CLA-2: RR:TC:SM 560430 BLS
Port Director
10 Causeway Street
Boston, MA 02222-1059
RE: Applicability of subheading 9802.00.60, HTSUS, to copper
sheets
produced from scrap obtained from manufacturing
operations in
the U.S.; HRL 555096
Dear Sir:
This is in reference to a letter dated April 15, 1997, on
behalf of Waterbury Rolling Mills, Inc. ("WRM"), requesting a
ruling that certain copper sheets imported from Germany are
eligible for the partial duty exemption under subheading
9802.00.60, Harmonized Tariff Schedule of the United States
(HTSUS). We understand that entries of the subject merchandise
are currently being filed at your port
FACTS:
WRM imports from Germany copper sheets which are either
refined copper sheets or copper alloy sheets. Depending on the
requirements of the purchaser in the U.S., WRM will subject these
copper sheets to a variety of manufacturing processes including
slitting, annealing, milling, rolling and leveling. During each
of these processes, a certain amount of scrap is generated in the
manufacturing process. WRM collects the scraps into segregated
groups of refined copper or copper alloy for shipment back to the
manufacturer in Germany. Upon return to the manufacturer, the
merchandise is subject to a process of manufacture which will
produce copper sheets of refined copper or copper alloy depending
on the scrap furnished by WRM. The German manufacturer then
returns the copper sheets to WRM at a price which consists of
only the tolling charge for processing the scrap into sheets.
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ISSUE:
Whether the scrap-generated copper sheets are eligible for
the partial duty exemption under subheading 9802.00.60, HTSUS,
upon importation into the U.S.
LAW AND ANALYSIS:
Subheading 9802.00.60, HTSUS, provides a partial duty
exemption for:
[a]ny article of metal (as defined in U.S. Note 3(d) of
this subchapter) manufactured in the
United States or subject to a process of
manufacture in the United States, if exported for
further processing,
and if the exported article as processed outside the
United States, or
the article which results from the processing outside
the United States,
is returned to the United States for further
processing.
This tariff provision imposes a dual "further processing"
requirement on eligible articles of metal--one foreign, and when
returned, one domestic. Metal articles satisfying these
statutory requirements may be classified under this tariff
provision with duty only on the value of such processing
performed outside the U.S., provided there is compliance with the
documentary requirements of section 10.9, Customs Regulations (19
CFR 10.9).
It is WRM's position that the scrap resulting from the
various stages of manufacture of the copper sheets in the U.S. is
an "article of metal ...manufactured in the U.S. or subjected to
a process of manufacture in the U.S." Therefore, WRM is of the
opinion that upon importation, the copper sheet made from the
scrap is eligible for the partial duty exemption under subheading
9802.00.60, HTSUS. WRM argues that this position is mandated by
the statutory language and Customs' prior rulings.
Headquarters Ruling Letter (HRL) 555096 (July 7, 1989),
cited by WRM in support of its position, concerned the
applicability of item 806.30, Tariff Schedules of the United
States (TSUS) (predecessor to subheading 9802.00.60, HTSUS), to
imported stainless steel articles produced from processed scrap
purchased from U.S. junk yards and sent abroad. In that case, we
stated that industrial scrap (leftover metal from manufacturing
operations performed on metal articles) satisfies the requirement
under subheading 9802.00.60 that the scrap be a metal article
manufactured or subjected to a process of manufacture in the
U.S., if the metal article from which the scrap was obtained was
initially manufactured or subjected
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to a process of manufacture in the U.S. We also stated the
following, which may serve to clarify Customs position:
We also do not concur with counsel's
contention that
industrial scrap (leftover metal such as
punchings,
turnings and grindings) derived from the
processing
of imported metal qualifies as a metal article
under
item 806.30, TSUS. The Customs Service has
consistently held that this tariff provision
is
inapplicable to scrap obtained directly from
processing
foreign-made metal in the U.S. In order for
scrap to be
eligible under the statute where foreign metal
is involved,
the scrap must be obtained from procesing
(sic) metal
initially obtained from processing the foreign
metal in the
U.S. (Emphasis added.)
The scrap in this case is generated in the U.S. from metal
(refined copper or copper alloy sheets) produced in Germany.
Accordingly, it is Customs position that the copper sheets
produced in Germany from scrap generated in the U.S. from
processing the foreign-made metal (also copper or copper alloy
sheets) are not eligible for the partial duty exemption under
subheading 9802.00.60, HTSUS.
We do not find the case of Ferrostaal Metals v. United
States, 664 F. Supp. 535 (CIT 1987), to be suportive of WRM's
position. The issue in that case was whether certain processing
(annealing and galvanizing) of steel products in New Zealand
resulted in a substantial transformation of Japanese-origin steel
for purposes of determining whether the resulting product was
covered by the U.S.-Japan voluntary restraint arrangement. (It
was held that the steel was not covered by the arrangement since
the annealing and galvanizing operations substantially
transformed the Japanese- origin steel into a product of New
Zealand). Whether or not a material such as the German copper
sheets has been "substantially transformed " in the U.S. is not
an issue in determining eligibility under subheading 9802.00.60.
The sole question is whether the exported metal product was
"manufactured" or subject to a "process of manufacture" in the
U.S.
Consistent with our position in HRL 555096, we find that the
copper scrap, which is a by-product of the imported metal sheets
that were subjected to a manufacturing process in the U.S., does
not, itself, meet the subheading 9802.00.60 criteria of being an
article of metal which was "manufactured in the United States
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or subject to a process of manufacture in the United States"
before exportation back to Germany to be made into more sheets of
copper.
HOLDING:
Scrap from foreign-made metal processed is not considered a
metal article "manufactured in the United States or subjected to
a process of manufacture in the United States." Therefore,
copper or copper alloy sheet produced in Germany from scrap
generated by the processing of foreign-made metal in the U.S. is
not eligible for the partial duty exemption under subheading
9802.00.60, HTSUS, when imported into the U.S.
Please provide a copy of this decision to Stephen J. Leahy,
Esq., Leahy & Ward, 63 Commercial Wharf, Boston, MA 02110.
Sincerely,
John
Durant, Director
Tariff
Classification Appeals