OT:RR:CTF:ER H303751 AJ
Law Offices of Paula M. Connelly 100 Trade Center
Suite 660
Woburn, MA 01801
Attn: Ms. Paula M. Connelly
RE: Binding Ruling Request; Zapp Precision Strip; Temporary Importation Under Bond; 9813.00.0540; Metal Processing
Dear Ms. Connelly,
This is in response to your letter dated April 11, 2019. In your letter, on behalf of your client Zapp Precision Strip, Inc. (“Zapp”), you request a binding ruling regarding whether two processing scenarios involving imported S305 stainless steel are eligible for duty free entry under subheading 9813.00.0540, of the Harmonized Tariff Schedule of the United States (“HTSUS”), as temporary importations under bond (“TIB”). Our decision follows.
FACTS:
Your client is a manufacturing firm that produces precision strip of stainless steel. For this request, your client is importing S305 stainless steel from the European Union to be sold to a customer in Thailand. S305 designates a specified chemical makeup of cold-rolled stainless steel strip. You have described two scenarios on which your client is requesting a ruling on whether the importations would qualify for TIB:
Scenario 1:
Zapp will reduce the thickness and width of the S305 stainless steel to meet the customer’s specification. The thickness of the imported coil is reduced in multiple cold rolling and annealing cycles that result in a wide width coil that meets specified thickness, mechanical properties and surface requirements. The wide width coil is then tension leveled to enhance the
coils flatness. The tension leveled coil is then slit or cut to the customer’s specified width and size specifications, then exported directly to the customer in Thailand. During the reduction process, approximately 20% of the stainless steel strip becomes scrap. The scrap is recovered and sold to a steel mill or scrap recycler.
Scenario 2:
Zapp will use the same processes described in Scenario 1 to reduce the thickness and width of the S305 stainless steel to meet their customer’s specifications. After the completion of this process, Zapp will ship the strip to a plating facility in New York for gold plating. A gold stripe will be applied to the strip via electroplating. The thickness of the gold stripe is between ten to fifteen micro inches. During the plating process, a small percentage of the stainless steel becomes scrap. The scrap will be recovered and sold to a steel mill or scrap recycler. Upon completion, the plated steel will be exported to Thailand, where it will be used in the manufacture of hard disk drives.
Your client will ensure that all waste is accounted for in both scenarios. For the valuable waste that is sold to a steel mill or recycler, Zapp will tender the duties in effect for the waste at the time of importation. If the scrap is not sold, then the scrap will be destroyed under Customs supervision.
ISSUE:
Under Scenario 1, is the imported S305 stainless steel eligible for temporary duty-free treatment under subheading 9813.00.0540, HTSUS?
Under Scenario 2, is the imported S305 stainless steel eligible for temporary duty-free treatment under subheading 9813.00.0540, HTSUS?
LAW AND ANALYSIS:
General Note 1, HTSUS, dictates that all merchandise imported into the United States is subject to duty unless specifically exempted therefrom. Subheading 9813.00.05, HTSUS, provides for duty-free entry, under bond, for merchandise imported into the United States for a temporary period, for repair, alteration, or processing.
Pursuant to U.S. Notes 1(a) and (c) of Subchapter XIII of Chapter 98, HTSUS, which contains subheading 9813.00.05, articles to be repaired, altered or processed, including processes which result in articles manufactured or produced in the United States, may enter into the United States temporarily free of duty under a TIB for exportation within one year from the date of importation. This one year period may be extended for one or more additional periods, which when added to the initial period may not exceed three years. See 19 CFR § 10.37.
In HQ 224661 (January 11, 1994), regarding subheading 9813.00.05, HTSUS, we stated that "[t]he processing can be a relatively minor procedure or extensive enough to be considered a manufacture or production." Webster's Third New International Dictionary (unabridged, 1966) defines the verb "process," in pertinent part, as follows:
process . . . to subject to a particular method, system, or technique of preparation, handling, or other treatment designed to effect a particular result: put through [*10] a special process: (1): to prepare for market, manufacture, or other commercial use by subjecting to some process . . . (2) to make usable by special treatment . . . .
See HRL 229970 (August 11, 2003). In HRL 224283 (March 17, 1993) we held that trimming steel coils to reduce their width and cutting the edges to certain tolerances was a processing. In HRL 228509 (April 9, 2002) we held that the processing of steel which involved only slitting and did not alter the characteristics of the imported steel would constitute a process within the meaning of 9813.00.05, HTSUS.
