CLA-2 OT:RR:CTF:TCM H243801 LOR
Ms. Casey Owen Durst
Area Port Director
U.S. Customs and Border Protection
50 South Maine Street
St. Albans, VT 05403
ATTN: Ellen Isham, Senior Import Specialist
RE: Application for Further Review of Protest No. 0201-13-100006; Classification of
Obsolete or Second-hand jewelry Containing Gold, Silver and Platinum and Obsolete or Second-hand Silver Tableware; 7113.19.25, HTSUS; 7114.11.60, HTSUS; 9817.00.90, HTSUS
Dear Ms. Durst:
This is in response to an Application for Further Review of Protest Number 0201-13-100006, submitted on behalf of Colt Refining, Inc. (“protestant”). Protestant contests the classification of merchandise by U.S. Customs and Border Protection (“CBP”) under subheading 7113.19.25, of the Harmonized Tariff Scheduled of the United States (HTSUS), which provides for “Articles of jewelry and parts thereof, of precious metal or of metal clad with precious metal: Of other precious metal, whether or not plated or clad with precious metal: Mixed link.” Furthermore, Protestant claims duty free treatment under subheading 9817.00.90, HTSUS, as articles of metal 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. In addition to the evidence forwarded with the file, including documentation subsequently presented by protestant, this decision also takes into consideration arguments presented at a meeting held between protestant and members of my staff on September 4, 2014.
FACTS:
The protest covers nine entries of previously-owned gold, silver and platinum jewelry and certain silver tableware packed in drums and imported into the United States to be melted for recovery of the precious metal. The merchandise at issue was entered into the United States from May of 2012 through September of 2012 under subheading 7112.99.00, HTSUS, which provides for “Waste and scrap of precious metal or of metal clad with precious metal; other waste and scrap containing precious metal or precious metal compounds, of a kind used principally for the recovery of precious metal: Other.”
According to protestant, the jewelry and tableware were obtained from a Canadian jeweler through purchase at collection events or from manufacturers who sell the items because they are obsolete, broken, damaged or otherwise unwanted, or because they are sweepings or articles damaged in manufacturing. Items sent for recovery of the precious metal to Protestant are segregated in a pail labeled with an identification number, with items such as broken necklaces and watch bands along with an invoice listing the item shipped, the weight, the seal number, and other information. The pails are loaded into drums, with the contents of each drum sealed and labeled with separate seal numbers. Following entry into the United States, the drums are opened, precious stones are removed, and the merchandise and invoices are examined by representatives from the Protestant, the jeweler and the U.S. recovery company. The Canadian jeweler’s representative witnesses the Protestant’s placement of the articles into the melting pot. Once the merchandise is melted, the resulting metal is weighed and measured. Following processing, the various parties reach a settlement price based on the precious metals value, as reflected in settlement reports.
Inspection of the merchandise by CBP officers upon importation, and samples taken at that time, revealed that in its imported condition, the articles, with or without repair or renovation, could be used as necklaces, bracelets, rings or other jewelry items and silverware. Local CBP also found that no attempt was made prior to import to render the goods damaged beyond repair or renovation by means of shredding, melting, or acidifying the precious metal. Photographs taken of the imported goods show jewelry that appears to be intact, along with some broken pieces and some articles that could be sold as jewelry with minor repair. Inspection also indicated that some of the imported goods could also be converted for other uses without being subjected to a process for the recovery of the precious metal. In response to a Notice of Propose Action, the Protestant filed a memo dated August 2, 2012, explaining its business as a precious metals refiner and that it does not sell articles of jewelry at wholesale or retail. Additional documents were submitted concerning the processing of the materials. The Canadian jeweler also submitted a letter to the protestant dated August 2, 2012 (and forwarded to the port) confirming that all of its shipments to protestant were made up of obsolete, damaged and/or unwanted jewelry, and were shipped for the purpose of recovery of precious metals through refining. CBP rate advanced the entries, as articles of jewelry of precious metals and subsequently liquidated them under subheading 7113.19.25, HTSUS, on October 26, 2016.
ISSUES:
Whether the imported merchandise is properly classified in heading 7112,
HTSUS, which provides for “Waste and scrap of precious metal or of metal clad with precious metal; other waste and scrap containing precious metal or precious metal compounds, of a kind used principally for the recovery of precious metal”.
Whether the imported merchandise is properly classified in heading 7113,
HTSUS, which provides for “Articles of jewelry and parts thereof, of precious metal or of metal clad with precious metal”.
