CLA-2 RR:CR:GC 966783 RSD
TARIFF NOS.: 7211.90.00, 7326.90.85, 8208.90.60
Danielle Cannata, Esq.
O’Melveny & Myers, LLP
1625 I Street, NW
Washington, D.C. 20006
RE: Steel Cutting Rule and Rule Die Material; Reconsideration of HQ 965591
Dear Ms. Cannata:
This is in response to your letter dated October 17, 2003, on behalf of Bohler-Uddleholm Strip Steel LLC (Bohler), requesting reconsideration of HQ 965591, dated September 17, 2002, concerning the classification of cutting rules and rule die material under the Harmonized Tariff Schedule of the United States (HTSUS). On January 26, 2004, members of my staff met with you, employees of Bohler, customers of Bohler, and an official from the Austrian government to discuss this matter. HQ 965591 was a decision denying a protest that Bohler had filed.
Once Customs denies a protest, Customs loses jurisdiction over the protested entries. See San Francisco Newspaper Printing Co. v. United States, 9 CIT 517, 620 F. Supp. 738 (1985). Accordingly, in a telephone conversation, a member of my staff advised you that because HQ 965591 was a protest decision, CBP is unable to reconsider the decision regarding the classification of merchandise for the entries that were the subject of the protest. In a subsequent telephone conversation, you also explained that there are several other entries of the same merchandise, which have been protested. It is our understanding that there are protests that are presently still pending before CBP. Because you have provided some new information, we indicated that we were willing to consider your arguments and review our decision in HQ 965591 to determine if we still believe that it was correctly decided in order to determine whether its holding should be applied to future
entries of the same merchandise.
FACTS:
The subject merchandise is steel cutting rule and rule die material that are primarily used in the packaging industry for cutting and creasing paper, paperboard, and textiles. Most of these cutting rules and rule die material will be imported in material lengths, meaning that they are imported in coil form on reels. However, some of the cutting rules will be imported in straight lengths of 36 inches. In either case, the merchandise enters the United States with a high-toleranced cutting edge longitudinally worked along its entire length. The cutting edge may differ slightly depending upon the type of die cutting that is required. All the imported merchandise has the knife-edge already set to its final height and thickness tolerance. After importation, the coil material is cut to the required lengths and is bent to particular configurations prior to use. The straight lengths of material require only minor cutting or sizing prior to use.
Bohler’s customers purchase the material in coils for use as blades in the cutting dies. These dies are used primarily in the packaging industry for cutting and creasing paper, paperboard, and textiles. Once an order for a die is received, the customer’s programming department takes the order and programs a design using a software program for the die industry. This type of software is continually changed and upgraded to allow the programmers to have true computerized drafting ability. The die board is cut with a laser using a downloaded program from the computerized design as a guide to generate the coordinates and a path for the laser. This was previously done by hand using a jigsaw, but it is now totally automated.
The same design and program generated to cut the die board is completed in a common file format, which is imported/downloaded into an automatic bending machine used to prepare the knife blade so that it can be inserted into the die board. You point out that there are only a few brands of automatic bending machines in the world. The automatic bending machines all use the design software programs to cut and bend the blades to standard lengths for insertion into dies. The coil in its imported form is placed on the automatic bending machine. This special automatic bending machine reads the design program, and unwinds a precise length of the imported blade from the spool based upon the design. The machine cuts and/or bends the blade to its finished length.
New technology allows the die-maker complete flexibility to create virtually any die imaginable in real-time. This technology has increased the accuracy of cutting and bending, eliminated the need for re-working, nearly eliminated scrap, and has also reduced the manufacturing time.
Once the blade is cut or bent, it is manually inserted into a die board. Apart from their use in the manufacture of a die, there is no other commercially viable use for the imported high-toleranced cutting edge blades. However, we note that there is no mention of any markings indicating the specific length of each of the cut die blades.
In HQ 965591, CBP held that the cutting rule and die rule material were classified in subheading 7211.90.00, HTSUS, as flat-rolled products of iron or nonalloy steel, of a width less than 600 mm…other.
ISSUE:
What is the classification of the subject steel cutting rule and rule die material under the HTSUS?
LAW AND ANALYSIS:
Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRI’s). GRI 1 provides that the classification of goods shall be determined according to the terms of the headings of the tariff schedule and any relative section or chapter notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRIs may then be applied.
