OT:RR:CTF:ERH332811 FKM
Angel Lui
Cooper Plating Inc.
1150 Nicholson Road
Newmarket, Canada L3Y9C4
RE: Temporary importation under bond of tin-plated brass strips
Dear Ms. Lui:
This letter is in response to your request for a ruling, dated June 8, 2023, on behalf of Cooper Plating Inc. (“Cooper”), regarding whether tin-plated brass strips may be imported under a temporary importation under bond (“TIB”) and, if so, whether the processing of the strips into brass plumbing parts are subject to the United States Mexico Canada Agreement (“USMCA”) lesser of duty rule.
FACTS:
In your letter, you request guidance on whether you may enter tin-plated brass strips into the United States under a TIB, as the strips are to be processed into articles manufactured or produced in the United States under subheading 9813.00.05, Harmonized Tariff Schedule of the United States (“HTSUS”). As you explained, Cooper is a Canadian metal plating and slitting manufacturer that purchases continuous brass strips from China, imports them into Canada, where the strips are plated with tin and slit. You explained that, in the United States, the strips will be processed into brass plumbing parts for use in vehicle manufacturing. The parts are then to be exported to Mexico for that use, and the scrap materials will be exported to Canada.
ISSUE:
Whether Cooper’s tin-plated brass strips qualify for TIB treatment under subheading 9813.00.05, HTSUS, as articles to be processed into articles manufactured or produced in the United States.
Whether Cooper’s brass plumbing parts are subject to the United States Mexico Canada Agreement (“USMCA”) lesser of duty rule.
LAW AND ANALYSIS:
Various statutory and regulatory authorities are relevant for a determination as to whether an article qualifies for TIB treatment under subheading 9813.00.05 and the USMCA lesser of duty rule. 19 C.F.R. §§ 10.31-10.40 establishes the regulations governing TIB entries, with 19 C.F.R. § 10.38 specifically detailing the exportation process for TIBs. 19 U.S.C. § 1313 codifies U.S. Customs and Border Protection (“CBP”) procedures regarding drawback and refunds, with 19 C.F.R. § 190 expanding upon modernized drawback claims.
Whether Cooper’s tin-plated brass strips qualify for TIB treatment under subheading 9813.00.05, HTSUS, as articles to be processed into articles manufactured or produced in the United States.
Pursuant to General Note 1, HTSUS, all merchandise imported into the United States is subject to duty unless specifically exempted. Under subheading 9813.00.05, HTSUS, articles to be repaired, altered, or processed (including processes that result in articles manufactured or produced in the United States), may be entered temporarily free of duty, under a bond for exportation, which must occur within one year from the date of importation. To satisfy the requirements for this TIB entry, the imported article must be timely exported. See U.S. Note 1(a) of Subchapter XIII, Chapter 98, HTSUS. The one-year period may be extended for additional periods, not to exceed three years. Id. Additionally, to qualify under this provision, the merchandise may not be imported for the purpose of sale or sale on approval, id., and an application for exportation must be made on CBP Form 3495. 19 C.F.R. § 10.38.
Subheading 9813.00.05, HTSUS, does not define the term “processed,” though CBP has analyzed this term for the purpose of TIB entries in previous rulings. For example, “[t]he processing can be a relatively minor procedure or extensive enough to be considered a manufacture or production.” HQ 224661 (dated January 11, 1994); see also 19 C.F.R. § 190.2 (“Manufacture or production means a process, including, but not limited to, an assembly, by which merchandise is either made into a new and different article having a distinctive name, character or use; or is made fit for a particular use even though it is not made into a new and different article.”) (emphasis added). Additionally, CBP has “liberally interpreted this provision [heading 9813.00.05 HTSUS] to include processes which would not otherwise qualify as a manufacture or production for drawback under 19 U.S.C. 1313(a) or (b).” HQ 226589 (dated March 1, 1996); see also HQ 957424 (dated May 12, 1995) (determining that slitting steel is an allowable operation under subheading 9813.00.05 even though it did not rise to the level of a manufacture).
An article is “processed” when the “result is a change in the character and use” of the merchandise to meet certain customer specifications. HQ 229962 (dated August 1, 2003). For example, the blending and grading of wheat was determined to be a “process” for TIB purposes because the “character [was] changed in the grade, protein level, moisture content or falling number, and the use [was] changed to meet certain customer specifications.” Id. Perhaps more relevant to the present facts, CBP determined that “creating welded tube from the titanium strip by rolling, welding and cutting is a process within the meaning of subheading 9813.00.05, HTSUS, and the titanium strip may be entered into the U.S. under subheading 9813.00.05, HTSUS.” HQ 230286 (dated April 12, 2004). The “welded tubing [was] an article manufactured or produced in the U.S., because, when compared with the imported titanium strip, the welded tubing [was] a new and different article having a distinctive name, character and use.” Id. (citing Anheuser-Busch v. United States, 207 U.S. 556 (1908)).
