CON-9-04-CO:R:C:E 224283 AJS
Mr. Matthew Chang
Assistant Vice President
ITOCHU International Inc.
335 Madison Avenue
New York, NY 10017
RE: Steel coils; Temporary importation bond; silicon electrical
steel; Subchapter XIII, U.S. Note 1(a); 19 CFR 10.31 - 10.40; 19
CFR 141.90; 19 CFR 141.103; Subchapter XIII, U.S. Note 1(c); 19
CFR 10.39(d)(1); Subchapter XIII, U.S. Note 2(b); Subheading
7204.30.00; "waste and scrap"; Section XV, note 6(a).
Dear Mr. Chang:
This is reply to your letter of November 6, 1992, requesting
a ruling on the transportation of silicon electrical steel
products through the United States in bond.
FACTS:
The merchandise at issue is flat-rolled alloyed steel coils,
also known as "master coils", of a width of 40 inches, and of
silicon electrical steel. The country of origin of the steel is
Japan. You propose to import the steel under a temporary
importation bond (TIB) and perform a slitting operation on the
steel which trims the width of the steel to 10 or 12 inches, and
also cut the edges to certain tolerances. The slitting operation
will be performed in the United States by an unrelated third
party. ITOCHU will retain ownership while the coils are in the
United States. Upon completion of the slitting operation, the
coils will be recoiled and exported to Canada where they will be
used as steel cores in transformers. No further processing of
the coils will take place in Canada. As a result of the slitting
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operation, a scrap component estimated to range from 2.2% - 5.0%
of the total weight will be produced. This scrap will not be
returned to ITOCHU, but disposed of, used or sold by the
processor.
ISSUE:
Whether the subject steel coils qualify for treatment as
articles admitted temporarily free of duty, under bond, within
subheading 9813.00.05, Harmonized Tariff Schedule of the United
States (HTSUS).
LAW AND ANALYSIS:
All merchandise imported into the United States is subject
to duty unless specifically exempted therefrom. General Note 1,
HTSUS. Subheading 9813.00.05, HTSUS, pro- vides for temporary
duty-free entry, under bond, for merchandise imported into the
United States 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. Subchapter XIII, U.S. Note 2(b). This
provision requires that the imported merchandise be exported or
destroyed within one year of the date of importation. Subchapter
XIII, U.S. Note 2(b). This period may be extended for one or
more further periods which, when added to the initial one year,
do not exceed a total of three years. Subchapter XIII, U.S. Note
1(a). In order to qualify for this duty-free treatment,
merchandise cannot be imported for the purpose of sale or sale of
approval. Subchapter XIII, U.S. note 1(a).
In this instance, the subject coils will be imported through
the Port of Philadelphia. While in the United States the coils
will be trimmed to reduce their width, and the edges cut to
certain tolerances so that they are more readily adaptable as
cores for transformers. After this operation, they will be
exported to Canada and used as steel cores in transformers. This
type of operation would appear to be a processing within the
meaning of subheading 9813.00.05, HTSUS.
The applicable Customs regulations for TIBs may be found at
19 CFR 10.31 through 10.40. Section 10.31(f) states that a bond
shall be given on Customs Form 301 in an amount equal to double
the duties which it is estimated would accrue (or such larger
amount as the district director shall state in writing to the
entrant is necessary to protect the revenue)
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had all the articles covered by the entry been entered under an
ordinary consumption entry. The basis for the computation of the
amount of a TIB is estimated duties determined in accordance with
sections 141.90 and 141.103 of the Customs Regulations (19 CFR
141.90 and 19 CFR 141.103). To this amount is added any other
duties that the district director ascertains may become due on
the articles so entered and, as well, estimated expenses of
reimbursable supervision such as may arise, for instance, when
the articles are not properly marked.
Heading 7225, HTSUS, provides for flat-rolled products of
other alloy steel, of a width of 600mm (i.e, approximately 24
inches) or more. The subject steel satisfies the terms of this
heading. It is flat rolled alloyed steel with a width of 40
inches. More specifically the subject steel is described within
subheading 7225.10.00, HTSUS, which provides eo nomine for
silicon electrical steel. Accordingly, the subject steel is
classifiable within this subheading.
The shipment to Canada of an article entered into the United
States under heading 9813.00.05, HTSUS, shall not constitute an
exportation, unless the article is a drawback eligible good under
section 204(a) of the United States-Canada Free-Trade Agreement
Implementation Act of 1988. Subchapter XIII, U.S. Note 1(c).
The subject coils will be shipped to Canada and entered into the
United States under the above heading. Therefore, this shipment
cannot constitute an "exportation" pursuant to this note. If
this shipment is not an exportation, then the coils are not
eligible for treatment under heading 9813.00.05, HTSUS, inasmuch
as they cannot be considered exported to Canada. A failure to
export or destroy the coils would result in a breach of the TIB,
and a demand under the bond for the payment of liquidated
damages. 19 CFR 10.39(d)(1). As an alternative to the TIB
procedure, the coils could be entered under a consumption entry
and subject to duty within subheading 7225.10.00, HTSUS.
However, the above provision shall apply to shipments on or
after January 1, 1994 (or, if later, the date proclaimed by the
President under section 204(b)(2)(B) of such Act). Subchapter
XIII, U.S. Note 1(c). You ask whether this only applies to coils
imported under a TIB after 12/31/93, or only for coils shipped to
Canada after that date. In our view, this paragraph will apply
to coils shipped to Canada on or after 1/01/94. If the coils are
imported into the United States before 1/01/94 but shipped to
Canada on or after this date, the above provision will apply.
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Subchapter XIII, U.S. Note 2(b) provides that merchandise
may be admitted into the United States under heading 9813.00.05,
HTSUS, only on condition that if any processing of such
merchandise results in an article (other than an article
described in (a) of this U.S. note) manufactured or produced in
the United States:
(i) a complete accounting will be made to the Customs
Service for all articles, wastes and irrecoverable losses
resulting from such processing; and
(ii) all articles and valuable wastes resulting from such
processing will be exported or destroyed under Customs
supervision within the bonded period; except that in lieu of the
exportation or destruction of valuable wastes, duties may be
tendered on such wastes at rates of duties in effect for such
wastes at the time of importation.
In this case, the processing of the subject steel coils
results in an article produced in the United States (i.e, steel
cores for transformers). Consequently, a complete accounting
must be made to Customs for the waste resulting from the
operation performed in the United States.
Your letter asks under what subheading will any waste and
scrap created by the slitting operation be classified.
Subheading 7204.30.00, HTSUS, provides for "other" waste and
scrap of alloy steel. As stated beforehand, the steel at issue
is alloy steel. The terms "waste and scrap" refer to 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. Section XV, note
6(a). Any waste or scrap produced by the slitting operation
which satisfies this description would properly be classifiable
within this subheading. Steel from Japan classifiable within
subheading 7204.30.00, HTSUS, is free of duty. Therefore, no
duties are required to be tendered for any steel waste or scrap
produced in the slitting operation.
HOLDING:
Entry of the steel coils is permitted temporarily free of
duty, under bond, within subheading 9813.00.05, HTSUS, which
provides for articles to be repaired, altered or processed. The
importer must meet all the accountability requirements under the
U.S. Notes of Subchapter XIII to the satisfaction of the District
Director.
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The steel coils are classifiable within subheading
7225.10.00, HTSUS, which provides for flat-rolled products of
alloy steel, of silicon electrical steel of widths of 600 mm or
more, currently dutiable at the General Column 1 rates of 5.8
percent ad valorem.
Sincerely,
John Durant, Director