CLA 2 RR:CR:GC 960800 PH
Port Director
U.S. Customs Service
511 NW Broadway
Portland, OR 97209
RE: Protest 2904 97 100109; titanium ingot; slab; ring; billet; electrode; disk; casting; defective or damaged; scrap; wrought; unwrought; remelt statement; Additional U.S. Note 1, Section XV; U.S. Note 1, Chapter 98; 19 CFR 10.112; 19 CFR 54.6; HQ 958806
Dear Port Director:
This is in response to protest 2904 97 100109, which pertains to the tariff classification of titanium under the Harmonized Tariff Schedule of the United States (HTSUS). Pictorial representations were submitted for our examination. Consideration was given to the presentation of counsel for the protestant in a meeting with representatives of this office on June 23, 1998, and a follow-up supplemental submission by counsel dated July 27, 1998.
FACTS:
Twenty entries, of which two were filed in 1995 (listed below as entry # ---289-5 and ---748-0) and the remainder were filed in 1996, are included in the protest (four other entries were originally included in the protest but, at the request of the protestant two were deleted; two other entries were reliquidated duty-free and duties were refunded). The protest is against the merchandise classified in subheading 8108.10.50 or 8108.90.60, HTSUS. The merchandise liquidated with classification in either of these subheadings is listed below (entries for which there is a statement that the merchandise will be remelted are marked with an asterisk (*)):
Entry # Invoiced as Exam. Disclosed
---289-5 BT1 ingots
---748-0 BT6 plates & bars Slabs
---005-1 PT3V & VT1-0 electrodes Ingots
---690-0 BT1-0 small cast slugs Large cast ingots
---090-0* VT1 electrodes Ingots
---618-8* PT3V & TL3 rings,
PT3V ingots
---622-0* BT1 slabs
---624-6 BT6, PT3V & BT1 billets,
BT6, PT3V & BT1 ingots
---894-5 BT5 billets & ingots Billets
---896-0* PT3V electrodes
---897-8* VT1, 3M, VT5, & VT6 Billets
square bars
---898-6* VT1, VT6, & 3M square bars Billets
---899-4* PT3V electrodes Ingots
---945-5* VT1 square bars Billets
---150-1 BT1 ingots Ingots
---318-4 VT1 billets
---364-8* PT3V rings & disks,
PT3V billets
---467-9* PT3V, BT6, BT5, BT1 & 3M
rings
---469-5* BT5 billets, BT5 ingots, Purchase order lists
rings, TL3 castings (if ingots & billets;
not machined or summary of shipment
processed) sheet shows only
ingots were imported.
---612-0* VT1 electrodes Ingots
The protested entries were liquidated between February 14 and April 18, 1997. On May 13, 1997, counsel for the importer filed this protest contending that the merchandise subject to the protest is "... titanium scrap for remelt purposes ... imported in various forms, including ingots, billets, blocks, flat forgings, rings, pancakes, rods, bars, slabs, castings, slugs, tube, plates, and disks [and that] they are damaged or defective goods and are processed as scrap in the United States by remelting." Citing Headquarters Ruling Letter (HQ) 958806 dated July 26, 1996, the protestant contends that the titanium under consideration in unwrought form was "defective or damaged" as those terms are used in the first part of subheading 9817.00.90, HTSUS. In regard to the titanium in wrought form, the protestant contends that it meets the requirements for the third part of subheading 9817.00.90, HTSUS, in that it was to be used in remanufacture by remelt and a "remelt certificate", as provided for in 19 CFR 54.6, is completed for all of the forms of titanium for remelt.
In a July 27, 1998, supplemental submission, the protestant contends that the titanium in unwrought form is considered defective or damaged for the following reasons:
... First, the inability to trace the origins and input materials for the product gives rise to the presumption that it contains a defect. The history of the product is essential to ascertaining whether the product is acceptable for the particular application. If the titanium product cannot be traced, the worst must be assumed. ... Second, since the product is being sold as remelt scrap there is a high probability that the product contains one of the following three defects: [there follows a description of the three defects, "high interstitial defects", "high aluminum defects", and "high density inclusions"][.] In fact, the probability that the imported merchandise contains one of these defects is born out by [the protestant’s] experience with its imported scrap for remelt. Common defects include tungsten contamination ....
