CLA-2 CO:R:C:M 952994 DWS
Mr. Frank J. Desiderio
Grunfeld, Desiderio, Lebowitz & Silverman
12 East 49th Street
New York, NY 10017
RE: Defective Telephone Equipment; Waste and Scrap; GRI 3(b);
Explanatory Note 3(b)(VIII); Section XV, Note 6(a);
General Explanatory Note (IV)(C)(2)(d)(iv) to Chapter 72;
General Explanatory Note to Chapter 74; U.S. v. Baker Perkins,
Inc. et al.; Roser Customs Service a/c Continental Ore
Corporation et al. v. U.S.; Condition As Imported; 3915.90.00
Dear Mr. Desiderio:
This is in response to your letters of July 20, 1992, and of
October 15, 1992, on behalf of American Telephone & Telegraph
Company (AT&T), to the Area Director of Customs, New York Seaport,
concerning the classification of defective telephone equipment
under the Harmonized Tariff Schedule of the United States (HTSUS).
FACTS:
The merchandise consists of defective telephone equipment.
When the telephones which AT&T produces are not in working order,
AT&T sends them to one of several repair facilities in Mexico.
Telephone equipment deemed irreparable is exported from Mexico to
the U.S. as waste and scrap to be reclaimed for the equipment's
plastic and metal content. The metal consists in weight
predominately of either copper or carbon steel. Also, some of the
metal is plated with gold.
At importation, the equipment is entered either grouped
together in large containers or separated into individual boxes.
A sample of various pieces of used equipment purported to be
representative of the imported equipment was submitted. At a
reclamation center in the U.S., the defective equipment is sent
down one of two lines. On one line, the equipment is run through
a hammer mill. On the other line, the equipment is run through a
ring mill, which uses teeth-like rings to chew-up the equipment.
The various categories of scrap materials are then grouped
according to type and sold to various recyclers.
ISSUE:
Whether the defective telephone equipment is classifiable as
waste and scrap under the HTSUS?
LAW ANALYSIS:
Classification of merchandise under the HTSUS is in accordance
with the General Rules of Interpretation (GRI's), taken in order.
GRI 1 provides that classification is determined according to the
terms of the headings and any relative section or chapter notes.
It is claimed that the telephone equipment is plastic waste
and scrap classifiable under subheading 3915.90.00, HTSUS, which
provides for: "[w]aste, parings and scrap, of plastics: [o]f other
plastics." We disagree with this classification.
The defective equipment, containing metal and plastic parts,
constitutes composite goods under the HTSUS. GRI 3(b) states that:
[m]ixtures, composite goods consisting of different materials
or made up of different components, and goods put up in sets
for retail sale, which cannot be classified by reference to
3(a), shall be classified as if they consisted of the material
or component which gives them their essential character,
insofar as this criterion is applicable.
In understanding the language of the HTSUS, the Harmonized
Commodity Description and Coding System Explanatory Notes may be
utilized. The Explanatory Notes, although not dispositive, are to
be used to determine the proper interpretation of the HTSUS. 54
Fed. Reg. 35127, 35128 (August 23, 1989). Explanatory Note
3(b)(VIII) (p. 4) states that:
[t]he factor which determines essential character will vary
as between different kinds of goods. It may, for example,
be determined by the nature of the material or component,
its bulk, quantity, weight or value, or by the role of a
constituent material in relation to the use of the
goods.
Although it is our understanding that the plastic parts
together weigh more than the metal parts, it is also our
understanding that the metal parts are higher in value than the
plastic parts. Therefore, based on the higher value and the role
of the metal parts in the imported merchandise, it is our position
that those parts impart the essential character of the defective
equipment.
Section XV, note 6(a), HTSUS, defines "waste and scrap" as:
[m]etal 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.
As the subject equipment is defective and to our understanding
irreparable, it is our position that it satisfies the definition
of "waste and scrap" under section XV, note 6(a), HTSUS. Once the
equipment has been deemed irreparable, its only use is for
reclamation purposes.
The remaining question is whether the gold plating of some of
the metal parts affects the classification of the equipment.
General Explanatory Note (IV)(C)(2)(d)(iv) to chapter 72 (p.981)
states that:
[s]urface treatments or other operations, including cladding,
to improve the properties or appearance of the metal, protect
it against rusting and corrosion, etc. Except as otherwise
provided in the text of certain headings, such treatments do
not affect the heading in which the goods are classified.
They include:
(a)-(c) xxx
(d) Surface finishing treatment, including:
(i)-(iii) xxx
(iv) coating with metal (metallisation) the main processes
being:
- electroplating (cathodic deposition of a coating
material on the product to be coated, by electrolysis
of a suitable solution of metallic salts), e.g.,
. . . gold . . .
In part, the General Explanatory Note to chapter 74 (p. 1042)
states that:
[t]he products and articles of copper are frequently
subjected to various treatments to improve the properties or
appearance of the metal, etc. These treatments are generally
those referred to in the General Explanatory Notes to Chapter
72, and do not affect the classification of the goods.
Therefore, the General Explanatory Note to chapter 74
incorporates General Explanatory Note (IV)(C)(2)(d)(iv) mutatis
mutandis.
As the gold plating does not affect the classification of the
defective telephone equipment, it is our position that the
equipment in which copper predominates by weight over the other
base metals is classifiable under subheading 7404.00.00, HTSUS,
which provides for: "[c]opper waste and scrap". The equipment in
which carbon steel predominates by weight over the other base
metals is classifiable under subheading 7204.49.00, HTSUS, which
provides for: "[f]errous waste and scrap; remelting ingots of iron
or steel: [o]ther waste and scrap: [o]ther."
It has been suggested that for the defective equipment to
qualify as waste and scrap, it must be mutilated so that reuse is
not possible. This is an incorrect position.
It is well settled that, in the absence of deception,
disguise, or artifice resorted to for the purpose of perpetrating
a fraud upon the revenue, imported merchandise must be classified
with reference to its condition as imported. U.S. v. Baker
Perkins, Inc. et al., 46 CCPA 128, 131, C.A.D. 714 (1959).
"Condition as imported" refers to the condition of the goods when
they are brought within the jurisdiction of the United States with
intent to unlade. Roser Customs Service a/c Continental Ore
Corporation et al. v. U.S., 64 Cust. Ct. 20, C.D. 3953 (1970).
We are satisfied that the merchandise is waste and scrap from
the information you have submitted, that the importations consist
of used equipment either grouped together in containers or
separated into individual boxes, the fact that the used equipment
will be sent through hammer and ring mills, the fact that the
broken up equipment will be sold to recyclers, and from an
examination of the submitted sample. It is our position that
mutilation prior to importation would be an unwarranted
requirement.
On the other hand, we recognize that the question as to
whether damaged or worn-out articles are waste and scrap involves
variable facts which can only be determined by inspection at the
time of importation. We do not deem it unwarranted if the District
Director, in carrying out his inspection responsibilities,
requires, in his discretion, written documentation regarding the
ultimate disposition of the merchandise.
HOLDING:
The defective telephone equipment in which copper predominates
by weight over the other base metals is classifiable under
subheading 7404.00.00, HTSUS, which provides for: "[c]opper waste
and scrap". The defective telephone equipment in which carbon
steel predominates by weight over the other base metals is
classifiable under subheading 7204.49.00, HTSUS, which provides
for: "[f]errous waste and scrap; remelting ingots of iron or steel:
[o]ther waste and scrap: [o]ther." Goods classifiable under these
provisions receive duty free treatment.
Sincerely,
John Durant, Director