OT:RR:CTF:VS H281558 RMC
C.J. Erickson
Cowan, Liebowitz & Latman, P.C.
1133 Avenue of the Americas
New York, NY 10036
Re: Subheading 9802.00.60; Copper Scraps
Dear Mr. Erickson:
This is in response to your letter, dated July 8, 2016, on behalf of your client, Aurubis AG (“Aurubis”), concerning the eligibility of certain copper products for a partial duty exemption under subheading 9802.00.60, Harmonized Tariff Schedule of the United States (“HTSUS”). Your request was forwarded to this office from the National Commodity Specialist Division for review. Our ruling is set forth below.
FACTS:
Aurubis is a copper producer and recycler with facilities in Germany, the United States, and several other countries. Aurubis proposes to procure copper scrap in the United States under two scenarios:
“Customer Scrap”
You state that Aurubis copper shapes and rods are imported to the United States and sold to domestic customers who use them in the production of plates, sheets, strips, foils, wires, cables, bars, and other products. In order to make these products, U.S. customers apply “complex manufacturing processes including cold-rolling, annealing, pickling, cutting, bending, drawing, stamping, shaping, forming and/or brushing” to the imported Aurubis copper. In addition to the desired final products, this U.S. processing also produces some scrap copper pieces, which you refer to as “customer scrap.”
“Dealer Scrap”
In addition to scrap purchased from U.S. customers, Aurubis also plans to purchase scrap from U.S. scrap dealers. Aurubis refers to this scrap as “dealer scrap.” You state that “Aurubis conditions its purchase on written representations from each of the scrap dealers that the scrap copper sold to Aurubis is generated from U.S. origin metal.” The U.S.-origin metal will be either copper products manufactured in the United States, which will be marked with the United States as the country of origin (e.g., copper tubes and pipes marked “Made in the USA”), or items made from foreign copper that has been “substantially transformed in the United States to qualify as U.S. products” (e.g., “melting and reconfigure[ing] of components into new articles of commerce such as blocks, plates, ingots, etc., or the shredding of larger metal components.”).
Aurubis proposes to send the “customer scrap” and the “dealer scrap” to Germany to be manufactured into defined shapes and rods. The copper products made from the “customer scrap” and the “dealer scrap” will then be imported into the United States for further processing. Aurubis states that the further processing to be performed in the United States “includes significant operations that materially change the shape and characteristics of the imported copper shapes and rods” and “typically include[s] a combination of: cold-rolling, annealing, pickling, cutting, bending, drawing, stamping, shaping, forming and/or brushing.” Your inquiry asks whether the copper products under both scenarios will be eligible for a partial duty exemption under subheading 9802.00.60, HTSUS.
Aurubis provided sample documents entitled the “Customer Scrap Supplier’s Affidavit” and the “Dealer Scrap Supplier’s Affidavit.” In short, the “Customer Scrap Supplier’s Affidavit” requires the supplier representative to affirm that the subject scrap was generated when Aurubis copper shapes and/or copper rods were “use[d] in the production of new and different articles of commerce” and were subject to “complex manufacturing processes . . . including a combination of one or more of the following: cold-rolling, hot-rolling, annealing, pickling, cutting, bending, drawing, stamping, shaping, forming, extruding, and/or brushing.” The “Dealer Scrap Supplier’s Affidavit” requires the scrap dealer to affirm that “[a]ll the scrap copper . . . is generated from U.S. origin metal or otherwise processed in the United States to qualify as U.S. origin scrap” and that “[t]he merchandise . . . does not include foreign-origin scrap (e.g., scrap recovered or derived solely from foreign-origin metal without sufficient processing).”
In addition to the sample supplier affidavits, Aurubis also provided two sample documents entitled “Foreign Processor Declaration” and “Importer Declaration.” These two documents are identical to the declarations found in 19 C.F.R. § 10.9(a), which an importer must file “in connection with the entry of articles which are returned after having been exported for further processing and which are claimed to be subject to duty only on the value of the processing performed abroad under subheading 9802.00.60, HTSUS.” See 19 C.F.R. § 10.9(a).
ISSUE:
Whether copper rods and shapes which are manufactured in Germany using the “customer scrap” and “dealer scrap” from the United States will be eligible for a partial duty exemption under subheading 9802.00.60, HTSUS, when they are imported into the United States.
LAW AND ANALYSIS:
Subheading 9802.00.60, HTSUS, provides a partial duty exemption for:
[a]ny article of metal . . . manufactured in the United States or subject to a process of manufacture in the United States, if exported for further processing, and if the exported article as processed outside the United States, or the article which results from the processing outside the United States, is returned for the United States for further processing.
Subheading 9802.00.60, HTSUS, therefore imposes four requirements: (1) the merchandise must be an article of metal; (2) the metal must either be manufactured in the United States or subject to a process of manufacture in the United States; (3) the metal must be exported for further processing; and (4) the metal must be returned to the United States for further processing.
For purposes of subheading 9802.00.60, HTSUS, “metal” includes “base metals enumerated in note 3 to section VX,” which in turn includes copper. See U.S. Note 3(e) to Chapter 98, HTSUS. Therefore, the “customer scrap” and the “dealer scrap” will qualify as “article[s] of metal” under subheading 9802.00.60, HTSUS.
The relevant Chapter Notes do not provide definitions for the requirement that the metal be “manufactured or subject to a process of manufacture in the United States.” In this context, CBP examines the processing that the metal undergoes to determine whether a manufacturing process has occurred in the United States. See HQ 555096, dated July 7, 1989. Although this inquiry differs from the determination of the metal’s country of origin under the substantial transformation test, it is clear that metal properly marked as a product of the United States has undergone sufficient processing to qualify as “manufactured . . . in the United States” under 9802.00.60, HTSUS. Id.