Whether the imported silverware is properly classified in heading 7114, HTSUS, which provides for “Articles of goldsmiths’ or silversmiths’ wares and parts thereof, of precious metal or metal clad with precious metal”.
Whether Protestant should be permitted to correct and resubmit its entries under subheading 9817.00.90, HTSUS, as articles 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.
LAW & ANALYSIS:
Initially, we note that this matter is protestable under 19 U.S.C. § 1514(a) (2) as a decision on classification. The protest was timely filed within 180-days of liquidation for entries made on or after December 18, 2004. See, 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)). The Protest was timely filed on April 22, 2013, within 180 days of the date of liquidation. (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. 0201-13-100006 is properly accorded to Protestant pursuant to 19 C.F.R. § 174.24. Specifically, further review is justified under 19 C.F.R. § 174.24(a) in light of Protestant’s allegation that the classification decision is inconsistent with other rulings by the Commissioner of Customs or his designate, including, but not limited to, HQ H168824, dated February 29, 2012, which involves the importation of substantially similar merchandise.
Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRI). GRI 1 provides that the classification of goods shall be “determined according to the terms of the headings 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 GRI 2 through 6 may be applied in order.
The HTSUS provisions under consideration are as follows:
7112. Waste and scrap of precious metal or of metal clad with precious metal; other waste and
scrap containing precious metal or precious metal compounds, of a kind used principally
for the recovery of precious metal:
* * * *
7113. Articles of jewelry and parts thereof, of precious metal or of metal clad with precious
metal:
* * * *
7114. Articles of goldsmiths’ or silversmiths’ wares and parts thereof, of precious metal or of
metal clad with precious metal:
* * * *
Chapter 71, Note 1, HTSUS, provides the following:
1. Subject to note 1(a) to section VI and except as provided below, all articles consisting wholly
or partly:
Of natural or cultured pearls or of precious or semiprecious stones (natural, synthetic or
reconstructed), or
(b) Of precious metal or of metal clad with precious metal, are to be classified in this chapter.
Pursuant to Note 4(a) to Chapter 71, HTSUS, the expression “precious metal” means silver, gold and platinum.
The following language is set forth at Chapter 71, HTSUS, Note 8:
Subject to note 1(a) to section VI, goods answering to a description in heading 7112 are to be classified in that heading and in no other heading of the tariff schedule.
Additional U.S. Note 1(c) to Chapter 71, HTSUS, states: ‘The term “waste and scrap” refers to materials and articles which are second-hand or waste or refuse, or are obsolete, defective or damaged, and which are fit only for the recovery of the metal content or for use in the manufacture of chemicals. It includes residues and ashes of a kind used principally for the recovery of precious metals, but does not include metals in unwrought form or metal-bearing materials provided for in heading 2616.
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 these headings. See T.D. 89-80, 54 Fed. Reg. 35127-28 (Aug. 23, 1989).
The EN for 71.12, HTSUS, provides, in pertinent part:
This heading covers waste and scrap in metallic form fit only for the recovery of the precious metal, or for use as a basis for the manufacture of chemicals.
The heading also covers waste and scrap of any material containing precious metal or precious metal compounds, of a kind used principally for the recovery of precious metal.
Scrap of worn-out or broken articles (tableware, goldsmiths’ or silversmiths’ wares,
catalysts in the form of woven gauze, etc.) no longer fit for their original use. It does not extend to those which, with or without repair or renovation, can be reused for their former purposes, or which can be converted for other uses without being subjected to processes for the recovery of precious metals. (Emphasis in original).
The EN for heading 7113, HTSUS, provides the following, in pertinent part:
This heading covers articles of jewellery as defined in Note 9 to this Chapter, wholly or partly of
precious metal or metal clad with precious metal, that is:
(A) Small objects of personal adornment (gem-set or not) such as rings, bracelets,
necklaces, brooches, ear-rings, neck chains, watch-chains and other ornamental chains; fobs, pendants, tie-pins and clips, cuff-links, dress-studs, buttons, etc.; religious or other crosses; medals and insignia; hat ornaments (pins, buckles, rings, etc.); ornaments for handbags; buckles and slides for belts, shoes, etc.; hair-slides, tiaras, dress combs and similar hair ornaments.
To fall in this heading these articles must contain precious metal or metal clad with precious metal (including base metal inlaid with precious metal) to an extent exceeding minor
constituents; ...
The heading also covers unfinished or incomplete articles of jewellery and identifiable parts of jewellery, provided they contain precious metal or metal clad with precious metal to an extent exceeding minor constituents, for example, motifs for incorporation in rings, brooches, etc.
(Emphasis in original)
* * * *
Note 10 to Chapter 71, HTSUS, provides the following:
10. For the purposes of heading 7114, the expression "articles of goldsmiths' or silversmiths' wares" includes such articles as ornaments, tableware, toilet-ware, smokers' articles and other articles of household, office or religious use.
The EN for heading 7114, HTSUS, provides the following, in pertinent part:
This heading covers articles of goldsmiths’ or silversmiths’ wares as defined in Note 10 to this Chapter wholly or partly of precious metal or metal clad with precious metal. In general these goods are larger than articles of jewellery of heading 71.13; they include:
Articles of tableware such as table knives, carving sets, spoons, forks; ladles; poultry
or meat grips; trays, plates, soup or vegetable dishes and bowls; sauce-boats; fruit dishes; sugar-bowls, coffee-pots, teapots, tea or coffee cups; goblets; egg-cups, decanters, liqueur services; stands and baskets for bread, cake, fruit, etc.; fish-servers; cake servers; wine cooling buckets; cruets; sugar-tongs; knife-rests, serviette rings; table bells; ornamental stoppers, etc.
* * * *
Classification in Chapter 71, HTSUS:
Protestant claims that the imported merchandise should be classified as waste and scrap under heading 7112, HTSUS, but notes that the articles are not “factory waste and scrap”. Several cases have discussed the definition of waste and scrap. For instance, in Latimer v. United States, 223 U.S. 501 (1912), the Court held that broken tobacco leaves used in making a cheaper grade of tobacco products were not waste because they were used for the main purpose of making tobacco products. Likewise, in Mawer-Gulden-Annis (Inc.) v. United States, 17 CCPA 270, T.D. 43689 (1929), the court held that imperfect or broken olives, not salable as perfect or whole or stuffed olives, were not waste. The court reached its decision by noting that while inferior to perfect or whole olives, they nevertheless possessed the same food qualities and some of the uses of whole, pitted green olives. In citing these cases, the court in the United States v. David Studner, et al., 57 C.C.P.A. 122, 427 F.2d 819, 821, C.A.D. 990 (1970), approved the following definition of waste: "[T]hat which has no original value or no value for the ordinary or main purpose of manufacture" (emphasis in the original).
In HQ 963790, dated January 29, 2001, CBP advised: “[T]he fact that both the foreign exporter and the protestant regard this merchandise as waste and scrap does not satisfy the legal requirement that the merchandise be worn-out, no longer fit for its original use, and fit only for the recovery of the metal content. Customs is obligated to classify and assess duty on merchandise in its condition as imported.” CBP has consistently followed the long-standing classification principle stated by the Supreme Court in United States v. Citroen, 223 U.S. 407, 414-15, 32 S. Ct. 259, 56 L.Ed. 486 (1911): … [t]he rule is well established that “in order to produce uniformity in the imposition of duties, the dutiable classification of articles imported must be ascertained by an examination of the imported article itself, in the condition in which it is imported.” Worthington v. Robbins, 139 U.S. 337,341, 35 L. Ed. 181, 182, 11 Sup. Ct. Rep. 581; Dwight v. Merritt, 140 U.S. 213, 219, 35 L. Ed. 450, 452, 11 Sup. Ct. Rep. 768; United States v. Schoverling, 146 U.S. 76, 82, 36 L. Ed. 893, 895, 13 Sup. Ct. Rep. 24; United States v. Irwin (C.C.A. 2d C.) 24 C.C.A. 349, 45 U.S. App. 746, 78 Fed. 799, 802. [Emphasis supplied.] In this case, there is no indication that the imported articles could no longer be used as jewelry or tableware, or that the merchandise was fit only for the recovery of the precious metal.
Here, the goods at the time of importation consisted of jewelry [necklaces, bracelets, rings, brooches, etc.] and silverware made of precious metal. Consequently, by means of clarifying language of Additional U.S. Note 1(c) to Chapter 71 on waste and scrap; the ENs to heading 7112, HTSUS, on waste and scrap; and case law decisions referenced above with respect to waste and scrap, the subject merchandise cannot be classified in heading 7112, HTSUS, because the imported goods could be reused for their original purpose – that of jewelry or of silverware, as appropriate. Accordingly, the goods that are the subject of this protest are not subject to classification under heading 7112, HTSUS, inasmuch as the imported jewelry has value for the ordinary or main purpose of manufacture. Furthermore, as the imported articles of silverware also had value as such, these articles are not subject to classification under heading 7112, HTSUS, as waste or scrap metal.
