CLA-2: OT:RR:CTF:TCM H219217 RSD
Port Director
U.S. Customs and Border Protection
Port of Houston
2350 N. Sam Houston Pkwy E. #1000
Houston, Texas 77032-3100
RE: Protest Number 5309-12-100006; Classification of Spent Carbon Fines Containing Gold; Generalized System of Preferences
Dear Port Director:
This is our decision on Protest Number 5309-12-100006 filed by counsel on behalf of IAMGOLD Purchasing Services, Inc., against your decision of the classification under the Harmonized Tariff Schedule of the United States (HTSUS) of gold saturated carbon fines imported from Suriname. In addition, Protestant claims that the imported merchandise was eligible for duty-free treatment under the Generalized System of Preferences (GSP).
FACTS:
The subject imported merchandise is known as gold-saturated carbon fines. These carbon fines containing gold were imported directly from Suriname and were the result of a gold extracting process called “carbon-in-leach” (CIL). According to counsel, the process that produced the imported carbon fines began with the mining of mineral ores containing gold in an open pit in Suriname. The rocks containing gold were hauled to a crusher and ball mills, which reduced the ore to a pulp or slurry. The ground ore was then transferred to tanks to be treated with cyanide, creating a cyanide/ore solution with gold. The cyanide/ore solution was thickened and then sent to leaching tanks. Activated carbon was added, and as it absorbed the particles of gold into its pores, the activated carbon was changed to loaded carbon. The loaded carbon was then mechanically screened and sent through an acid wash, which removed some impurities (specifically calcium). Through a desorption process, 95 percent of the gold was removed from the loaded carbon. When the loaded carbon was stripped down to approximately 5 percent gold, the carbon was sent to a thermal regeneration kiln with an inside temperature of 650 degrees Celsius, where the stripped carbon was reactivated. The reactivated carbon containing gold was then sent to a carbon sizing screen. Any carbon small enough to fall through the screen was considered a carbon fine. In other words, the merchandise at issue in this protest, the carbon fines was a by-product of a gold recovery process. The gold particles contained in the carbon fines were smaller than a carbon fine itself and were not visible to the naked eye.
The spent carbon fines were imported in bags each of which typically weighed 500-1,500 kilograms. For each bag, the Protestant used a formula based on its actual past experience to calculate and estimate the amount of gold that it recovered, measured in ounces. Using the estimated amount of recoverable gold in each bag, Protestant calculated the invoice value of the imported carbon fines using the price of gold on the London Metal Exchange on the date of the invoice.
In order to verify the nature of the merchandise subject to this Protest, a sample was sent to Customs and Border Protection (CBP) Office of Laboratories and Scientific Services. The Office of Laboratories and Scientific Services indicates that the sample was dried, then sieved, and separated into the following three components:
Sand colored material in a size less than 0.5 mm
Brown colored material in a size range between 0.5mm-1mm
Black colored material in a size range between 1mm-2.36 mm.
The laboratory report further indicates that the black colored material essentially consists of carbon with 0.04 percent gold content, a small amount of calcite (calcium carbonate), and a small amount of quartz. The sand colored material is mostly composed of quartz. The brown material contains quartz (silicon dioxide), albite (sodium aluminum silicate) strontium silicon fluoride hydrate, and some other unidentified material with a small amount of carbon.
The merchandise at issue was entered on July 5, 2010. At the time of entry,
Protestant entered the merchandise under subheading 7108.11.00, HTSUS. The entry was liquidated on June 24, 2011. On December 21, 2011, Protestant filed a protest against the tariff classification of the merchandise in subheading 3802.10.00, HTSUS.
ISSUES:
I. Whether the subject merchandise is classified as other articles of activated carbon under heading 3802, HTSUS, or as articles of gold in heading 7108, HTSUS?
II. If classified in heading 7108, HTSUS, is the subject merchandise classified in subheading 7108.11.00, as a gold powder or in the basket provision of subheading 7108.12.50, as nonmonetary other unwrought forms of gold, other?