The HTSUS subheadings under consideration, are as follows:
8108.10.50: Titanium and articles thereof, including waste and scrap: [u]nwrought titanium; waste and scrap; powders: ... [o]ther.
8108.90.60: Titanium and articles thereof, including waste and scrap: ... [o]ther: ... [o]ther.
The 1995 and 1996 general column one rate of duty for goods classifiable under subheading 8108.10.50 or 8108.90.60 is 15% ad valorem.
9817.00.90: Unwrought metal including remelt scrap ingot(except copper, lead, zinc and tungsten) in the form of pigs, ingots or billets (a) which are defective or damaged, or have been produced from melted down metal waste and scrap for convenience in handling and transportation without sweetening, alloying, fluxing or deliberate purifying, and (b) which cannot be commercially used without re manufacture; relaying or rerolling rails; and articles of metal (except articles of lead, of zinc or of tungsten, and not including metal bearing materials provided for in section VI, chapter 26 or subheading 8548.10 and not including unwrought metal provided for in chapters 72 81) to be used in remanufacture by melting or to be processed by shredding, shearing, compacting or similar processing which renders them fit only for the recovery of the metal content: ... [o]ther.
Goods classifiable under subheading 9817.00.90 receive duty-free treatment.
ISSUE:
Whether the titanium, in the form of ingots, slabs, rings, billets, electrodes, disks, or castings, qualifies for duty-free entry under subheading 9817.00.90, HTSUS, as either (1) unwrought metal in the form of pigs, ingots, or billets which is defective or damaged and cannot be commercially used without re-manufacture; or (2) articles of metal not including unwrought metal to be used in remanufacture by melting.
LAW AND ANALYSIS:
Initially, we note that the protest was timely filed (i.e., within 90 days after but not before the notice of liquidation; see 19 U.S.C. 1514(c)(3)(A)) and the matter protested is protestable (see 19 U.S.C. 1514(a)(2) and (5)).
The classification of merchandise under the HTSUS is governed by the General Rules of Interpretation (GRI's). GRI 1, HTSUS, states, in pertinent part, that for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes.
U.S. Note 1, Chapter 98, HTSUS, provides that:
The provisions of this chapter are not subject to the rule of relative specificity in [GRI] 3(a). Any article which is described in any provision in this chapter is classifiable in said provision if the conditions and requirements thereof and of any applicable regulations are met.
Thus, if the merchandise qualifies for classification in subheading 9817.00.90, HTSUS, it is classifiable in that provision regardless of whether it is also described in subheading 8108.10.50 or 8108.90.60, HTSUS. For purposes of the issue under consideration, subheading 9817.00.90, HTSUS, describes three forms of metal: (1) unwrought metal including remelt scrap ingot in the form of pigs, ingots or billets; (2) relaying or rerolling rails; and (3) various articles of metal not including unwrought metal (i.e., wrought metal). The second of these forms is not applicable. If in the first category (unwrought), the metal must be defective or damaged or have been produced from melted down metal waste and scrap and be incapable of being commercially used without re-manufacture. If in the third category (wrought), the metal must be for use in remanufacture by melting or processing by shredding, shearing, compacting or similar process.
The merchandise in controversy is in the following forms (based on Customs examination, or invoice description if the merchandise was not examined): ingots (including "large cast" ingots), slabs, rings, billets, electrodes, disks, "castings" (the last form is the invoiced form in entry # ---469-5; the purchase order and summary shipment sheet for this entry do not include "castings").
Initially, we must determine which of the provisions of subheading 9817.00.90, HTSUS, are applicable to these forms. To be included in the first provision, the metal must be unwrought and in the form of pigs, ingots, or billets. See Luria Bros. & Co. v. United States, 64 Cust. Ct. 261, C.D. 3988 (1970), interpreting item 911.12, Tariff Schedules of the United States (TSUS), in which the pertinent provisions were the same as in subheading 9817.00.90, HTSUS.
The Court in Luria, supra, applied the definition of "unwrought" in headnote 3(a), schedule 6, part 2, TSUS, to determine whether the metal forms in that case were unwrought. That definition is virtually identical to Additional U.S. Note 1., Section XV, HTSUS, which provides that:
For the purposes of this section, the term "unwrought" refers to metal, whether or not refined, in the form of ingots, blocks, lumps, billets, cakes, slabs, pigs, cathodes, anodes, briquettes, cubes, sticks, grains, sponge, pellets, flattened pellets, rounds, rondelles, shot and similar manufactured primary forms, but does not cover rolled, forged, drawn or extruded products, tubular products or cast or sintered forms which have been machined or processed otherwise than by simple trimming, scalping or descaling.