The transformation of tin-plated brass strips to plumbing parts constitutes “processing” under subheading 9813.00.0520, HTSUS, as the activity results in a new and different article having a distinctive name, character, and use. HQ 230286 (dated April 12, 2004). When imported, the strips act as a raw material to be made into the final brass plumbing part, which will ultimately be used for the manufacture of vehicles. This U.S. processing alters the name of the article, from brass strips to a plumbing part, which has a distinct character—as further noted by the new HTSUS subheading—and the use of the article changes, as it is now able to be used for vehicle manufacturing. Accordingly, we find that the changing of the tin-plated brass strips to brass plumbing parts is indeed “processing” under subheading 9813.00.05, HTSUS.
For articles to make entry under subheading 9813.00.05, HTSUS, two conditions must be met. First, articles may not be processed into “alcohol, distilled spirits, wine, beer or any dilution or mixture of any or all of the foregoing; a perfume or other commodity containing ethyl alcohol . . . ; or a product of wheat.” Ch. 98, Sub. XIII, U.S. Note 2(a), HTSUS. Second, if the processing results in an article other than that described above in U.S. Note 2(a):
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 wastes resulting from such processing will be exported or destroyed under customs supervision within the bonded period; except that in lieu of the exportation or destruction of valuable wastes, duties may be tendered on such wastes at rates of duties in effect for such wastes at the time of importation.
Ch. 98, Sub. XIII, U.S. Note 2(b), HTSUS.
The first condition for entry under subheading 9813.00.05, HTSUS has been met, as the articles will not be processed into “alcohol, distilled spirits, wine, beer or any dilution or mixture of any or all of the foregoing; a perfume or other commodity containing ethyl alcohol . . . ; or a product of wheat.” Ch. 98, Sub. XIII, U.S. Note 2(a), HTSUS. In regard to the second condition, Cooper has represented that any scraps from the U.S. processing will be exported to Canada. Thus, to satisfy this condition, Cooper must provide CBP with a complete accounting for all articles, wastes and irrecoverable losses resulting from the aforementioned processing, as established in Ch. 98, Sub. XIII, U.S. Note 2(b), HTSUS.
Accordingly, the tin-plated brass strips are eligible for TIB treatment under subheading 9813.00.05, HTSUS, as articles to be processed into articles manufactured or produced in the United States if all regulatory requirements are met. Specifically, irrespective of the fact that Cooper has submitted this ruling request describing the use of the articles, to satisfy the regulatory requirements, there must be a submission describing the use of the articles with each TIB entry summary, including a declaration that the articles are not to be put to any other use and that the articles are not imported for sale or sale on approval, in addition to the data regularly provided on a consumption entry summary. See 19 C.F.R. § 10.31(a)(3). Furthermore, to satisfy the requirements of the TIB, the imported article must be timely exported, which is defined as “a severance of goods from the mass of things belonging to this country with an intention of uniting them to the mass of things belonging to some foreign country.” Swan & Finch Co. v. United States, 190 U.S. 143, 145 (1903); see also 19 C.F.R. § 101.1. An application for such an exportation must be made on CBP From 3495. 19 C.F.R. § 10.38.
Whether Cooper’s brass plumbing parts are subject to the USMCA lesser of duty rule.
In the ruling request, Cooper asked “. . . if we can do TIB, my second question [is] if it qualifies for the duty exemption as provided by 19 CFR 181.53 (b)(5)?” Because Cooper plans to export the brass plumbing parts to Mexico, and the scrap tin-plated brass strips to Canada, we must consider the USMCA Implementation Act. Pub. L. 116-118; 19 U.S.C. § 4534. “Upon the exportation or destruction under customs supervision of articles manufactured or produced in the United States with the use of imported merchandise . . . an amount calculated pursuant to regulations . . . shall be refunded as drawback . . . .” 19 U.S.C. § 1313(a) (emphasis added). Under the USMCA, drawback may be granted only on the lesser of the total duties paid or owed on the importation into the United States or the total amount of duties paid on the exported good on its subsequent importation into Canada or Mexico—often referred to as the “lesser of” rule. 19 C.F.R. § 182.44. TIB entries are treated as a form of such a drawback under the USMCA provisions. 19 C.F.R. § 182.41. Thus, all articles imported into the United States that are exported to Canada or Mexico are subject to drawback restrictions, i.e., the lesser of duty rule, unless a specific exception applies. See 19 C.F.R. 182.44(a); 19 U.S.C. § 4534. The lesser of duty rule, in the specific context of subheading 9813.00.05, is contained in U.S. Note 1(c), Chapter 98, Subchapter XIII, HTSUS. If this rule were applicable, a consumption entry must be filed, and duty would be collected.