III. Whether the subject merchandise is eligible for duty free treatment under the Generalized System of Preferences?
LAW AND ANALYSIS:
The matter protested is protestable under 19 U.S.C. §1514(a) (2) as a decision on classification. The protest was timely filed on December 21, 2011, within 180 days of liquidation of the first entry for entries made on or after December 18, 2004. (Miscellaneous Trade and Technical Corrections Act of 2004, Pub.L. 108-429, § 2103(2)(B)(ii), (iii) (codified as amended at 19 U.S.C. § 1514(c)(3)(2006)). Further Review of Protest No. 5309-12-100006 was properly accorded to Protestant pursuant to 19 C.F.R. § 174.24 because the decision against which the protest was filed involves specific factual and legal questions that have not been the subject of a Headquarters ruling or court decision. Specifically, the issue is whether the subject article is classified in heading 3802, HTSUS, or in heading 7108, HTSUS.
I. CLASSIFICATION
Classification of goods under the HTSUS is governed by the General Rules of Interpretation (GRI). GRI 1 provides that classification 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 2 through 6 may then be applied in order.
The HTSUS provisions at issue are as follows:
3802 Activated carbon activated natural mineral product; animal black including spent animal black
3802.10.0000 Activated carbon
* * *
7108 Gold (including gold plated with platinum) unwrought or in
semimanufactured forms, or in powder form:
Nonmonetary:
7108.11.00 Powder
7108.12 Other unwrought forms:
7108.12.10 Bullion and Dore
Bullion:
7108.12.50 Other
***
The Harmonized Commodity Description and Coding System Explanatory Notes (ENs), constitute the official interpretation of the Harmonized System at the international level. While neither legally binding nor dispositive, the ENs provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of the headings. It is CBP’s practice to follow, whenever possible, the terms of the ENs when interpreting the HTSUS. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
In considering whether the carbon fines are classified in Chapter 38, HTSUS, as activated carbon or in Chapter 71, HTSUS, we note the composite nature of the good, of which the recovery of trace amounts of the precious metal gold stripped from the carbon is the reason why the product was imported into the United States. The imported carbon fines with a trace amount of gold cannot be classified in Chapter 38, HTSUS under GRI 1 because they do not only consist of activated carbon.
With respect to the classification of carbon fines in Chapter 71, HTSUS, as precious metals, we must consider Legal Note (LN) 5 in chapter 71, HTSUS. LN 5 provides that for the purposes of this chapter, any alloy (including a sintered mixture and an inter-metallic compound) containing precious metal is to be treated as an alloy of precious metal if any one precious metal constitutes as much as 2 percent, by weight, of the alloy. LN 5(b) further specifies an alloy containing 2 percent of more by weight, of gold but no platinum, or less than 2 percent, by weight, of platinum, is treated as an alloy of gold. Because the carbon fines at issue do not consist of 2 percent gold or more by weight, in accordance with LN 5, they cannot be considered as a precious metal. Thus, they also cannot be classified in Chapter 71 HTSUS under GRI 1. Therefore, because no single heading of the HTSUS completely describes the spent carbon fines, and their components, they are prima facie classifiable in two or more headings, and thus their classification must be resolved using GRI 3. GRI 3 provides, in pertinent part:
When by application of Rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:
(b) Mixtures, 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.
For purposes of GRI 3(b) the EN (IX) to GRI 3(b) explains, in relevant part, that: … composite goods made up of different components shall be taken to mean not only those in which the components are attached to each other to form a practically inseparable whole but also those with separable components, provided these components are adapted one to the other and are mutually complementary and that together they form a whole which would not normally be offered for sale in separate parts.
GRI 3(b) requires that classification be based on the product that provides the composite good with its essential character. In its discussion of the essential character of composite goods, EN (VIII) to GRI 3(b) states:
The 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.