Customs has applied the above definition to subheading 9817.00.90, HTSUS (see, e.g., Headquarters Ruling Letter (HQ) 958806 dated July 26, 1996; note also that the third provision of subheading 9817.00.90, HTSUS, refers to unwrought metal provided for in chapters 72-81).
In HQ 958806, we held certain titanium ingots to be "unwrought", for purposes of subheading 9817.00.90, HTSUS. This is consistent with the court cases interpreting these tariff provisions and their predecessors, as well as the manufacturing processes for titanium. See, in addition to Luria, supra, United States v. Wells, 1 Ct. Cust. App. 158, T.D. 31211 (1911); Erie Technological Products, Inc. v. United States, 65 Cust. Ct. 538, C.D. 4134 (1970); Anval Nyby Powder AB v. United States, 927 F. Supp. 463 (CIT 1996), affirmed CAFC App. No. 96-1438, September 11, 1998, in which the meaning of the term "unwrought" has evolved from "merchandise ... not in its crude state" (Wells) to "primary forms" or "initial or relatively primitive forms" (Luria and Erie Technological) to "forms that have undergone some processing but must undergo further processing before they appear in an eventual final product" (Anval Nyby).
The manufacturing process of titanium, or the winning of metallic titanium is described as follows:
...
Winning. All commercial titanium metal is produced from titanium tetrachloride .... The process ... involves chlorination of ore concentrates [to form] impure titanium tetrachloride[,] [and] ... purification of the raw tetrachloride .... The purified titanium tetrachloride is ... reacted ... to form the pure metal called sponge, because of its porous cellular form. ... The sponge ... is cleaned ....
Consolidation. ... A mass of sponge, alloy additions, and scrap are mixed, then compressed into compacts and welded together to form a sponge electrode. This is melted ... to form an ingot. ... To attain commercially acceptable uniformity, the first ingot is remelted at least once and sometimes twice. ...
Forming. The conversion of the titanium ingot into mill products, such as forging billet, plate, sheet, and tubing, is accomplished for the most part on conventional metalworking equipment. Mills designed to roll and shape stainless or alloy steel are used with only slight modifications. ...
Shaping. Fabricating titanium mill products into finished parts is performed on conventional metal-working equipment with only a few exceptions. ...
McGraw-Hill Encyclopedia of Science & Technology (1992), vol. 18, Titanium metallurgy, pp. 396-400; see also, The Encyclopedia Americana International Edition (1993), vol. 26, Titanium, pp. 785-787 (in this volume, the process after preparation of the sponge is described as follows: "The sponge, along with any necessary additives, is melted in an electric furnace to form ingots[;] [t]he ingots are remelted to form the final pure titanium ingot, which can be readily drawn, forged, or rolled."); Ullmann’s Encyclopedia of Industrial Chemistry (1996), vol. A27, Titanium and Titanium Alloys, p. 95 et seq.; and Kirk-Othmer Encyclopedia of Chemical Technology (1993), vol. 23, Titanium and Titanium Alloys, p. 98 et seq.
Thus, not only is titanium in ingots one of the forms listed in the definition of "unwrought" in Additional U.S. Note 1, Section XV, HTSUS, it is a "relatively primitive form" or a form that has undergone some processing but must undergo further processing before appearing in an eventual final product, as in the above-referenced court decisions. Also, according to the above descriptions of the titanium manufacturing process, titanium ingots have not been "rolled, forged, drawn or extruded", consistent with the caveat in Additional U.S. Note 1, Section XV, HTSUS. In regard to titanium electrodes, in each case in which the merchandise was invoiced as "electrodes" and Customs examined the shipment, the merchandise was found to be ingots (entry # ---005-1, ---090-1, ---899-4, and ---612-0). Of the entries under consideration, the merchandise was invoiced as electrodes and there was no Customs examination only in entry
# ---896-0. On the basis of the results of Customs examination of the merchandise in four of the five entries in which the merchandise was invoiced as electrodes, we conclude that the merchandise in entry # ---896-0 was also ingots. (Even if the merchandise in this entry was electrodes, the protest decision for the entry would remain the same, since, as a more primitive form of titanium than ingots (according to the manufacturing processes as described above), the electrodes would be "unwrought" and would be precluded from duty-free treatment under the third provision of subheading 9817.00.90, HTSUS.)
