CLA-2 OT:RR:CTF:TCM H055410 ARM
Area Port Director
U.S. Customs and Border Protection
237 West Service Road Champlain, NY 12919
RE: Application for Further Review for Protest No. 0712-09-100062; Silver Nitrate
Dear Port Director:
The following is our decision regarding the Application for Further Review for Protest No. 0712-09-100062, timely filed by Counsel on behalf of Ames Goldsmith Corporation, on February 23, 2009, regarding the classification of silver nitrate, under the Harmonized Tariff Schedule of the United States (HTSUS).
FACTS:
The instant merchandise consists of silver nitrate (AgNO3) crystal entered in a solid block form in the shape of the container in which it is held. In its imported form, the silver nitrate crystal can not be crushed and prepared in a normal milling system due to the high worker exposure associated with handling of the silver nitrate. The consistency of the product is claimed to render it damaged with no market in the United States without further processing. As such, protestant states that the merchandise will be processed for the recovery of the precious metal (silver). Additionally, protestant intends to manufacture a new product, silver oxide, from the imported silver nitrate.
The protest describes one entry on March 28, 2008, under subheading 7112.99.00, HTSUS, which provides for other waste and scrap containing precious metal compounds, of a kind used principally for the recovery of precious metal. CBP issued a Notice of Action on August 11, 2008, reclassifying the merchandise in subheading 2843.21.00, HTSUS, which provides for silver nitrate. CBP liquidated the merchandise on August 29, 2008. The entry subject to this protest contains merchandise imported at the declared value of approximately $2,000,000.00 more than the claimed value of silver nitrate.
ISSUES:
What is the correct classification of silver nitrate crystal in solid block form?
What is the correct method of appraisement of silver nitrate crystal in solid block form transported from protestant’s facility in the UK to its facility in the US?
LAW AND ANALYSIS:
I. Classification
The protest is properly filed under 19 U.S.C. §1514(a)(1) and (2) as a decision on classification and valuation. The protest was timely filed, within 180 days of liquidation of the first entry. (Miscellaneous Trade and Technical Corrections Act of 2004, Pub.L. 108-429, § 2103(2)(B)(ii), (iii) (codified as amended at 19 U.S.C. § 1514(c)(3) (2006)).
Further Review of Protest No. 0712-09-100062 was properly accorded to protestant pursuant to 19 C.F.R. § 174.24 because the classification and valuation of the silver nitrate in block form is inconsistent with Headquarters Ruling Letter (HQ) 966673, dated December 22, 2003 and HQ H019073, dated November 2, 2007.
Merchandise imported into the United States is classified under the HTSUS. Tariff classification is governed by the principles set forth in the General Rules of Interpretation (GRIs) and, in the absence of special language or context which requires otherwise, by the Additional U.S. Rules of Interpretation. The GRIs and the Additional U.S. Rules of Interpretation are part of the HTSUS and are to be considered statutory provisions of law for all purposes.
GRI 1 requires that classification be determined first according to the terms of the headings of the tariff schedule and any relative section or chapter notes and, unless otherwise required, according to the remaining GRIs taken in order.
In understanding the language of the HTSUS, the Explanatory Notes (ENs) of the Harmonized Commodity Description and Coding System may be utilized. The ENs, although not dispositive or legally binding, provide a commentary on the scope of each heading, and are generally indicative of the proper interpretation of the HTSUS. See T.D. 89-80, 54 Fed. Reg. 35127 (August 23, 1989).
The HTSUS subheadings under consideration are as follows:
2843: Colloidal precious metals; inorganic or organic compounds of precious metals, whether or not chemically defined; amalgams of precious metals:
Silver compounds:
2843.21.00 Silver nitrate . . . .
* * * * *
7112: Waste and scrap of precious metal or of metal clad with precious metal; other waste and scrap containing precious metal or precious metal compounds, of a kind used principally for the recovery of precious metal:
7112.99.00 Other . . . .
EN 28.43 (B) lists silver nitrate as one of the most common compounds of precious metals, stating:
Silver nitrate (AgNO3) white crystals, soluble in water, toxic, damages the skin. Used for silvering glass or metals; for dyeing silk or horn; in photography; for the manufacture of indelible ink; and as an antiseptic or a parasiticide. Sometimes called ‘lunar caustic’, though this name is also applied to silver nitrate melted with a small quantity of sodium or potassium nitrate, and sometimes with a little silver chloride, to form a cauteriser of Chapter 30.
