Mr. Paul Kay Ostermann & Scheiwe USA Inc. P.O. Box 669 Spanaway, Washington 98387

Dear Mr. Kay:

This is in reference to your letter dated April 14, 1993, concerning the possibility of entering lumber temporarily under bond.


Your company imports rough green or rough dry lumber from Canada and remanufactures the wood. You use higher grades of Hemlock, Lodgepole Pine, or Cedar. Some of the remanufactured wood is sold domestically and some is exported. You pay countervailing duty on all the Canadian lumber.

The wood is put through the following processes:

Step one-

Depending on size it could go to a resaw to change or reduce size horizontally.

Step two-

Material resawn in step one has Kiln or dryer sticks put cross ways or 90 degrees to the lumber length in order to permit hot air circulation while it goes through the dry kiln. (If the lumber comes in dry it starts through the plant at the same place as lumber coming out of the dry kilns and continues through the plant remanufacturing process.)

Step three-

Dry lumber, depending on grade and number of defects, may go to resaws, or rip saws or it could go to the planner or surfacer then back to resaws.

Step four-

Surfaced lumber could go to chop or cutoff saws to cut out defects. Surfaced lumber may be ripped first and then go to cutoff saws to cut out defects and cut to product lengths.


The portion of the volume that is ready to ship at this point goes to finished goods for sorting and packaging.

Step five-

Some material goes to the Moulders or Weinings to be run to pattern or shapes that may be round, square or irregularly shaped.

Any one piece of lumber coming from the Kilns may be eventually processed into one to five products depending on quality, grade, knot spacing or other tree defects that must be cut out. There is waste wood that develops during each process which is measured to determine yield from grades purchased. This waste may consist of shavings, trimmed ends, knot cutouts, etc.

You state in your recent letter that you have sufficient record keeping by item, volume, wood species, etc., to match up and account for import and export volumes. ISSUE:

Whether lumber to be processed and exported may be entered temporarily under bond to avoid the payment of countervailing duties.


Subheading 9813.00.05, Harmonized Tariff Schedule of the United States (HTSUS), provides for duty-free importation under bond for merchandise to be repaired, altered, or processed in the United States, provided it is not imported for sale or sale on approval and that it is exported in a timely manner. (See U.S. Note 1(a) of Subchapter XIII, Chapter XXII, HTSUS, and 19 CFR 10.37). The processing can be a relatively minor procedure or extensive enough to be considered a manufacture or production. This provision requires that the imported merchandise be exported or destroyed within one year of the date of importation. Subchapter XIII, U.S. Note 1(a).

The lumber you import is processed and would be eligible for entry under a TIB. However, you export only a portion of the lumber and sell the rest domestically. Usually importation under a TIB requires direct identification of the specific articles to insure timely exportation; however, there have been exceptions. If the imported articles are fungible and are commingled with articles of domestic origin Customs has allowed identification on a first-in, first-out (FIFO) basis. (See CSD 84-12.) You have stated that you keep very detailed records and can segregate the


lumber that is to be under bond and exported from the lumber that is imported to be sold domestically. Your records will have to identify each lot in order of sequence into and out of the commingled mass. Your inventory records will have to be very precise (see C.S.D. 88-1, enclosed). You will also have to make two entries, one for consumption and one for the TIB merchandise. (See 19 CFR 141.52(c)).

It was held in C.S.D. 86-16, that fungible merchandise imported under TIB and under consumption entries may be commingled and the TIBs cancelled on a FIFO basis, provided the importer has on hand at all times in the commingled inventory sufficient merchandise (or articles manufactured therefrom) to cancel all outstanding TIBs.

Your processes also produce waste. Subchapter XIII, U.S. Note 2(b) provides that merchandise may be admitted into the United States under subheading 9813.00.05, HTSUS, only on the 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.

You wish to enter the lumber under a TIB in order to avoid the payment of countervailing duties. Countervailing duties are normally charged against the temporary importation bond and do not have to be deposited at entry. This is so because TIB entries are not considered consumption entries for TIB purposes. See HQ 223899, dated September 2, 1992, and HQ 223491, dated March 30, 1992. Because your merchandise is imported of Canadian origin a TIB bond is not required and the countervailing duties do not need to be deposited at entry.


The lumber does meet the requirements for temporary importation under bond under subheading 9813.00.05, HTSUS, provided that all the accountability requirements are met. The countervailing duty applicable to these lumber imports from


Canada need not be deposited at entry nor charged to a TIB bond.


John A. Durant Director Commercial Rulings Division