With respect to metal that was not “manufactured . . . in the United States,” CBP has clarified which processes qualify as “processes of manufacture in the United States” under subheading 9802.00.60, HTSUS. In HQ H265781, dated December 7, 2015, CBP revoked HQ H560430, dated June 30, 1997, which incorrectly concluded that imported copper sheets had not been “subject to a process of manufacture” in the United States when the importer performed “splitting, annealing, milling, rolling, brushing, and leveling” on the imported copper in the United States. CBP also noted that there are two types of scrap metal: “obsolete” and “industrial.” See id.; and HQ 555096. “Obsolete” scrap consists of worn-out or discarded metal articles, and “industrial scrap” consists of leftover metal from manufacturing operations performed on metal articles.
As explained above, because metal properly marked as a product of the United States has undergone sufficient processing to qualify as “manufactured . . . in the United States,” U.S.-origin “obsolete” scrap is eligible under subheading 9802.00.60, HTSUS. However, because foreign-origin “obsolete scrap” was neither “manufactured in the United States” nor “subject to a process of manufacturing” in the United States, it is ineligible under subheading 9802.00.60, HTSUS. See HQ 555096. On the other hand, “industrial scrap” derived from foreign metal was determined to be eligible so long as it was derived from a qualifying process of manufacture in the United States, such as “splitting, annealing, milling, rolling, brushing, and leveling.” See HQ H265781.
For example, CBP held that industrial scrap derived from foreign metal was eligible under subheading 9802.00.60, HTSUS, where it resulted from the production of metal tool boxes in the United States. See New York (“NY”) N018085, dated October 26, 2007. In NY N018085, an importer brought aluminum coils from Greece into the United States, where they were cut into sheets and sold to U.S. customers who manufactured them into tool boxes. As a result of the tool box manufacturing process, aluminum scrap was produced, which was sold to the aluminum supplier in Greece where it was melted down and used in the production of aluminum coils to be shipped back to the U.S. The new coils were eligible under subheading 9802.00.60, HTSUS because the metal article from which the scrap was obtained (the tool boxes) was initially subjected to a process of manufacture in the United States (the cutting of aluminum coils to produce sheets, and then the stamping, bending, welding, punching holes, and hemming of the sheets to produce the finished tool boxes).
Here, the “customer scrap” is a type of “industrial scrap” that is created when U.S. customers process foreign-origin Aurubis copper in the United States. You state that U.S. customers apply “complex manufacturing processes including cold-rolling, annealing, pickling, cutting, bending, drawing, stamping, shaping, forming and/or brushing,” which are sufficient to satisfy the requirement that the metal be “subject to a process of manufacture” in the United States. See HQ H265781 (holding that “splitting, annealing, milling, rolling, brushing, and leveling” were “processes of manufacture” for purposes of subheading 9802.00.60, HTSUS).
According to Aurubis’s description, the “dealer scrap” contains both “obsolete scrap” and “industrial scrap.” The copper products such as copper tubes and pipes marked “Made in the USA” are “obsolete scrap.” As explained above, metal properly marked as a product of the United States has undergone sufficient processing to qualify as “manufactured . . . in the United States” for purposes of subheading 9802.00.60, HTSUS.
As for the “industrial scrap,” Aurubis states that it consists of copper that has been substantially transformed in the United States such that it becomes a product of the United States (e.g., “melting and reconfigure[ing] of components into new articles of commerce such as blocks, plates, ingots, etc., or the shredding of larger metal components.”). We note again that the inquiry into whether a good is “manufactured or subject to a process of manufacture in the United States” for purposes of eligibility under subheading 9802.00.60, HTSUS, differs from the substantial transformation analysis, which Aurubis alludes to here by referring to “product[s] of the United States” and “new articles of commerce.” Nonetheless, and without addressing whether a substantial transformation occurs under these circumstances, the proposed “melting and reconfigure[ing] of components into new articles of commerce such as blocks, plates, ingots, etc., or the shredding of larger metal components” will qualify as “process[es] of manufacture” for purposes of subheading 9802.00.60, HTSUS. See HQ H265781.
Finally, subheading 9802.00.60, HTSUS requires that the metal be exported for further processing and then returned to the United States for further processing. Here, the scrap copper will be sent to Germany to be manufactured into defined shapes and rods, which qualifies as “further processing.” See HQ H265781 (holding that scrap copper exported from the United States underwent “further processing” for purposes of subheading 9802.00.60, HTSUS, when it was used to create copper sheets abroad). With respect to the requirement that the resulting copper products be returned to the United States for further processing, Aurubis states that it will provide an importer declaration identical to the sample in 19 C.F.R. § 10.9(a)(2) which states, in pertinent part, that “the returned articles will be subjected to (describe processing to be performed in the United States) by (name and address of U.S. processor).” For purposes of this ruling, we are not determining whether this requirement will be satisfied. We note that evidence of further processing in the United States is subject to verification, as is evidence of the origin of the “customer scrap” and the “dealer scrap.”
HOLDING:
Based on the information presented, and provided that further processing will occur in the United States, copper rods and shapes which are manufactured in Germany using the “customer scrap” and “dealer scrap” from the United States will be eligible for a partial duty exemption under subheading 9802.00.60, HTSUS, when they are imported into the United States.
Please note that this ruling letter is “issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect.” See 19 C.F.R. § 177.9(b)(1). The application of this ruling letter is “is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.” See id. CBP therefore reserves the right to verify all facts including the origin of the “customer scrap” and the “dealer scrap,” as well as whether further processing will occur in the United States. Furthermore, this ruling letter will be “applied only with respect to transactions involving articles identical to the sample submitted with the ruling request or to articles whose description is identical to the description set forth in the ruling letter.” See 19 C.F.R. § 177(b)(2).
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch