CON-9-04-CO:R:C:E
Mr. Paul Kay
Ostermann & Scheiwe USA Inc.
P.O. Box 669
Spanaway, Washington 98387
Dear Mr. Kay:
This is in reference to your letter dated April 14, 1993,
concerning the possibility of entering lumber temporarily under
bond.
FACTS:
Your company imports rough green or rough dry lumber from
Canada and remanufactures the wood. You use higher grades of
Hemlock, Lodgepole Pine, or Cedar. Some of the remanufactured
wood is sold domestically and some is exported. You pay
countervailing duty on all the Canadian lumber.
The wood is put through the following processes:
Step one-
Depending on size it could go to a resaw to change or reduce
size horizontally.
Step two-
Material resawn in step one has Kiln or dryer sticks put
cross ways or 90 degrees to the lumber length in order to
permit hot air circulation while it goes through the dry
kiln. (If the lumber comes in dry it starts through the
plant at the same place as lumber coming out of the dry
kilns and continues through the plant remanufacturing
process.)
Step three-
Dry lumber, depending on grade and number of defects, may go
to resaws, or rip saws or it could go to the planner or
surfacer then back to resaws.
Step four-
Surfaced lumber could go to chop or cutoff saws to cut out
defects. Surfaced lumber may be ripped first and then go to
cutoff saws to cut out defects and cut to product lengths.
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The portion of the volume that is ready to ship at this
point goes to finished goods for sorting and packaging.
Step five-
Some material goes to the Moulders or Weinings to be run to
pattern or shapes that may be round, square or irregularly
shaped.
Any one piece of lumber coming from the Kilns may be
eventually processed into one to five products depending on
quality, grade, knot spacing or other tree defects that must be
cut out. There is waste wood that develops during each process
which is measured to determine yield from grades purchased. This
waste may consist of shavings, trimmed ends, knot cutouts, etc.
You state in your recent letter that you have sufficient
record keeping by item, volume, wood species, etc., to match up
and account for import and export volumes.
ISSUE:
Whether lumber to be processed and exported may be entered
temporarily under bond to avoid the payment of countervailing
duties.
LAW AND ANALYSIS:
Subheading 9813.00.05, Harmonized Tariff Schedule of the
United States (HTSUS), provides for duty-free importation under
bond for merchandise to be repaired, altered, or processed in the
United States, provided it is not imported for sale or sale on
approval and that it is exported in a timely manner. (See U.S.
Note 1(a) of Subchapter XIII, Chapter XXII, HTSUS, and 19 CFR
10.37). The processing can be a relatively minor procedure or
extensive enough to be considered a manufacture or production.
This provision requires that the imported merchandise be exported
or destroyed within one year of the date of importation.
Subchapter XIII, U.S. Note 1(a).
The lumber you import is processed and would be eligible for
entry under a TIB. However, you export only a portion of the
lumber and sell the rest domestically. Usually importation under
a TIB requires direct identification of the specific articles to
insure timely exportation; however, there have been exceptions.
If the imported articles are fungible and are commingled with
articles of domestic origin Customs has allowed identification on
a first-in, first-out (FIFO) basis. (See CSD 84-12.) You have
stated that you keep very detailed records and can segregate the
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lumber that is to be under bond and exported from the lumber that
is imported to be sold domestically. Your records will have to
identify each lot in order of sequence into and out of the
commingled mass. Your inventory records will have to be very
precise (see C.S.D. 88-1, enclosed). You will also have to make
two entries, one for consumption and one for the TIB merchandise.
(See 19 CFR 141.52(c)).
It was held in C.S.D. 86-16, that fungible merchandise
imported under TIB and under consumption entries may be
commingled and the TIBs cancelled on a FIFO basis, provided the
importer has on hand at all times in the commingled inventory
sufficient merchandise (or articles manufactured therefrom) to
cancel all outstanding TIBs.
Your processes also produce waste. Subchapter XIII, U.S.
Note 2(b) provides that merchandise may be admitted into the
United States under subheading 9813.00.05, HTSUS, only on the
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.
You wish to enter the lumber under a TIB in order to avoid
the payment of countervailing duties. Countervailing duties are
normally charged against the temporary importation bond and do
not have to be deposited at entry. This is so because TIB
entries are not considered consumption entries for TIB purposes.
See HQ 223899, dated September 2, 1992, and HQ 223491, dated
March 30, 1992. Because your merchandise is imported of Canadian
origin a TIB bond is not required and the countervailing duties
do not need to be deposited at entry.
HOLDING:
The lumber does meet the requirements for temporary
importation under bond under subheading 9813.00.05, HTSUS,
provided that all the accountability requirements are met. The
countervailing duty applicable to these lumber imports from
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Canada need not be deposited at entry nor charged to a TIB bond.
Sincerely,
John A. Durant
Director
Commercial Rulings Division