There have been several court decisions on "essential character" for purposes of classification under GRI 3(b). See, Conair Corp. v. United States, 29 C.I.T. 888 (2005); Structural Industries v. United States, 360 F. Supp. 2d 1330, 1337-1338 (Ct. Int’l Trade 2005); and Home Depot USA, Inc. v. United States, 427 F. Supp. 2d 1278, 1295-1356 (Ct. Int’l Trade 2006), aff’d 491 F.3d 1334 (Fed. Cir. 2007). “[E]ssential character is that which is indispensable to the structure, core or condition of the article, i.e., what it is.” Home Depot USA, Inc. v. United States, 427 F. Supp. 2d at 1293 quoting A.N. Deringer, Inc. v. United States, 66 Cust. Ct. 378, 383 (1971). In particular in Home Depot USA, Inc. v. United States, the court stated “[a]n essential character inquiry requires a fact intensive analysis.” 427 F. Supp. 2d 1278, 1284 (Ct. Int’l Trade 2006). Therefore, a case-by-case determination on essential character is warranted in this situation.
Applying the essential character analysis to the present case, we have considered factors such as the nature and value of the components, and the role of the constituent material in relation to the use of the goods.
The imported carbon fines are properly classified under GRI 3(b) because they are a composite good. The essential character of the imported product is determined by the precious metal contained in the spent carbon fines because of its value, as compared to the carbon and other material in the fines, which is essentially worthless. We also note that the gold contained in the carbon fines is the only reason why the product was imported into the United States. Therefore, pursuant to GRI 3(b), we find the imported good to be classified in Chapter 71. Moreover, because the removal of the precious metals from the carbon is a specific process to obtain the gold rather than waste and scrap resulting from the processing, it is not properly classified as waste and scrap. Based on the above, we find that the imported good is properly classified in heading 7108, HTSUS.
Next, pursuant to GRI 6, we must ascertain in which subheading, contained in heading 7108, the carbon fines are classified. In accordance with Chapter 71, Subheading Note 1, HTSUS, for the purposes of subheading 7108.11, the expression "powder" and “in powder form” mean products of which 90 percent or more by weight passes through a sieve having a mesh aperture of 0.5 mm. In order to determine the size of the particles of the carbon fines, the CBP Office of Laboratory Services performed an analysis on a sample of carbon fines. After analyzing the sample, which was broken down into 3 segments the CBP Lab determined that the gold was only present in the black colored segment of the sample carbon fines which consisted mostly of carbon with small amounts of other materials. The particle size of the black color material portion of the sample, which contained the gold, was between 1 mm-2.36 mm. Therefore, based on CBP’s laboratory analysis, the particle size of the carbon fines is too large to be considered as “powder” under the definition provided in Chapter 71, subheading Note 1. Although the gold contained in the carbon fines was much smaller than 0.5 mm, at the time of importation, the gold was attached to the carbon fine particles which were larger than 0.5 mm. It is a basic concept of Customs law that articles imported into the United States are classified and duty is assessed on the basis of their condition when they are imported into the United States, not on the basis of what their condition may become after importation into the United States. See United States v. Citroen, 223 U.S. 407, 414-415 (1911), and cases cited therein; see also Simod America Corp. v. United States, 872 F. 2d 1572, 1577 (Fed. Cir. 1989)). Thus, because the spent carbon fines containing the gold were larger than 0.5 mm at the time of importation, they cannot be classified as a powder in subheading 7108.11, HTSUS.
Accordingly, the carbon fines are classified in the next subheading of 7108.12, as “other unwrought forms”. The term "unwrought" refers, in relevant part, to metal whether or not refined, in the form of ingots, blocks, lumps...cathodes, anodes... and similar manufactured primary forms, but does not cover...cast or sintered forms which have been machined or processed otherwise than by simple trimming, scalping or descaling. See Section XV, Additional U.S. Note 2, HTSUS. This subheading is broken down into “bullion and dore” and “other”.
