless specifically exempted therefrom. Subheading
9813.00.05, HTSUS, provides for duty-free entry, under bond, for
merchandise imported into the United States for a temporary
period for the purpose of repair, alteration, or processing. The
latter may include processing that transforms an article into one
that is considered manufactured or produced in the United States.
The provision requires that the imported merchandise be exported
or destroyed within one year of the date of importation. This
period may be extended for one or more periods which, when added
to the initial one year, do not exceed a total of three years.
In order to qualify for this duty-free treatment, merchandise
cannot be imported for the purpose of sale (or sale on approval).
From the extensive description of the operation, there is no
doubt that the uranium hexafluoride is manufactured, in the U.S.,
into a new and different article of commerce (the uranium oxide
pellets) as required for TIB treatment. Additionally, an outline
has been provided of the inventory system and accounting system,
employed by the importer, for each cylinder and its contents from
the time of importation, through processing, to exportation.
Specific documentation of these matters is an essential
requirement of qualifying for TIB treatment. As stated in U.S.
Note 2(b) of Subchapter XIII (Chapter XIII, HTSUS). Any
processing that amounts to a manufacture or production of
articles must include an accounting for all articles, wastes, or
irrecoverable losses resulting from the processing. All such
articles and valuable wastes shall be exported or destroyed under
Customs supervision within the bond period; alternatively, duties
may be paid on valuable wastes at the rate applicable to such
wastes at the time of importation of the entered merchandise.
Additionally, you have inquired about the application of
subheading 9813.00.45, HTSUS, to the cylinders used to import the
uranium hexafluoride gas to the U.S. This section provides for
the temporary importation under bond for containers for
compressed gases, filled or empty, and containers or other
articles in use for covering or holding merchandise ... during
transportation and suitable for reuse for that purpose.
The cylinders will be used to transport the uranium
hexafluoride gas to the importer's facility in the U.S. Once the
gas is emptied, the container will be cleaned, prepared for re-
use for future transportation of compressed gases and exported to
the foreign owner. Upon compliance with all other required
provisions, found in 19 CFR 10.31-10.40, temporary importation
would be permitted under subheading 9813.00.45, HTSUS.
In addition to qualification for TIB entry, you have raised
the question, as to whether or not the uranium hexafluoride in
question can be imported without payment of the applicable
antidumping duties.
Antidumping duties are to be charged against the TIB bond
and do not have to be deposited at the time of entry. This is so
because TIB entries are not considered consumption entries for
TIB purposes (see HRL 223491, dated March 30, 1992). The bond
requirements and the basis of computation of the amount of a
temporary importation bond may be found in section 10.31(f) of
the Customs Regulations (19 CFR 10.31(f)) and sections 141.90 and
141.103 of the Customs Regulations (19 CFR 141.90 and 19 CFR
141.103).
Finally, you have requested to cancel the bonds filed for
the uranium hexafluoride contained in each cylinder on a FIFO
basis since a portion of the finished uranium oxide fuel pellets
to be exported will be processed from blending uranium oxide
powder derived from the imported uranium hexafluoride from the
imported cylinder and fungible uranium oxide powder from the
working stock. Under this procedure, the working stock will be
accounted for last.
The Customs Service has interpreted the temporary
importation under bond provisions as usually requiring direct
identification of each particular article to show timely
exportation. However, the Customs Service has granted exceptions
to the policy of requiring direct identification of each
individual article covered by a TIB entry when direct
identification of the imported merchandise was inconceivable
because the physical identity of the imported merchandise and the
ability to directly account for the imported merchandise was lost
due to commingling. The FIFO method has been employed by the
Customs service as an one such exception. (See C.S.D. 84-12,
where raw sugar was imported under item 864.05, TSUS (presently
subheading 9813.00.05, HTSUS), commingled with fungible imported
and domestic raw sugar, under FIFO procedures, refined and
exported within the TIB period and U.S.D.A. regulations. See
also C.S.D. 86-16, where TIBs were permitted to be cancelled on a
FIFO basis when fungible merchandise entered for consumption and
merchandise entered under a TIB, under item 864.05 TSUS
(presently subheading 9813.00.05, HTSUS), were commingled and
sufficient merchandise was maintained in the commingled
merchandise to cancel all outstanding TIBs.)
Under the present circumstances, uranium oxide powder is
manufactured with all of the imported uranium hexaflouride. The
imported uranium oxide powder is blended with an extra 20% of the
uranium oxide powder from the working stock preventing any means
of physically distinguishing between the two products. The
ability to account for the imported product, however, still
exists. An accurate accounting of the ownership and contents of
each imported cylinder is kept throughout the production of the
imported product. Only after the damaged pellets (which may be
few or none) are removed from the pellets to be exported is there
any uncertainty as to the amount of imported uranium which is to
be exported. The imported uranium and the exported uranium,
therefore, may be directly identified, preventing the application
of any other accounting method.
The uranium contained in the damaged pellets which remain in
the U.S. may prevent the utilization of the duty-free entry under
the temporary importation provisions unless this uranium is
characterized as valuable waste, the importer provides an
accounting and duty is paid on the valuable waste, at the rate
applicable at the time of importation. See U.S. Note 2(b) of
Subchapter XIII.
The characterization of material resulting from the
manufacture of a product as either waste or a by-product, for TIB
purposes, has been discussed in detail in C.S.D. 83-5, C.S.D. 84-
40, C.S.D. 79-419, C.S.D. 82-109 and C.S.D. 81-224. In C.S.D.
83-5, we adopted the consideration of several elements used to
determine the existence of a by-product or waste for drawback
purposes. These elements are:
1. The nature of the material of which the residue is
composed.
2. The value of the residue as compared to the value of
the principal product and the raw material.
3. The use to which it is put.
4. Its status under the tariff law, if imported.
5. Whether it is a commodity recognized in commerce.
6. Whether it must be subjected to some process to make
it saleable.
The nature of the rejected pellets differs from the good
pellets in that they are no longer suitable for its original
purpose (to be used in fuel assemblies). The damaged pellets
retain only a scrap value and retain no commercially marketable
value. No further processing is required to make them scrap,
however, additional processing is necessary to make them useful
as working stock. The identity, characteristics, and
classification differ. We are satisfied that the rejected
pellets are valuable waste within the intendment of Note 2(b) of
Subchapter XIII.
HOLDING:
The operation in question, as applied to the imported
uranium hexafluoride, qualifies as "processing" under subheading
9813.00.05, HTSUS, and therefore, can be entered under the TIB
procedures. The importer must meet all of the accountability
requirements under the U.S. Notes of Subchapter XIII to the
satisfaction of the District Director.
Entry is, additionally, permitted under the TIB procedures
for the cylinders, under 9813.00.45, HTSUS.
The entries of the uranium hexafluoride under the TIB
procedures which are subject to the antidumping duty are not
considered consumption entries. In the case of such TIB entries,
the TIB bond should be set in an amount to take into account the
antidumping duty in order to protect the revenue.
Finally, the bond for the temporary importations may only be
cancelled upon an accounting of all the pellets derived from the
processing and the valuable waste resulting from the processing
and the payment of the appropriate duties for the valuable waste.
Sincerely,
John Durant, Director