Because the titanium ingots are "unwrought", to qualify for duty-free treatment under subheading 9817.00.90, HTSUS, they must meet the conditions of that provision. That is, they must be: (1) defective or damaged, or have been produced from melted down metal waste and scrap for convenience in handling and transportation without sweetening, alloying, fluxing or deliberate purifying; and (2) incapable of commercial use without remanufacture.
There is no evidence that the titanium ingots have been produced from melted down metal waste and scrap for convenience in handling and transportation, not does the protestant contend that this is so (in the ruling cited by the protestant in this regard, HQ 958806, the titanium was such "remelt" scrap; thus HQ 958806 may not serve as precedent for this case and is distinguished on that basis). To qualify for classification in subheading 9817.00.90, HTSUS, the ingots must have been "defective or damaged." The protestant contends that this requirement is met because the origins of the titanium cannot be traced so "the worst must be assumed" and further "there is a high probability that the product contains one of ... three defects". The pertinent provision of subheading 9817.00.90, HTSUS, does not require a "high probability" that the metal is defective or damaged. The requirement is that the metal actually "[is] defective or damaged". In this regard, see United States v. Lineiro, 37 CCPA 5, 10, C.A.D. 410 (1949), in which the Court stated "[d]etermination of issues in customs litigation may not be based on supposition". The ingots and electrodes (entry # ---289-5, ---005-1, ---690-0, ---090-0, ---618-8 (as to ingots only), ---624-6 (as to ingots only), ---896-0, ---899-4, ---150-1, ---469-5 (as to ingots only), and ---612-0) do not meet the terms and requirements of subheading 9817.00.90, HTSUS, because they are not defective or damaged. They are classified in subheading 8108.10.50, HTSUS, as articles of unwrought titanium.
This decision is consistent with Luria, supra. In Luria the importer claimed that the merchandise "may be defective by virtue of undersize, fragments of pigs, they may contain blow holes or other physical defects, or they may be off-grade in terms of their chemical composition ..." (64 Cust. Ct. at 264, emphasis added). The Court stated that "[e]ven if the disputed items were in one of those forms [the forms provided for in the TSUS predecessor to subheading 9817.00.90, HTSUS], there is nothing to establish that they meet the condition for free entry of those forms under TSUS item 911.12 as claimed" (64 Cust. Ct. at 266-267).
The remaining forms of titanium under consideration (slabs, rings, billets, disks, and castings) are included within the forms of metal of the third provision of subheading 9817.00.90, HTSUS. That is, they are articles of metal but are not within the parenthetical exclusion of "unwrought metal provided for in chapters 72-81". According to the above descriptions of the titanium manufacturing process, these forms of titanium have been "rolled, forged, drawn or extruded", and thus are not within the definition of "unwrought" in Additional U.S. Note 1, Section XV, HTSUS. We note that, in particular regard to billets, not only do the above-referenced descriptions of the titanium manufacturing processes indicate that billets are rolled, forged, drawn or extruded, but other industry publications also describe billets as being produced by such a process (see American Society for Testing and Materials (ASTM) standard B348-95a, "Standard Specification for Titanium and Titanium Alloy Bars and Billets", which describes a billet as "a solid semifinished section hot rolled or forged from an ingot ...", and The Purchasing Guide of the Metal Industries; METAL STATISTICS 1987, pp. 191-193, which distinguishes between titanium ingots and titanium mill products such as "[f]orging and extrusion billet"). Further, in regard to billets, this is consistent with the manufacturing process for the titanium in billet form as described by protestant’s counsel in the July 27, 1998, supplemental submission.
The forms of titanium within the forms provided for in the third provision of subheading 9817.00.90, HTSUS, must be for use in remanufacture by melting or processing by shredding, shearing, compacting or similar processing which renders them fit only for the recovery of the metal content. Procedures for compliance with this requirement are specifically provided in the Customs Regulations. Under 19 CFR 54.6, merchandise meeting the description of the third provision of subheading 9817.00.90, HTSUS, shall be admitted duty-free subject to the following conditions (as applicable in this case):
(1) In connection with the entry there shall be filed a statement of the importer that the intended use of the merchandise is one of the uses provided for in the subheading;
(2) A bond, as required in 19 CFR 54.6(b) and 113.62, is filed;
(3) Liquidation of the entry shall be suspended pending proof of use or other disposition of the merchandise within 3 years from the date of entry;
(4) Within 3 years from the date of entry, the importer shall submit to the director of the port of entry a statement from the superintendent or manager of the plant at which the articles were used in remanufacture by melting, or were processed by shredding, shearing, compacting, or similar processing showing the information listed in 19 CFR 54.6(c)(1) through (4).
(5) If satisfactory proof of use of the articles in remanufacture as required is furnished within 3 years from the date of entry, the entry shall be liquidated without duty on the covered articles; if not, the entry shall be liquidated without any exemption from duty under subheading 9817.00.90, HTSUS.
Of the entries of forms provided for in the third provision of subheading 9817.00.90, HTSUS, the statement of intended use to be filed by the importer in connection with the entry was filed for entry # ---618-8, ---622-0, ---897-8, ---898-6, ---945-5,
---364-8, ---467-9, and ---469-5. There is no such statement for entry # ---748-0, ---624-6, ---894-5, and ---318-4, each of which is of forms provided for in the third provision of subheading 9817.00.90, HTSUS. However, we understand, based on a November 13, 1998, telephone conversation between the Customs officer in your office handling this protest and the case-handler in this office, that such statements now have been filed with your office for these entries.
The statement of intended use required by 19 CFR 54.6(a) is required to be filed "in connection with the entry". Pursuant to section 54.6(d), this term means "any time before liquidation of the entry or within the period during which a reliquidation may be completed ...." See also, 19 CFR 10.112; Aviall of Texas, Inc. v. United States, 18 CIT 727, 861 F. Supp. 100 (1994), affirmed, 70 F.3d 1248 (Fed. Cir. (T) 1995); Gulfstream Aerospace Corp. v. United States, 981 F. Supp. 654 (CIT 1997). Because the entries under consideration have been protested, the statements have been filed "within the period during which a reliquidation may be completed".
Accordingly, pursuant to 19 CFR 54.6, duty-free admission under subheading 9817.00.90, HTSUS, should be allowed for entry # ---748-0, ---618-8 (not including ingots), ---622-0, ---624-6 (not including ingots), ---894-5, ---897-8, ---898-6, ---945-5,
---318-4, ---364-8, ---467-9, and ---469-5 (not including ingots), provided that within the time allowed the importer submits the required statement under 19 CFR 54.6(c), and provided that, in regard to entry # ---469-5, in which the invoice, purchase order, and summary of shipment sheet may be inconsistent as to the merchandise imported, the protestant satisfactorily establishes the form of the imported merchandise.
HOLDINGS:
(1) The titanium in the form of ingots, including that invoiced as electrodes, is unwrought titanium but does not qualify for duty-free entry under subheading 9817.00.90, HTSUS, because it is not defective or damaged; it is classified in subheading 8108.10.50, HTSUS, as articles of unwrought titanium.
(2) The titanium in the form of slabs, rings, billets, disks, or castings qualifies for duty-free entry under subheading 9817.00.90, HTSUS, as articles of metal not including unwrought metal to be used in remanufacture by melting, subject to compliance with 19 CFR 54.6.
The protest should be DENIED IN PART (entry # ---289-5,
---005-1, ---690-0, ---090-0, ---618-8 (as to ingots only),
---624-6 (as to ingots only), ---896-0, ---899-4, ---150-1,
---469-5 (as to ingots only), and ---612-0) and ALLOWED IN PART (as to entry # ---748-0, ---618-8 (not including ingots),
---622-0, ---624-6 (not including ingots), ---894-5, ---897-8,
---898-6, ---945-5, ---318-4, ---364-8, ---467-9, and ---469-5 (not including ingots), provided that within the time allowed the importer submits the required statement under 19 CFR 54.6(c), and provided that, in regard to entry # ---469-5, the protestant satisfactorily establishes the form of the imported merchandise). In accordance with Section 3A(11)(b) of Customs Directive 099 3550 065, dated August 4, 1993, Subject: Revised Protest Directive, you are directed to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web, by means of the Freedom of Information Act, and other public methods of distribution.
Sincerely,
John Durant, Director,
Commercial Rulings Division