The HTSUS provisions under consideration are as follows:
7211 Flat-rolled products of iron or nonalloy steel, of a width of less than 600 mm, not clad, plated or coated:
7211.90.00 Other.
* * * * * * * * * * *
7326 Other articles of iron or steel:
7326.90 Other:
Other:
Other:
7326.90.85 Other.
* * * * * * * * * * *
8208 Knives and cutting blades, for machines or for mechanical appliances, and base parts thereof:
8208.90 Other:
8208.90.60 Other (including parts).
* * * * * * * * * *
8441 Other machinery for making up paper pulp, paper or paperboard, including cutting machines of all kinds, and parts thereof:
8441.90.00 Parts.
* * * * * * * * * * *
The Harmonized Commodity Description And Coding System Explanatory Notes (EN’s) constitute the official interpretation of the Harmonized System. While not legally binding on the contracting parties, and therefore not dispositive, the EN’s provide a commentary on the scope of each heading of the Harmonized System and are thus useful in ascertaining the classification of merchandise under the system. Customs believes the EN’s should always be consulted. See T.D. 89 80, 54 Fed. Reg. 35127, 35128 (Aug. 23, 1989).
EN 82.08 states that:
This heading applies to unmounted knives or cutting blades, rectangular, circular or of other shapes, for machines or for mechanical appliances. It does not, however, cover cutting blades or knives for the hand tools of headings 82.01 to 8205 (e.g., plane irons).
The heading includes knives or cutting blades:
…
(5) For other machines or mechanical appliance, such as:
(a) Blades and knives, including circular or cup-shaped blades, for machines used in splitting, paring or trimming the surface of leather.
(b) Blades and knives for machines for cutting paper, textiles, plastics, etc.; for tobacco shredding machines, etc.
You argue that pursuant to GRI 2(a) the cutting rules and dies are classified in heading 8208, HTSUS, because they have the essential character of a finished blade for cutting machines. In support of your position, you point out that the specific cutting edge, tolerance, and width of the blades are fixed from the moment the coils leave the mill in Austria. Once the edge is set, it cannot be altered or removed without destroying the whole product. As such, you claim that the character of the cutting blades is set at the time of their importation. Furthermore, there is no other commercially viable use for the unfinished blade.
GRI 2(a), which deals with incomplete or unfinished articles, reads as follows:
Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as entered, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), entered unassembled or disassembled.
In classifying the subject merchandise, the main issue to be resolved is whether the cutting rules and the rule die material are parts or materials. Because numerous "parts" vs. "materials" cases exist, each appearing to announce a rule of law that best fits the particular merchandise at issue, the courts have favored a case-by-case approach. Heraeus-Amersil v. United States, 640 F. Supp. 1331 (1986), addressed the classification of contact tape composed of gold, silver and palladium imported in continuous lengths for use in making individual contacts for telephone relays. Notwithstanding that it is a case decided under the HTSUS predecessor tariff code, the Tariff Schedules of the United States (TSUS), the rule in the decision in Heraeus is that importations of small articles manufactured together in one piece should be classified as if already cut apart. The court in Heraeus cited U.S. v. Buss & Co., 5 C.C.A 110, 113 T.D. 34138 (1914), wherein the court stated: "…where such [small articles] are imported in the piece and nothing remains to be done except to cut them apart, they shall be treated for dutiable purposes as if already cut apart and assessed according to their individual character or identity. This follows, however, only in case the character or identity of the individual articles is fixed with certainty and in case the woven piece in its entirety is not commercially capable of any other use."
In HQ 955346, dated February 9, 1994, which concerned the classification of coils of stainless steel curved wire designed for the manufacture of piston rings for automobile engines, we stated that:
[u]nder a longstanding Customs principle, goods which are material when entered are not classifiable as a particular article unfinished. See Sandvik Steel, Inc. v. U.S., 321 F.Supp. 1031, 66 Cust. Ct. 12, C.D. 4161 (1971) (shoe die knife steel in coils and cutting rules in lengths, without demarcations for cutting or bending, held to be material rather than unfinished knives or cutting blades); The Harding Co. v. U.S., 23 Cust. Ct. 250 (1936) (rolls of brake lining held to be material because the identity of the brake lining was not fixed with certainty); Naftone, Inc. v. U.S., 67 Cust. Ct. 340, C.D. 4294 (1971) (rolls of plastic film without demarcations for cutting despite having only one use held to be insulating material).
See also HQ 952938, dated August 4, 1993.