Protestant’s claims that the merchandise is second-hand and certainly damaged are insufficient to overcome CBP’s determination after inspection and photographic evidence, that the imported articles could be used as necklaces, bracelets, rings and other jewelry or silverware without repair or renovation. Moreover, there is insufficient evidence to support a determination that an attempt was made prior to importation to render the merchandise damaged beyond repair or renovation by means of shredding, melting, or acidifying the precious metal.
We find that at the time of importation, the goods consisted of jewelry and silverware made of precious metals; some containing precious stones. Although some of the necklaces and watchbands may have been broken prior to being imported into the U.S., this does not render the jewelry unfit for use in its original condition as jewelry. Therefore, the imported jewelry is properly classified under heading 7113, HTSUS.
As with the imported jewelry, there is insufficient evidence for us to conclude that the imported silverware was unfit for use as silverware at the time of importation. Accordingly, the imported silverware is properly classified in heading 7114, HTSUS.
Classification in Heading 9817, HTSUS:
Subheading 9817.00.90, HTSUS, provides as follows:
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.
Procedures for compliance with this subheading are specifically provided for in 19 C.F.R. § 54.6. In connection with the entry a statement of the importer is required consistent with the requirements of 19 CFR 10.134 that the intended use of the merchandise is one of the uses provided for in the subheading. Liquidation of the entry shall be suspended pending proof of use or other disposition of the merchandise within three years from the date of entry, and within three 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 C.F.R. § 54.6(c)(1) through (4). See also, HQ H255172 dated November 24, 2014.
Proof of use of imported articles in remanufacture is discussed under 19 C.F.R. § 54.6(d). This section provides the following:
(d) If satisfactory proof of use of the articles in remanufacture by melting, or in
processing by shredding, shearing, compacting, or similar processing which rendered them fit only for the recovery of the metal content, is furnished within the prescribed time, the entry shall be liquidated without the assessment of duty on the covered articles. If proof is not filed within 3 years from the date of entry, or withdrawal from warehouse for consumption, or the use does not warrant the classification claimed, the entry shall be liquidated without any exemption from duty under subheading 9817.00.80 or 9817.00.90, HTSUS.
As used in this section, the phrase “in connection with the entry” means any time before liquidation of the entry or within the period during which a reliquidation may be completed (§ 113.43(c). Therefore, a claim for free entry under … subheading 9817.00.90, HTSUS, supported by a statement of intent may be filed at any time before liquidation of the entry or within the period during which a valid reliquidation may be completed.
Under certain conditions, as discussed at 19 C.F.R. § 113.43(c) free-entry documents may be accepted prior to liquidation or within the period during which a valid reliquidation may be completed. 19 C.F.R. § 113.43(c) provides the following:
(c) Acceptance of a free-entry or reduced-duty document prior to liquidation. When a bond is given for the production of any free-entry or reduced-duty document and a satisfactory document is produced prior to liquidation of the entry or within the period during which a valid reliquidation may be completed, provided the failure to file was not due to willful negligence or fraudulent intent, it shall be accepted as satisfying the requirement that it be filed in connection with the entry, and the bond charge for its production shall be cancelled.
Protestant cites HQ H168824 dated February 29, 2012, where CBP considered, and rejected, the claim that certain previously-owned jewelry and coins were eligible for classification in subheading 9817.00.90, HTSUS. In that case, the importer properly posted a bond in accordance to the provisions of 19 C.F.R. §§ 54.5 and 54.6. However, a determination regarding which of the imported jewelry would be resold and which of the imported jewelry would be melted was not made until after import. Therefore, CBP found that none of the imported goods satisfied the requirements of subheading 9817.00.90, HTSUS.
In this case, we are satisfied that Protestant has submitted sufficient evidence prior to liquidation to support a determination that all of the subject merchandise was 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. Both the protestant and Canadian jeweler provided evidence dated August 2, 2012, to support a determination that none of the subject articles were resold as jewelry or silver tableware. Protestant has provided affidavits and other documentation including entry documents; internal refinery logs; internal Inspection, Weighing and Sampling Summary Reports; and tracking of the imported articles through the overseas purchase and/or acquisition processes and throughout the destruction tracking and settlement processes. Therefore, we find that the items may be reliquidated under subheading 9817.00.90, HTSUS.
HOLDING:
Based upon the information submitted, we find that the items may be reliquidated under subheading 9817.00.90, HTSUS.
You are instructed to grant the protest.
In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the protestant, through its counsel, 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 Trade, Regulations and Rulings will make the decision available to CBP personnel, and to the public on the Customs Rulings Online Search System (“CROSS”) at https://rulings.cbp.gov/, which can be found on the CBP website at http://www.cbp.gov and other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Director