These USMCA provisions apply only to those exported articles that are no longer in the “same condition” as entered as when imported into the United States. 19 C.F.R. § 182.45(b). Section 208 exempts merchandise exported to a USMCA party, in the same condition as when it is imported, from USMCA Drawback and the lesser of duty rule, allowing full drawback of U.S. duties upon exportation. 19 U.S.C. § 4534(a)(2). Pursuant to 19 C.F.R. § 182.45(b)(1), “same condition,” is defined as
a good that has been subjected to any of the following operations provided that no such operation materially alters the characteristics of the good:
Mere dilution with water or another substance;
Cleaning, including removal of rust, grease, paint or other coatings;
Application of preservative, including lubricants, protective encapsulation, or preservation paint;
Trimming, filing, slitting or cutting;
Putting up in measured doses, or packing, repacking, packaging or repackaging; or
Testing, marking, labelling, sorting, grading, or inspecting a good.
For articles that are not in the “same condition” and are exported to Canada or Mexico, the duty deferral provisions require an assessment of duty on the merchandise. 19 U.S.C. § 4534; 19 C.F.R. § 182.41. Under the duty deferral provisions, withdrawals for exportation to Canada or Mexico are treated as if the merchandise was entered for consumption in the United States after July 1, 2020. 19 C.F.R. § 182.41; 19 CFR Part142 Although 19 C.F.R. § 182.45(b) refers to goods that qualify for drawback under 19 U.S.C. § 1313(j), TIB entries are treated as a form of “drawback” under the North American Free Trade Agreement (NAFTA) provisions, and the regulations allow the same condition exemption from the lesser of duty rule to be applied to goods entered under a TIB as well as set forth in 19 C.F.R. § 181.53(a)(2)(i)(A). While section 181.53 pertains to NAFTA, and the corresponding USMCA regulation 19 C.F.R. § 182.53 has not yet been finalized, the provision is expected to remain unchanged from the NAFTA language.
In the present case, the imported tin-plated brass strips from Canada are processed into brass plumbing parts. Such a change to the article is not one of the specifically enumerated “same condition” operations set forth in 19 C.F.R. § 182.45(b)(1). CBP has previously held that, though the list of operations is informative, it is not exhaustive, and the analysis should focus on whether the article is in the “same condition,” including the absence of material alterations to the characteristics of the article regardless of the processes to which the item was subjected. HQ 228961 (dated January 23, 2002). For example, CBP previously determined that cutting and welding finished cable to fit various sizes of reels met the “same condition” definition because the process consisted of nothing more than supplying the proper quantity, as described in 19 C.F.R. § 181.45(b)(1)(v): “putting up in measured doses, or packing, repacking, packaging or repackaging.” HQ 226152 (dated July 23, 1996). Alternatively, CBP ruled that painting parts with John Deere identifying colors exceeded the “same condition” definition of “[a]pplication of preservative, including lubricants, protective, encapsulating, or preservation paint” because the painting of parts with John Deere identifying colors was “an operation of greater magnitude than the operations stated in 19 C.F.R. 181.45(b)(1).” HQ 225874 (dated March 22, 1996).
Cooper intends to modify the tin-plated brass strips, processing them into brass plumbing parts, and thus exceeding the “same condition” operations contemplated by 19 C.F.R. § 182.45(b)(1). The articles are not in the “same condition” for purposes of 19 U.S.C. § 4534(a)(2) because the characteristics of the tin-plated brass strips have been materially altered to form the brass plumbing parts, as discussed in Part I. Therefore, the brass plumbing parts are articles subject to USMCA drawback and the duty deferral restrictions found of Subpart E of 19 C.F.R. 182, as they are not excepted by 19 U.S.C. § 4534(a). Accordingly, a consumption entry must be filed upon export to Canada or Mexico, and the “lesser of” duties and fees must be paid, in accordance with 19 U.S.C. § 4534.
HOLDING:
Based on the foregoing, Cooper’s proposed modification to its tin-plated brass strips constitutes processing, such that the components described above are eligible for TIB treatment under subheading 9813.00.05, HTSUS. In addition, the goods are subject to the USMCA duty deferral restrictions, such that a consumption entry must be filed upon export to Canada or Mexico, and the “lesser of” duties and fees must be paid, in accordance with 19 U.S.C. § 4534.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach 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.” 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 U.S. Customs and Border Protection website at http://www.cbp.gov and other methods of public distribution.
Sincerely,
Monika Brenner, Interim Chief
Entry Process and Duty Refunds