CON-9-04-CO:R:C:E 224283 AJS

Mr. Matthew Chang
Assistant Vice President
ITOCHU International Inc.
335 Madison Avenue
New York, NY 10017

RE: Steel coils; Temporary importation bond; silicon electrical steel; Subchapter XIII, U.S. Note 1(a); 19 CFR 10.31 - 10.40; 19 CFR 141.90; 19 CFR 141.103; Subchapter XIII, U.S. Note 1(c); 19 CFR 10.39(d)(1); Subchapter XIII, U.S. Note 2(b); Subheading 7204.30.00; "waste and scrap"; Section XV, note 6(a).

Dear Mr. Chang:

This is reply to your letter of November 6, 1992, requesting a ruling on the transportation of silicon electrical steel products through the United States in bond.


The merchandise at issue is flat-rolled alloyed steel coils, also known as "master coils", of a width of 40 inches, and of silicon electrical steel. The country of origin of the steel is Japan. You propose to import the steel under a temporary importation bond (TIB) and perform a slitting operation on the steel which trims the width of the steel to 10 or 12 inches, and also cut the edges to certain tolerances. The slitting operation will be performed in the United States by an unrelated third party. ITOCHU will retain ownership while the coils are in the United States. Upon completion of the slitting operation, the coils will be recoiled and exported to Canada where they will be used as steel cores in transformers. No further processing of the coils will take place in Canada. As a result of the slitting


operation, a scrap component estimated to range from 2.2% - 5.0% of the total weight will be produced. This scrap will not be returned to ITOCHU, but disposed of, used or sold by the processor.


Whether the subject steel coils qualify for treatment as articles admitted temporarily free of duty, under bond, within subheading 9813.00.05, Harmonized Tariff Schedule of the United States (HTSUS).

LAW AND ANALYSIS: All merchandise imported into the United States is subject to duty unless specifically exempted therefrom. General Note 1, HTSUS. Subheading 9813.00.05, HTSUS, pro- vides for temporary duty-free entry, under bond, for merchandise imported into the United States for the purpose of repair, alteration or processing. The latter may include processing that transforms an article into one that is considered manufactured or produced in the United States. Subchapter XIII, U.S. Note 2(b). This provision requires that the imported merchandise be exported or destroyed within one year of the date of importation. Subchapter XIII, U.S. Note 2(b). This period may be extended for one or more further periods which, when added to the initial one year, do not exceed a total of three years. Subchapter XIII, U.S. Note 1(a). In order to qualify for this duty-free treatment, merchandise cannot be imported for the purpose of sale or sale of approval. Subchapter XIII, U.S. note 1(a).

In this instance, the subject coils will be imported through the Port of Philadelphia. While in the United States the coils will be trimmed to reduce their width, and the edges cut to certain tolerances so that they are more readily adaptable as cores for transformers. After this operation, they will be exported to Canada and used as steel cores in transformers. This type of operation would appear to be a processing within the meaning of subheading 9813.00.05, HTSUS.

The applicable Customs regulations for TIBs may be found at 19 CFR 10.31 through 10.40. Section 10.31(f) states that a bond shall be given on Customs Form 301 in an amount equal to double the duties which it is estimated would accrue (or such larger amount as the district director shall state in writing to the entrant is necessary to protect the revenue)


had all the articles covered by the entry been entered under an ordinary consumption entry. The basis for the computation of the amount of a TIB is estimated duties determined in accordance with sections 141.90 and 141.103 of the Customs Regulations (19 CFR 141.90 and 19 CFR 141.103). To this amount is added any other duties that the district director ascertains may become due on the articles so entered and, as well, estimated expenses of reimbursable supervision such as may arise, for instance, when the articles are not properly marked.

Heading 7225, HTSUS, provides for flat-rolled products of other alloy steel, of a width of 600mm (i.e, approximately 24 inches) or more. The subject steel satisfies the terms of this heading. It is flat rolled alloyed steel with a width of 40 inches. More specifically the subject steel is described within subheading 7225.10.00, HTSUS, which provides eo nomine for silicon electrical steel. Accordingly, the subject steel is classifiable within this subheading.

The shipment to Canada of an article entered into the United States under heading 9813.00.05, HTSUS, shall not constitute an exportation, unless the article is a drawback eligible good under section 204(a) of the United States-Canada Free-Trade Agreement Implementation Act of 1988. Subchapter XIII, U.S. Note 1(c). The subject coils will be shipped to Canada and entered into the United States under the above heading. Therefore, this shipment cannot constitute an "exportation" pursuant to this note. If this shipment is not an exportation, then the coils are not eligible for treatment under heading 9813.00.05, HTSUS, inasmuch as they cannot be considered exported to Canada. A failure to export or destroy the coils would result in a breach of the TIB, and a demand under the bond for the payment of liquidated damages. 19 CFR 10.39(d)(1). As an alternative to the TIB procedure, the coils could be entered under a consumption entry and subject to duty within subheading 7225.10.00, HTSUS.

However, the above provision shall apply to shipments on or after January 1, 1994 (or, if later, the date proclaimed by the President under section 204(b)(2)(B) of such Act). Subchapter XIII, U.S. Note 1(c). You ask whether this only applies to coils imported under a TIB after 12/31/93, or only for coils shipped to Canada after that date. In our view, this paragraph will apply to coils shipped to Canada on or after 1/01/94. If the coils are imported into the United States before 1/01/94 but shipped to Canada on or after this date, the above provision will apply.


Subchapter XIII, U.S. Note 2(b) provides that merchandise may be admitted into the United States under heading 9813.00.05, HTSUS, only on condition that if any processing of such merchandise results in an article (other than an article described in (a) of this U.S. note) manufactured or produced in the United States:

(i) a complete accounting will be made to the Customs Service for all articles, wastes and irrecoverable losses resulting from such processing; and

(ii) 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.

In this case, the processing of the subject steel coils results in an article produced in the United States (i.e, steel cores for transformers). Consequently, a complete accounting must be made to Customs for the waste resulting from the operation performed in the United States.

Your letter asks under what subheading will any waste and scrap created by the slitting operation be classified. Subheading 7204.30.00, HTSUS, provides for "other" waste and scrap of alloy steel. As stated beforehand, the steel at issue is alloy steel. The terms "waste and scrap" refer to metal waste and scrap from the manufacture or mechanical working of metals, and metal goods definitely not usable as such because of breakage, cutting-up, wear or other reasons. Section XV, note 6(a). Any waste or scrap produced by the slitting operation which satisfies this description would properly be classifiable within this subheading. Steel from Japan classifiable within subheading 7204.30.00, HTSUS, is free of duty. Therefore, no duties are required to be tendered for any steel waste or scrap produced in the slitting operation.


Entry of the steel coils is permitted temporarily free of duty, under bond, within subheading 9813.00.05, HTSUS, which provides for articles to be repaired, altered or processed. The importer must meet all the accountability requirements under the U.S. Notes of Subchapter XIII to the satisfaction of the District Director.


The steel coils are classifiable within subheading 7225.10.00, HTSUS, which provides for flat-rolled products of alloy steel, of silicon electrical steel of widths of 600 mm or more, currently dutiable at the General Column 1 rates of 5.8 percent ad valorem.


John Durant, Director