The term "bullion" is not defined in the tariff or in the legal notes. When a tariff term is not defined by the HTSUS or the legislative history, its correct meaning is its common, or commercial, meaning. See Rocknel Fastener, Inc. v. United States, 267 F.3d 1354, 1356 (Fed. Cir. 2001). "To ascertain the common meaning of a term, a court may consult 'dictionaries, scientific authorities, and other reliable information sources'
and 'lexicographic and other materials.'" Id. (quoting C.J. Tower & Sons of Buffalo, Inc. v. United States, 673 F.2d 1268, 1271, 69 Cust. Ct. 128 (1982); Simod Am. Corp. v. United States, 872 F.2d 1572, 1576 (Fed. Cir. 1989)).
In Jarell-Ash Co. v. United States, 60 Cust. Ct. 65 (1968), the U.S. Customs Court considered the classification of, among other items, silver grain described as "extremely small, irregularly shaped pieces of … silver, which have no uniform longitudinal or latitudinal measurement." The provision under consideration was paragraph 1638 of the Tariff Act of 1930, which exempted from duty "Bullion, gold or silver." Id. n.2. The Court consulted several dictionary definitions before concluding that the common meaning of the term "bullion" is "uncoined gold or silver in the mass considered as so much metal without regard to any value imparted to it by its form." Id. at 67. The Court further noted that "[n]ormally bullion is in the form of ingots, bars, plates and the like … [b]ut it may also consist of other forms or shapes so long as the form or shape does not impart value to the mass.” Since the gold contained in the carbon fines are not in the form of ingots, bars and plates and like, we do not believe that the carbon fines can be classified as bullion in subheading 7108.12.10, HTSUS.
Subheading 7108.12.10, HTUS also provides for gold dore, and thus to determine whether the carbon fines are classified in subheading 7108.12.10, HTSUS, we must also ascertain whether the carbon fines can be described as gold dore. Again, neither the HTSUS nor the Explanatory Notes provide a definition of the term gold dore. Accordingly, in accordance with Rocknel Fastener, Inc. v. United States Supra., we must consult an alternative source to get the meaning of the term gold dore to see if the carbon fines can be described as gold dore. The website http://www.allaboutjewels.com, which is a dictionary of jewelry terminology, provides the following definition for the term gold dore:
GOLD DORE
Gold doré (pronounced gold doh-rey) is a bar of semi-purified gold (e.g. bullion). After being mined, the first stage in the purification process of the gold ore produces a cast bar (gold dore) that is approximately 90% gold. The other 10% is mostly metals like silver and copper.
The carbon fines are not bars and the laboratory analysis revealed that they contain only a minuscule amount of gold which does not approach 90% gold. Accordingly, they do not fit within the above definition of gold dore, and thus we find the carbon fines cannot be classified as gold dore in subheading 7108.12.10, HTSUS. Since the gold contained within the carbon fines is not powder, bullion, nor gold dore, then the classification of the carbon fines would fall to the next applicable subheading, which is the basket provision of subheading 7108.12.50, HTSUS.
II. Generalized System of Preferences
Protestant claims that the carbon fines were eligible for duty free treatment under the General System of Preferences (GSP). Title V of the Trade Act of 1974, as amended (19 U.S.C. 2461-65), authorizes the President to establish a Generalized System of Preferences to provide duty-free treatment for eligible articles from beneficiary developing countries (“BDCs”). Articles produced in a BDC may qualify for duty-free treatment under the GSP if the goods are imported directly into the customs territory of the U.S. from the BDC and the sum or value of materials produced in the BDC plus the direct costs of the processing operations performed in the BDC is equivalent to at least 35 percent of the appraised value of the article at the time of entry into the United States. See 19 U.S.C. § 2463(a)(2) and (3).
According to the analysis above, the imported carbon fines are classified in subheading 7108.12.50, HTSUS, which is a GSP-eligible provision. Suriname is also designated as a BDC for purposes of the GSP. Thus, if the product at issue was produced in Suriname, it may be afforded preferential treatment under the GSP. See GN 4(a), HTSUS. Accordingly, the first issue that must be resolved is whether the imported carbon fines were a “product of” Suriname. A good is considered to be a “product of” a BDC if it is wholly the growth, product or manufacture of the BDC, or if made of materials imported into the BDC, those materials were substantially transformed in the BDC into a new and different article of commerce. See 19 C.F.R. § 10.176(a). In this case, it is not disputed that the spent carbon fines containing gold were wholly mined and totally processed within Suriname, and therefore a product of Suriname.
