CLA-2 CO:R:C:S W555557 CW
District Director of Customs
Wilmington, North Carolina 28401
RE: Application for Further Review of Protest Nos. 1501-8-000003 and 1501-8-000016 contesting the denial of TSUS item 806.30 treatment to certain articles of stainless steel imported by Newmet Corp.; scrap; T.D. 89-106; 555096; 554750; 063795;058412; 554013
Dear Sir:
The above-referenced protests filed by the importer, Newmet Corp., and the surety, Washington International Insurance Co., contest your denial of the partial duty exemption under item 806.30, Tariff Schedules of the United States (TSUS) (now subheading 9802.00.60, Harmonized Tariff Schedule of the United States (HTSUS)), for certain stainless steel articles imported in March of 1986.
We have considered in connection with these protests submissions from counsel for the importer dated March 11, 1987, January 10, 1990, February 15, 1990, March 8, 1990, April 27, 1990, and May 2, 1990, a submission from counsel for the surety dated August 21, 1989, a Report of Investigation dated June 21, 1989, and an audit report dated August 11, 1987, prepared by the Regulatory Audit Division, Northeast Region.
FACTS:
The record in this matter reflects that during the period 1984 through 1986, Newmet purchased stainless steel scrap, referred to as "commercial scrap," from various scrap yards in the U.S. The scrap which the scrap yards acquire generally consists of two types: "obsolete scrap" (worn-out or discarded metal articles) and industrial scrap" (leftover metal from manufacturing operations performed on metal articles). There is no dispute that a certain portion (estimated at between 5% and 15%) of the scrap obtained by the scrap yards originate from foreign-made metal articles which are commingled at the scrap yards with scrap derived from U.S.-made metal articles. The scrap yards subject the obsolete and industrial scrap to various operations to create commercial scrap. These operations include weighing, analyzing, sorting, cutting, sizing, decontamining, shredding, crushing, ripping, grinding, inspecting, upgrading,
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cleaning, blending, baling and packaging to meet contractual specifications with respect to the precise alloy content of the , commercial scrap. An apparently very small portion of the scrap obtained by the scrap yards need not be subjected to operations which impact on the metal (e.g., cutting, crushing, ripping), but need only be subjected to operations such as sorting, cleaning, blending and packaging.
The commercial scrap obtained by Newmet from the scrap yards was sent to facilities in Europe where it was manufactured into various articles of stainless steel, such as stainless steel sheet, which were then returned to the U.S. for further processing to create finished stainless steel products.
In response to a protest filed by Newmet with the District Director of Customs, Boston, Massachusetts, concerning merchandise imported through that port under the same circumstances as exist in this case, we issued Headquarters Ruling Letter (HRL) 555096 dated July 7, 1989 (copy enclosed). We concluded in that decision that the imported stainless steel articles were not entitled to TSUS item 806.30 treatment because protestant was unable to establish that all of the stainless steel scrap exported for further processing abroad was derived from metal articles manufactured or subjected to a process of
manufacture in the U.S. We reiterated the consistent position of this agency that reclamation activities (e.g., cutting, crushing, shredding, sorting and grading) performed by scrap yards on obsolete and industrial scrap are not considered to be manufacturing processes for purposes of TSUS item 806.30.
Although the facts in the instant case are identical to the facts involved in HRL 555096, Customs and counsel for the importer and surety agreed that the Application for Further Review of the instant Protest would be granted to permit a reconsideration by Headquarters of our previous protest decision.
Counsel for the importer raises essentially the same legal arguments that were considered in the July 7, 1989, protest decision (HRL 555096). In support of the contention that dismantling operations performed by scrap yards constitute "processes of manufacture," counsel for the surety directs our attention to the superior heading to TSUS items 870.50, 870.55 and 870.60 (now HTSUS subheadings 9817.00.80 and 9817.00.90), which provides, in relevant part, for the duty-free treatment of:
...articles of metal...to be processed by shredding, shearing, compacting or similar processing which renders them fit only for the recovery of the metal content.
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According to counsel for the surety, the fact that this provision expressly recognizes shredding, shearing and compacting as "processing" compels the conclusion that these and similar operations constitute "processes of manufacture" for purposes of TSUS item 806.30.
ISSUE:
Whether the imported stainless steel articles subject to this protest are entitled to the partial duty exemption under TSUS item 806.30.
LAW & ANALYSIS:
TSUS item 806.30 provides a partial duty exemption for:
[a]ny article of metal (except precious metal) manufactured in the United States or subjected 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 to the United States for further processing.
This tariff provision imposes a dual "further processing" requirement on eligible articles of metal--one foreign, and when returned, one domestic. However, not all "processing" to which articles of metal can be subjected are significant enough to qualify as "further processing," within the purview of TSUS item 806.30. Intelex Systems. Inc. v. United States, 59 CCPA 138, C.A.D. 1055, 460 F.2d 1083 (1972), aff'g, 65 Cust.ct. 306, C.D. 4093, 318 F.Supp. 515 (1970). Metal articles satisfying these statutory requirements may be classified under this tariff provision with duty only on the value of such processing performed outside the U.S., upon compliance with the documentation requirements of section 10.9, Customs Regulations (19 CFR 10.9).
Regarding the argument raised by counsel for the surety concerning the characterization of shredding, shearing and compacting as "processing" under the superior heading to TSUS items 870.50, 870.55, and 870.60, we are not persuaded that the use of the generic term "processing" in the context of this heading evidences that these and similar operations should be considered "processes of manufacture" under TSUS item 806.30.
Because the referenced heading and TSUS item 806.30 are separate and distinct tariff provisions with different purposes and requirements, we believe that an analysis of the wording and legislative history of the former provision is of limited use in interpreting the latter.
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After long and careful reconsideration of the legal issues previously considered in HRL 555096, it is our opinion that the conclusions reached in that decision are legally correct and should be affirmed. As previously stated, this agency has consistently held that the requirement that obsolete and industrial scrap be a metal article "manufactured or subjected to a process of manufacture in the U.S." is satisfied only if the metal article from which the scrap was obtained was manufactured or subjected to a final process of manufacture in the U.S. See HRLs 058412 dated July 24, 1978, 063795 dated July 21, 1980,554013 dated February 26, 1986, 554750 dated March 14, 1988 (as amended by letter dated September 23, 1988), and T.D. 89-106, 52 Cust. Bull. & Dec. 2 (December 27, 1989).
HOLDING:
For the reasons set forth above and in HRL 555096, as the importer is unable to establish that all of the stainless steel scrap exported for further processing abroad was derived from metal articles manufactured or subjected to a process of manufacture in the U.S., we find that the imported stainless steel articles subject to these protests are not entitled to entry under TSUS item 806.30. HRL 555096 is affirmed.
Therefore, the protests should be denied in full. A copy of this decision should be attached to the Form 19, Notice of Action, to be sent to the protestants. With respect to Protest No. 1501-8-000003, a Form 19 should be sent to each of the following two addresses: Mr. Robert Furniss, Newmet Corp. c/o Project Development International, Inc., 25 West 43 St., Suite 1202, New York, New York 10036; and Mr. Robert Wray, Robert Wray Associates, 2000 M Street, NW., Washington, D.C. 20036. Regarding Protest No. 1501-8-000016, the Form 19 should be sent to Ms. Stella Brown, Washington International Insurance Co., 1930 Thoreau Drive, Suite 101, Schaumburg, Illinois 60173.
Sincerely,
John Durant, Director
Commercial Rulings Division