In HRL 224283 (March 17, 1993) we held that performing a slitting operation on 40 inch steel coils which trimmed the width of the steel to 10 or 12 inches and also cut the edges to certain tolerances so that they were more readily adaptable as cores for transformers was a process within the meaning of subheading 9813.00.05, HTSUS. In HRL 230110 (December 12, 2003) a waterborne coating or "dry lube" was applied to stainless steel sheet and strip in coils. The dry lube was used to facilitate the stamping of the steel. The coils of steel were then slit to create narrower rolls. We determined that the application of the dry lube and the slitting were processes for purposes of subheading 9813.00.05, HTSUS. In coils of flat-rolled stainless steel strips in various widths were slit into thinner strips. In that Ruling we stated that
CBP has consistently held that slitting steel constitutes "processing" for purposes of subheading 9813.00.05, HTSUS. See HQ 224283, dated March 17, 1993. See also, HQ
230110, dated December 12, 2003, HQ 228509, dated April 9, 2002, and HQ 957424, dated May 12, 1995. In the scenario you propose, stainless steel strips 4 to 7.8 inches wide imported into the U.S. under bond would be slit into strips 0.25 to 1 inch wide. No other physical characteristic would be altered. Based on the foregoing, we find that the slitting operation you propose constitutes "processing" for purposes of subheading 9813.00.05, HTSUS.
Taken together these rulings make clear that changing the size of steel, either width or thickness, constitutes processing for purposes of subheading 9813.00.05, HTSUS. See also HQ 228509, April 9, 2002, finding that the slitting of stainless steel coils to reduce width was a process under subheading 9813.00.05, HTSUS.
In the instant case, in both scenarios Zapp intends to reduce the thickness and width of the S305 stainless steel to meet the customer’s specifications. The thickness of the imported coil is reduced in multiple cold rolling and annealing cycles that result in a wide width coil that meets
specified thickness, mechanical properties and surface requirements. The wide width coil is then tension leveled to enhance the coils flatness. The tension leveled coil is then to be slit or cut to the customer’s specified width and size specifications. Because Zapp intends to alter the size of the steel in ways that CBP has previously held to be “processing” we find that Zapp’s procedures also to be processing for purposes of subheading 9813.00.05, HTSUS.
In the second scenario after the reduction of the stainless steel’s thickness and width, a gold stripe will be applied to the strip via electroplating. We note that, since the size of the steel will be changed as in Scenario 1, based on the above the alteration of the steel in Scenario 2 also qualifies as processing within the meaning of subheading 9813.00.05, HTSUS. However, while prior rulings do not specifically address electroplating as a process, we have determined that the application of a substance to steel also constitutes “processing” for purposes of subheading 9813.00.05, HTSUS: adhesive coating to polyester film (HQ 227432, April 23, 1997); acrylic coating to fabric (HQ 227363, July 22, 1998); the application of dry lubrication on stainless steel sheet and strip (HQ 230110, December 12, 2003); the application or “painting” of an adhesive on bushing sleeves (HQ 231372, May 4, 2006). The common characteristic in these cases involves the exterior application of a thin substance affixed onto an article. This application is analogous to the electroplating process Zapp has described in Scenario 2, where a small gold stripe, about ten to fifteen micro inches thick, is affixed onto the processed steel strip. Accordingly, the procedures performed in Scenario 2 also constitute processing for purposes of subheading 9813.00.05, HTSUS.
We note that U.S. Note 2(b) of Subchapter XIII, Chapter 98, HTSUS, provides that merchandise may be admitted into the United States under subheading 9813.00.05 only on condition that:
If any processing of such merchandise results in an article . . . manufactured or produced in the United States:
A complete accounting will be made to the Customs Service for all articles, wastes and irrecoverable losses resulting from such processing; and
All articles and valuable waste resulting from such processing will be exported or destroyed under Customs supervision within the bonded period; except in lieu of the exportation or destruction of valuable wastes, duties may be tendered on such wastes or rates of duties in effect for such wastes at the time of importation.
Careful documentation of the processes and any waste or scrap which may or may not be produced as a result, “is an essential requirement of qualifying for duty-free entry under a TIB.” HQ H198355 (March 7, 2013). Zapp is responsible for fulfilling the accounting requirements for all scrap or waste resulting from their processes.
HOLDING:
Based on the foregoing information, Zapp’s importation of S305 stainless steel is entitled to duty free entry under subheading 9813.00.05 HTSUS, as temporary importations under bond, under both Scenario 1 and Scenario 2. Zapp must also comply with the accounting requirements for all wastes and scrap.
Sincerely,
GAIL G KAN
Digitally signed by GAIL G KAN Date: 2021.02.22
16:06:35 -05'00'
Gail G. Kan, Chief
Entry Process and Duty Refund Branch