CLA-2 OT:RR:CTF:VS H125976 HkP
Port Director
Port of Los Angeles
U.S. Customs and Border Protection
11099 South La Cienega Blvd.
Los Angeles, CA 90045
RE: AFR of Protest no. 2720-10-100627; Subheading 9802.00.50, HTSUS; Metal Chlorides
Dear Port Director:
This is in response to the Application for Further Review of Protest no. 2720-10-100627, timely filed by counsel on behalf of Heraeus Metal Processing Inc., on September 9, 2010. At issue is the classification under the Harmonized Tariff Schedule of the United States (HTSUS), of ruthenium, iridium, and rhodium, imported as chlorides after having been exported from the U.S. either mixed with a variety of other substances or in solid “sponge” form. Detailed information on the processing of the metals was submitted for our review. In reaching our decision, we have also taken into consideration additional information submitted to this office on April 15, 2011.
FACTS:
The subject merchandise is ruthenium, iridium, and rhodium, imported in chloride form after having been exported to be purified. In some cases, the ruthenium, iridium, and rhodium were exported mixed with a variety of other substances in the form of residue that had been recovered from equipment such as catalytic converters or their parts. In other cases, the ruthenium and iridium, but not the rhodium, were exported in solid “sponge” form that was over 99% pure and contained trace impurities.
In Germany, the metals were subjected to a multi-step purification process. The type of process depended on the metal and whether it was recycled material or in sponge form. According to the information submitted, each purification process involved combining the metals with different substances, which were removed later in the process. Chlorine, the last of the substances with which the metals were combined, was introduced in order that the metals could undergo either an ion exchange or distillation, and was not removed. Some processes included an optional drying step at the end which, if performed, changed the metal chloride solution into a solid form, i.e., a salt. According to the importer, the purification process yields an exceptionally purified form of the precious metal in a chloride structure. The chlorine is removed from the metals after importation.
Based on the Heraeus Material Safety Data Sheets for the three metals and statements by counsel, the exported metals, the imported solutions, and the final product that has the chlorine removed, are chemically and commercially distinct from each other. For example, the trade name for ruthenium sponge or powder is “Ruthenium Black”, its chemical formula is Ru, and its CAS-No is 744-18-8. Unlike the sponges, the recovered residues are not known or traded by name, due to the variety of other substances with which they are mixed and are simply known as “precious metal residues.” The trade name for ruthenium chloride solution is “Ruthenium (III) chloride; solution”, its chemical formula is RuCL3, and it’s CAS-No. is 10049-08-8. We have not been informed of the trade name and chemical formula for the final ruthenium product that has had the chlorine removed, but have been told by counsel that it is not described by the data sheet on ruthenium sponge. Counsel has informed CBP that, in their imported state, the purified metals cannot be used as catalysts or to produce other products until after the chlorine has been removed.
Twenty-one entries of the subject merchandise were made between May 6, 2009, and February 11, 2010. The merchandise was imported either in the form of chloride salt or chloride solution. For each entry, the importer claimed that the merchandise was classified under subheading 9802.00.50, HTSUS, as articles returned after having been exported for repairs or alterations. On May 6, 2010, U.S. Customs and Border Protection (“CBP”) rate advanced all entries of the goods under classification 2843.90.0000, HTSUS, on the basis that the overseas processing had substantially transformed the metals into new and different products, instead of merely repairing or altering the exported products. The importer protested CBP’s actions on September 9, 2010.
ISSUE:
Whether the subject ruthenium, iridium, and rhodium, exported to be purified overseas and then imported in chloride forms, are eligible for entry under subheading 9802.00.50, HTSUS.
LAW AND ANALYSIS:
Subheading 9802.00.50, HTSUS, provides a partial duty exemption for articles returned to the U.S. after having been exported to be advanced in value or improved in condition by means of repairs or alterations. Duty is assessed only on the cost or value of the repair or alteration performed abroad, provided that the documentation requirements of Section 10.8, U.S. Customs and Border Protection Regulations (19 C.F.R. § 10.8) are satisfied. Entitlement to the benefits of subheading 9802.00.50, HTSUS, is precluded in circumstances where the operations performed abroad destroy the identity of the articles or create new or commercially different articles. See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956); Guardian Industries Corp. v. United States, 3 Ct. Int’l Trade 9, 13 (1982). Further, classification under this provision is precluded when the exported product is not complete for its intended use, and the foreign operations constitute intermediate processing operations which are performed as a matter of course in the preparation of the finished article. See Dolliff & Co., Inc. v. United States, 81 Cust.Ct. 1, C.D. 4755, 455 F.Supp. 618 (1978), aff’d 66 CCPA 77, C.A.D. 1225, 599 F.2d 1015 (1979).
The Port is of the view the protested entries are not eligible to be classified under subheading 9802.00.50, HTSUS, because the imported merchandise is a new and different article from what was exported. The overseas processing substantially transformed the reclaimed metals and sponges from forms of platinum to metal chlorides, that is, forms of platinum mixed with chlorine. Consequently, the changes effected overseas were neither repairs nor alterations.
It is the position of the importer that the foreign operations did not destroy the identity of the metals because the chlorine that was combined with the metals as a part of the purification process is removed after importation and before the metals are used. Further, when exported, the metals are complete for their intended use in catalyst production. The importer states that CBP has consistently held that purification operations such as those performed on the subject metals are “alterations” within the meaning of subheading 9802.00.50, HTSUS, and that the port’s decision to disallow entry under the subheading is inconsistent with CBP rulings interpreting the subheading and its predecessor provision, item 806.20, Tariff Schedule of the United States (TSUS). Headquarters Ruling Letter (HQ) 063616 (Mar. 26, 1980), HQ 085216 (Oct. 27, 1989), HQ 562175 (Oct. 29, 2001), and HQ 563422 (May 30, 2006), are cited by the importer in support of its position.
In HQ 082516, at issue was the country of origin of sugar grown in India or the United States, which was shipped to Canada where the sugar was sifted and magnetically treated to remove tramp iron and then repacked in various sized bags before being imported into the United States. The operations in Canada converted the sugar from non-food grade to food grade under the U.S. Food and Drug Administration standards. The U.S. Customs Service (now CBP) found that the Canadian operations merely removed impurities but did not substantially transform the sugar, which remained the same chemically and physically. Accordingly, the Canadian operations resulted in the alteration of the U.S.-exported sugar within the meaning of subheading 9802.00.50, HTSUS, so that duty on the U.S. sugar, but not the Indian sugar, was only assessed on the cost of the foreign operations.
The importer argues that, like the sugar cleaning operations in HQ 085216, the purification processes in the instant case merely remove impurities from the exported metals. Further, the importer argues, although HQ 085216 involved a strictly mechanical process, other rulings such as HQ 063616 establish that incorporating chemicals to effectuate a purifying or restorative change does not cause a process to exceed the scope of an alteration within the meaning of subheading 9802.00.50, HTSUS. HQ 063616 concerned the regeneration of metal oxides on an aluminum substrate (cylinders), during which process it was possible that some of the oxides would chemically react with the oil it was being used to “crack” to form metal sulfides. In such cases, 95 percent to 100 percent of the sulfides would be reconverted to oxides during the regeneration process, after which the cylinders would be returned to the U.S.
HQ 562175 concerned the eligibility of sodium chondroitin sulfate for the partial duty exemption provided under subheading 9802.00.50, HTSUS. The sodium chondroitin sulfate was exported as a solution from the U.S. to Spain, where it was diluted with water, filtered, purified by precipitation, dried, sieved, milled, and homogenized. The result was two different powders with varying amounts of sodium chondroitin sulfate, which were packaged and shipped to the United States. However, the sulfate was sold in both liquid and powder forms to health food supplement manufacturers, who further processed it for sale to consumers. CBP found that the operations performed in Spain constituted an alteration within the meaning of subheading 9802.00.50, HTSUS, because the chondroitin sulfate was complete for its intended use prior to being exported to Spain, the Spanish operations did not have the effect of destroying the identity of the chondroitin or changing its chemical composition, and the Spanish operations did not result in any significant change in the character or use of the product.
As an initial matter, we note that HQ 085216 and HQ 063616 illustrate CBP’s longstanding view that products exported to be purified are the same chemically and physically as the purified product, despite the impurities in the exported product. Although not concerning purification, HQ 562175 also sets out CBP’s view that, under the provisions of subheading 9802.00.20, HTSUS, imported products must be the same chemically and physically the same as the exported products. Our view is supported by May Food Manufacturing dba Mrs. May’s Naturals v. United States (May Food), 616 F. Supp. 2d 1349 (citations omitted). The Court of International Trade, citing Chevron Chem. Co. v. United States, 59 F. Supp. 2d 1361, 1369 (Ct. Int’l Trade 1999) stated, “[u]nder subheading 9802.00.50, HTSUS, changes and additions to an article constitute alterations so long as the article has not lost its identity or has not been converted into something else.” (Internal quotation marks omitted.) May Food at 1352.
HQ 085216, HQ 063616 and HQ 562175 are distinguishable from the instant case. Unlike previous cases, the issue in the instant case is not that chemicals were used in the purification process, but that they were left in the product and not removed until after importation. Ruthenium, iridium, and rhodium, in the form of precious metal residues, and iridium and ruthenium in sponge form, were exported. However, the precious metals imported (ruthenium chloride, iridium chloride, and rhodium chloride) contained chlorine, making them chemically and commercially distinct from the exported metals.
Using the case of ruthenium as an example, when it is exported in sponge form, it is as a particular product, known chemically as Ru, and commercially as Ruthenium Black (CAS-No. 7440-18-8). According to counsel, these commercial and chemical descriptions for ruthenium sponge do not pertain to the final ruthenium product with the chlorine removed. The imported merchandise, ruthenium chloride, is known chemically as RuCL3, and commercially as ruthenium chloride solution, which has the CAS-No. 10049-08-8. Based on this example, it is our understanding that none of the commercial and chemical descriptions of the imported chloride solutions pertain to the exported products or to the final products that have the chlorine removed.
In accordance with the longstanding classification principle that goods must be classified in the condition in which they are imported, our decision must take account of the fact that when imported, the metals are chlorides. Although it appears that the chloride solutions are created at a particular stage of the recycling process and that the metals will be returned to a pure state before being used, we cannot take into consideration that the chlorine will be removed after importation. Consequently, we find that the overseas operations cause the exported metals to lose their identities and to become new articles when imported, both chemically and commercially. Accordingly, we find that the overseas operations are more than just alterations. See HQ 561757 (Oct. 19, 2000), HQ 555772 (Jan. 14, 1991), and HQ 555461 (Mar. 15, 1990).
The importer cites HQ 563422 for the proposition that the conversion of a substance from a liquid to a solid is an acceptable alteration under subheading 9802.00.50, HTSUS. In HQ 563422, sugar syrup was exported from the U.S. to be crystallized. CBP found that the operations performed abroad did not have the effect of destroying the identity of the sugar or changing its chemical composition, but only served to change the form of the product from a liquid to a solid.
Subheading 9802.00.50, HTSUS, allows previously exported goods to be imported in an altered form. In HQ 563422, that meant that exported sugar syrup was allowed to be imported as crystallized sugar under the provisions of the subheading because the exported and imported products were chemically the same. Based on the record in this case, the port did not object to classification under subheading 9802.00.50, HTSUS, because the exported metals were being imported in new forms, that is as solutions or as salts. The objection was based on the fact that the solutions and salts contained chlorine, making the merchandise imported chemically different from those that had been exported.
After considering the facts, we find that the port was correct in denying entry of the metal chlorides under subheading 9802.00.50, HSTUS, because they were not chemically or commercially the same as the metals that had been exported. The exported metals were not altered but were transformed by the addition of chlorine into new chemicals and commercial products.
Finally, we note that our decision in this case is distinguishable from that taken in Press Wireless v. United States, 6 Cust. Ct. 102 (1941), and other cases in which a finished article is exported for repair or, analogously, to be recycled. In Press Wireless, radio tubes were sent abroad for repairs so as to restore the tubes to perfect working condition. Heavier filament than that used in the original tubes was used to effect the repairs, which resulted in increased efficiency of the tubes, though the increase was not important to the importer’s use of the tubes. The court held that the use of improved materials in the restoration was immaterial, as long as the article was not considered a new and different article of commerce or its identity was destroyed. In the instant case, the metals’ identities as ruthenium, rhodium, and iridium were lost by the overseas purification operations and not regained until after importation. At the time of importation they were new and different articles of commerce.
HOLDING:
Based on the facts presented, the imported metal chlorides are new and different products from the reclaimed metals and metal sponges that were exported. Consequently, they do not qualify for the partial duty exemption provided under subheading 9802.00.50, HTSUS, for articles returned after repair or alteration overseas. This protest should be denied.
In accordance with the Protest/Petition Processing Handbook (CIS HB, December 2007), you are 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 in accordance with the decision must be accomplished prior to the mailing of the decision. Sixty days from the date of the decision the Office of International Trade, Regulations and Rulings, will make the decision available to CBP personnel and to the public on the CBP website, located at www.cbp.gov, by means of the Freedom of Information Act and other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division