The United States of Court of Appeals for the Federal Circuit reaffirmed this position regarding parts vs. materials in Baxter Healthcare Corporation of Puerto Rico, v. United States, 182 F.3d 1333 (1999). The court found in Baxter that certain polypropylene filaments imported in material form (on spools) were classified as material and not as parts. This filament was specifically designed for use as the gas-exchanging membrane of an oxygenator and had no other known use. The court noted that at the time of import, the individual parts could not be discerned from the roll, and the roll nowhere marked or otherwise identified the individual parts to be made from it. Rather, Baxter individually cut lengths of Oxyphan (R) from a roll and custom-fit them around a steel bellows. The exact length needed per oxygenator was not known until the oxygenator was made. Because the individual parts were not identifiable or fixed at the time of import, Oxyphan (R) could not be classified as a “part” of an oxygentator.
You cite Doherty-Barrow of Texas, Inc. v. United States, 3 C.I.T. 228 (1982), in which the merchandise at issue was strip steel which was cut to length after importation to make bale ties. The court noted the merchandise as imported (1) was so far advanced in manufacture as to be dedicated to use in making steel cotton bale ties, (2) was incapable of other commercial and practical use and (3) required only to be cut to a standard length of 11’6” or a length of 9’6”. You argue that the determination in this case should be applied to the present situation, but for the reasons set forth below we disagree.
In the Doherty-Barrow case, at the time of importation, it was known that the coil steel strip was to be cut to standard lengths, but in this instance, the coils of cutting rule and rule die material are not cut to any pre-determined lengths. There are no markings identifying where the coils are to be cut to create the individual blades. Although at the time of importation, the coils of cutting rule and rule die material have an edge, and the width and height of the finished blades, the length of each blade has not been designated. Consequently, the dimensions of the cutting rule and rule die material are not “fixed with certainty” at the time they are imported. Therefore, we conclude that the imported cutting rule and rule die material that are imported in coils do not have the essential character of blades or knives of heading 8208, HTSUS and thus do not satisfy the requirements of GRI 2(a) as unfinished blades that are classified in heading 8208, HTSUS.
PARTS OF MACHINES OF HEADING 8441
If we determine that the cutting dies and rule die steel are not blades classified in heading 8208, HTSUS, you contend that the merchandise should be classified in subheading 8441.90.00, HTSUS, as parts of machines for making cartons, boxes, case tubes, drums or similar containers. In determining whether articles such as the subject merchandise are considered parts, it is a well-established rule that a part of an article is something necessary to the completion of that article. It is an integral, constituent, or component part, without which the article to which it is to be joined, could not function as such article. United States v. Willoughby Camera Stores, Inc., 21 CCPA 322, 324, T.D. 46,851 (1933), cert denied, 292 U.S. 640 (1934). The rule set out in Willoughby Camera has been modified over the years so that a device may be a part of an article even though the device is not necessary to the operation of the article, provided that once the device is installed the article cannot function properly without it. To meet this test, the device must be dedicated for use upon the article. See Beacon Cycle, Supply Co., Inc. v. United States, 81 Cust. Ct. 46, 50-51, C.D. 4764 (1978). However, because the cutting rules and dies are imported in material lengths rather than in specific lengths, as already noted, they are not identifiable as individual blades at the time of their importation. Therefore, we find that they cannot be considered as parts of the machines of heading 8441, HTSUS.
HEADING 7211
The alternative classification for the cutting rule is heading 7211, HTSUS, for flat-rolled products of iron or nonalloy steel, of a width of less than 600 mm. Chapter 72, Note 1(k) provides a definition of flat-rolled products. It states that flat-rolled products have the following meaning:
Rolled products of solid rectangular (other than square) cross section, which do not conform to the definition at (ij) above in the form of:
- coils of successively superimposed layers, or
- straight lengths, which if of a thickness less than 4.75 mm are of a
width measuring at least 10 times the thickness or if of a thickness of
4.75 mm or more are of a width which exceeds 150 mm and
measures at least twice the thickness.
Flat-rolled products include those with patterns in relief derived directly from rolling (for example, grooves, ribs, checkers, tears, buttons, lozenges) and those which have been perforated, corrugated or polished, provided that they do not thereby assume the character of articles or products of other headings.
Flat-rolled products of a shape other than rectangular or square,
of any size, are to be classified as products of a width of 600 mm or more, provided that they do not assume the character of articles or products of other headings.
