CLA-2 CO:R:C:M 955367 DWS
District Director
U.S. Customs Service
P.O. Box 1490
Room 218
St. Albans, VT 05478
RE: Protest 0201-93-100281; Aluminum Alloy Ingot; Titanium;
Boron; Grain Refiner; CFTA eligibility; General Note
3(c)(vii)(B); GRI 3(b); Section XV, Notes 3 and 5;
De Minimis Test; T.D. 92-8
Dear District Director:
The following is our decision regarding Protest 0201-93-
100281 concerning your action in classifying and assessing duty
on aluminum alloy ingot under the Harmonized Tariff Schedule of
the United States (HTSUS).
FACTS:
The merchandise consists of aluminum alloy ingot imported
from Canada. The ingot possesses a non-North American (i.e.,
United Kingdom) grain refiner (titanium or boron), the quantity
of which is so small that it may be measured in the finished
product only in terms of parts per million. During manufacture
in Canada, grain refiner is added to the ingot to achieve desired
grain characteristics in the final product. The protestant
states that, for many reasons, it is not possible to introduce
plain titanium or boron into molten aluminum and for it to be
adequately dispersed. The accepted technology for dispersal is
to use an intermediate product, a waffle of unwrought aluminum,
with the desired ingredient uniformly dispersed in a small
quantity of the aluminum ingot.
The aluminum alloy ingot was entered under subheading
7601.20.90, HTSUS, which provides for: "[u]nwrought aluminum:
[a]luminum alloys: [o]ther: [o]ther." The entries were
liquidated on April 16, 1993, under subheading 7601.20.90, HTSUS.
The protest was timely filed on July 7, 1993.
There is agreement as to classification of the merchandise
under subheading 7601.20.90, HTSUS. However, there is
disagreement as to whether the merchandise is eligible for U.S.-
Canada Free-Trade Agreement (CFTA) benefits. If the merchandise
qualifies for CFTA benefits, the protestant is entitled to a
reduced rate in the merchandise processing fees it paid. The
merchandise processing fee is a formal entry fee for all
importations into the U.S. If CFTA benefits are not granted, the
protestant is obliged to pay .19 percent of the entered value per
entry. If CFTA benefits are not granted, the protestant is
obliged to pay .038 percent of the entered value per entry.
ISSUE:
Whether the aluminum alloy ingot is eligible for benefits
under the CFTA.
LAW AND 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.
General note 3(c)(vii)(B), HTSUS, in pertinent part, states:
(vii) United States-Canada Free Trade Agreement
Implementation Act of 1988
(B) For the purposes of subdivision (c)(vii) of this
note, goods imported into the customs territory of
the United States are eligible for treatment as
"goods originating in the territory of Canada"
only if --
(1) they are goods wholly obtained or produced in
the territory of Canada and/or the United
States, or
(2) they have been transformed in the territory of
Canada and/or the United States, so as to be
subject --
(I) to a change in tariff classification as
described in the rules of subdivision
(c)(vii)(R) of this note, or
(II) to such other requirements subdivision
(c)(vii)(R) of this note may provide when
no change in tariff classification occurs,
and they meet the other conditions set out
in subdivisions (c)(vii)(F), (G), (H),
(I), (J), and (R) of this note.
(C) - (Q) xxx
(R) Change in Tariff Classification Rules.
(1) - (14) xxx
(15) Section XV: Chapters 72 through 83.
(aa) A change from one chapter to another;
provided, that goods subject to rules
(ii) or (vv) meet the conditions set
forth therein.
* * *
Because the merchandise contains a non-originating grain
refiner, it is not "wholly obtained or produced in the territory
of Canada." Therefore, for it to be eligible for CFTA benefits,
the merchandise must have been "transformed in the territory of
Canada" following general note 3(c)(vii)(B), HTSUS.
The protestant claims that, under GRI 3(b), the essential
character of the grain refiner is imparted by the titanium and
boron, and not the aluminum waffle. Therefore, the grain refiner
would not be classifiable under chapter 76, HTSUS, but under the
HTSUS chapters describing either titanium or boron. The aluminum
alloy ingot would then be eligible for CFTA benefits as there
would be a change from one chapter to another (chapter 76), as
enumerated in general note 3(c)(vii)(B), 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.
Section XV, note 3(b), HTSUS, states:
3. Classification of alloys (other than ferroalloys and
master alloys as defined in chapters 72 and 74):
(a) xxx
(b) An alloy composed of base metals of this section
and of elements not falling within this section
is to be treated as an alloy of base metals of this
section if the total weight of such metals equals
or exceeds the total weight of the other elements
present.
Based upon section XV, note 3(b), HTSUS, the grain refiner
is an alloy as it consists of titanium and aluminum, both base
metals, and boron, which is an element not falling with section
XV, HTSUS.
In part, section XV, note 5, HTSUS, states:
5. Classification of composite articles:
Except where the headings otherwise require, articles of
base metal (including articles of mixed materials treated
as articles of base metal under the General Rules of
Interpretation) containing two or more base metals are to
be treated as articles of the base metal predominating by
weight over each of the other metals. . .
Based upon section XV, note 5, HTSUS, because the aluminum
predominates by weight over the titanium, the grain refiner is
classifiable as an aluminum alloy, and, by the authority of GRI
1, it is classifiable under heading 7601, HTSUS. Consequently,
there is no need to resort to the subsequent GRIs.
Therefore, because, under general note 3(c)(vii)(B), HTSUS,
as both the grain refiner and the aluminum alloy ingot are
classifiable under heading 7601, HTSUS, there is no change from
one chapter to another, and the aluminum alloy ingot is not
"transformed in the territory of Canada" and is not eligible for
benefits under the CFTA.
Alternatively, the protestant claims that because the amount
of titanium and boron in the final product is so small, it should
be regarded as de minimis, and the aluminum alloy ingot should be
regarded as being "wholly obtained or produced in the territory
of Canada". We disagree.
In T.D. 92-8, 57 Fed. Reg. 2447, 2448 (January 22, 1992),
which set forth the Customs Regulations implementing the CFTA, we
stated that:
[t]he rules of origin set forth in the CFTA do not provide
for a de minimis test on third country content.
Therefore, because a de minimis test does not exist in the
CFTA, the grain refiner cannot be discounted, and the aluminum
alloy ingot cannot be regarded as being "wholly obtained or
produced in the territory of Canada". It is our position that if
the drafters of the CFTA intended for a de minimis test to exist,
they would have included such a test in the document. It is
noted that the drafters of the North American Free Trade
Agreement have included such a test. See general note 12(f),
HTSUS (1994).
HOLDING:
Because the aluminum alloy ingot is not "transformed in the
territory of Canada", it is not eligible for benefits under the
CFTA. Therefore, the protestant is not entitled to a reduced
rate in merchandise processing fees.
The protest should be DENIED in full. In accordance with
Section 3A(11)(b) of Customs Directive 099 3550-065, dated August
4, 1993, Subject: Revised Protest Directive, this decision,
together with the Customs Form 19, should be mailed by your
office to the protestant no later than 60 days from the date of
this letter. Any reliquidation of the entry in accordance with
the decision must be accomplished prior to mailing of the
decision. Sixty days from the date of the decision the Office of
Regulations and Rulings will take steps to make the decision
available to Customs personnel via the Customs Rulings Module in
ACS and the public via the Diskette Subscription Service, Lexis,
Freedom of Information Act, and other public access channels.
Sincerely,
John Durant, Director
Commercial Rulings Division