The record also indicates that there was no controversy as to whether the subject merchandise was imported directly into the United States from Suriname.
The next consideration in our analysis for eligibility for duty-free treatment under the GSP statute is to determine whether the merchandise has satisfied the 35 percent value-content requirement. For purposes of satisfying the 35 percent value-content requirement, 19 C.F.R. § 10.176(a) states, in pertinent part, that:
Duty-free entry under the GSP may be accorded to an article only if the sum of the cost or value of the materials produced in the beneficiary developing country, … plus the direct costs of processing operations performed in the beneficiary developing country or member countries, is not less than 35 percent of the appraised value of the article at the time it is entered.
In determining the cost or value of the materials produced in a beneficiary developing country, the following can be considered: (i) the manufacturer’s actual cost for the materials; (ii) when not included in the manufacturer’s actual cost for the materials, the freight, insurance, packing, and all other costs incurred in transporting the materials to the manufacturer’s plant; (iii) the actual cost of waste or spoilage (material list), less the value of recoverable scrap; and (iv) taxes and/or duties imposed on the materials by the beneficiary developing country, or an association of countries treated as one country, provided they are not remitted upon exportation. 19 C.F.R. § 10.177(c). "Direct costs of processing operations" are defined as costs either directly incurred in, or which can be reasonably allocated to, the growth, production, manufacture, or assembly of the specific merchandise under consideration. 19 C.F.R. § 10.178(a).
The protest record does contain adequate documentation of the production costs of the spent carbon fines to establish that at least 35 percent of the appraised value of the imported merchandise was incurred in Suriname. We also recognize that at the time of importation into the United States, the importer was only able to provide an estimate of the appraised value of the carbon fines because their value was dependent upon the amount of gold contained in a shipment, which would not be precisely known until after the processing to remove the gold was completed in the United States. However, under 19 C.F.R. § 10.176(c), “merchandise which is wholly the growth, product or manufacture of a beneficiary developing country … and manufactured products consisting of materials produced only in such country … shall normally be presumed to meet the requirements set forth in this section”, which includes the 35 percent value content requirement of the GSP. The record indicates that all the materials used to produce the carbon fines are mined or otherwise wholly produced in Suriname, and that all the processing operations involved in producing the carbon fines were performed in Suriname. Because all of the costs involved in producing the merchandise were attributable to materials obtained from Suriname and the processing performed in Suriname, in accordance with 19 C.F.R. § 10.176(c), we will presume that the 35 percent value content requirement of the GSP has been met. Therefore, we find that the Protestant has satisfied the requirements for eligibility under the GSP. Accordingly, we hold that the imported spent carbon fines, containing gold content, qualify for duty-free treatment under the GSP. However, we recognize that there may be future importations of the same merchandise; if such is the case, it is within your authority to request documentation to verify the Protestant’s future GSP claims. The protest should be granted.
HOLDING:
The imported carbon fines are classified in subheading 7108.12.50, HTSUS, “Gold (including gold plated with platinum) unwrought or in semimanufactured forms, or in powder form: Nonmonetary: Other unwrought forms: Other.” The 2010 general column one a rate of duty was 4.1 percent ad valorem.
Based on the facts described above, the imported carbon fines have satisfied the requirements for qualifying for preferential treatment under GSP. Protest No 5309-12-100006 is Granted.
In accordance with the Protest/Petition Processing Handbook (CIS HB December 2007), you are to mail this decision, together with the CBP Form 19, to the protestant no later than 60 days from the date of this letter. Any re-liquidation of the entry or entries in accordance with the decision should be accomplished prior to mailing of this decision. Sixty days from the date of this decision, the Office of Regulations and Rulings will
make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial & Trade Facilitation Division