Chapter 72, Note 1(m), HTSUS, states that other bars and rods have the following meaning:
Products which do not conform to any of the definitions at (ij), (k) or (l) above or to the definition of wire, which have a uniform solid cross section along their whole length in the shape of circles, segments of circles, ovals, rectangles (including squares), triangles or other convex polygons (including “flattened circles” and “modified rectangles”, of which two opposite sides are convex arcs, the other two sides being straight, of equal length and parallel). These products may:
have indentations, ribs, grooves or other deformations produced during the rolling process (reinforcing bars and rods);
be twisted after rolling.
EN 72.11 states that:
Products of this heading may be worked (e.g. corrugated, ribbed, chequered, embossed, bevelled or rounded at the edges), provided that they do not thereby assume the character of articles or of products of other headings.
They are used for many purposes, e.g., hooping of boxes, casks and other containers; as a basis for tin-plate; manufacture of welded tubes, tools (e.g., saw blades), cold-formed angles, shapes or sections, conveyor and machinery belting, in the automobile industry and for the production of many other articles (by stamping, folding, etc.).
The heading does not cover:
(a) Twisted hoop of a kind used for fencing, or iron or steel (heading 73.13).
(b) Corrugated strip with one edge serrated or bevelled, being corrugated nails in the length used for assembling
wooden parts (heading 73.17).
(c) Blanks of articles of Chapter 82 (including razor blade blanks in strips).
[All emphasis in original.]
Because the products at issue meet the requirements for the products in heading 7211, HTSUS, we find that the cutting rules and rule material that are imported in coils are classified in subheading 7211.90.00, HTSUS.
You also claim that HQ 965591 is inconsistent with the position taken by other countries regarding the classification of cutting rules and rule die material. As stated in T.D. 89-80, classification decisions of other administrations, while instructive, are not binding on the United States, as these rulings may have been subject to political realities or domestic regulations which are different from our own.
CUTTING RULES IMPORTED WITH A SPECIFIC LENGTH AND SERRATED PRODUCTS
HQ 965591 only addressed cutting rules and rule die material with straight edges imported in material lengths on coils. However, Bohler also imports cutting rules with serrated edges and some cutting rules that have a specific length of 36”. As cited above, Chapter 72 Note 1(k) specifies the flat-rolled products with patterns in relief derived directly from rolling that are included in Chapter 72, HTSUS. Serrated products are not among the flat-rolled goods that are mentioned in Note 1(k) as being included in Chapter 72, HTSUS. Accordingly, the serrated products at issue are not classified in heading 7211, HTSUS. The serrated products are classified in subheading 7326.90.85, HTSUS as: “Other articles of iron or steel: Other: Other: Other: Other.” See NY J87549 dated August 19, 2003. We also note that the products imported in specific 36” lengths will require only minor cutting or sizing prior to their use. Since only one blade is to be produced from each length of cutting rule and die material, at the time of importation the dimensions of the blades are fixed with certainty, and thus the cutting rules would be identifiable as blades and are classified in subheading 8208.90.60, HTSUS.
Pursuant to the Section 201 steel safeguard measures implemented by Presidential Proclamation 7529, and terminated by Presidential Proclamation 7741, certain flat-rolled products of steel classified in subheading 7211.90.00, HTSUS, and entered or withdrawn from warehouse after March 20, 2002 through December 5, 2003, are subject to the additional ad valorem duties specified by subheadings 9903.73.02 and 9903.73.03, HTSUS, depending on the date that they were entered or withdrawn from warehouse. The cutting rule and die rule material are subject to duties under subheading 9903.73, HTSUS, subject to the above date of entry conditions.
HOLDINGS:
The cutting rule and die rule material (with a straight edge which is imported in material lengths) are classified in subheading 7211.90.0000, as: “Flat-rolled products of iron or nonalloy steel, of a width of less than 600 mm, not clad, plated or coated: Other.” The column one general rate of duty is free.
The cutting rule and die rule material with a serrated edge are classified in subheading 7326.90.8587 as: “Other articles of iron or steel: Other: Other: Other: Other: Other” at a duty rate of 2.9 percent ad valorem.
The items that are imported in straight fixed lengths of 36 inches are classified in subheading 8208.90.6000, HTSUS, as: “Knives and cutting blades, for machines or for mechanical appliances, and base parts thereof: Other: Other (including parts).” The column one general rate of duty is free.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the World Wide Web at www.usitc.gov.
EFFECT ON OTHER RULINGS:
The holding of HQ 965591 regarding cutting rules and rule die material with a straight edge that are imported in material lengths on coils is affirmed.
Sincerely,
Myles B. Harmon, Director
Commercial Rulings Division