EN 71.12 states, in pertinent part, the following:
This heading covers waste and scrap in metallic form fit only for the recovery of the precious metal, or for use as a basis for the manufacture of chemicals.
The heading also covers waste and scrap of any material containing precious metal or precious metal compounds, of a kind used principally for the recovery of precious metal.
It includes, in particular:
(A) Ash containing precious metal or precious metal compounds, arising from the incineration of photographic films, printed circuit boards, etc.
(B) Waste and residues derived from the mechanical working of precious metal or of metal clad with precious metal, in mints, goldsmiths, silversmiths, jewelers workshops, etc., for example, sweepings, dust, lemels, shavings, etc., resulting from shaping, drilling, working, etc.
(C) Scrap of worn-out or broken articles (tableware, goldsmiths or silversmith wares, catalysts in the form of woven gauze, etc.) no longer fit for their original use. It does not extend to those which, with or without repair or renovation, can be reused for their former purposes, or which can be converted for other uses without being subjected to processes for the recovery of precious metals.
(D) Waste and scrap of photographic plates, film, paper, paperboard or textiles, containing precious metal in metallic form or in the form of compounds (e.g., silver halides).
(E) Waste and scrap of electronic circuit boards and similar carriers containing precious metal (e.g., gold or silver).
(F) Residues of metallurgical, electrolytic or chemical processes, containing precious metal (e.g., slags, sludges from electrolytic refining and plating, silver residues from photographic fixing baths).
There is no dispute that the terms of heading 2843, HTSUS, describe the merchandise. Instead, protestant claims that the merchandise is not in a useable form for silver nitrate and therefore is considered waste of precious metal or waste containing precious metal compounds of heading 7112, HTSUS.
Protestant cites Cheltenham Supply Corporation v. United States, 306 F. Supp. 472 (1969), for the definition therein of waste. In Cheltenham, the court found that certain importations of cellophane were properly classified as waste and scrap, of rubber or plastics, fit only for remanufacture in item 771.15 of the Tariff Schedules of the United States (TSUS, the predecessor of the HTSUS) rather than as articles not specially provided for of rubber or plastics, of item 774.60, TSUS. The cellophane, originally manufactured for use in the packaged of foods which are to be frozen, contained one or more mechanical defects such that it could not be used as such. The defective cellophane was imported by plaintiff who was in the business of buying waste products and developing them into a saleable and usable product, specializing exclusively in cellophane. Prior to sale, similarly defective cellophane was destroyed.
With respect to the definition of waste, the court stated:
Perhaps the most helpful judicial expression of the tariff meaning of the term is found in Harley Co. v. United States, 14 Ct. Cust. Appls. 112, 115, T.D. 41644 (1926), where the Court of Customs Appeals stated: ‘In the tariff sense, waste is a term which includes manufactured articles which have become useless for the original purpose for which they were made and fit only for remanufacture into something else. It also includes refuse, surplus, and useless stuff resulting from manufacture or from manufacturing processes and commercially unfit, without remanufacture, for the purposes for which the original material was suitable and from which material such refuse, surplus, or unsought residuum was derived. The latter class of waste might be appropriately designated as new waste and includes such things as tangled spun thread, coal dust, broken or spoiled castings fit only for remanufacture.’ * * * * *
It would seem incongruous and illogical to say that the refuse or scrap of the manufacturing process constitutes waste, and not the product itself if it is so damaged or defective as to be unfit for use for the original purpose for which it was made. In either event it ought to be classified as ‘waste’, within the definition set forth in the Harley Co. case, if it is ‘fit only for remanufacture’. Cheltenham Supply Corp. v. United States, 63 Cust. Ct. 271, 274 (Cust. Ct. 1969)
In finding for plaintiff, the Cheltenham court distinguished the case of C.J. Tower & Sons of Buffalo v. United States, 56 Cust. Ct. 274, 283 (Cust. Ct. 2d Div. 1966), wherein the court stated:
We are of the opinion that, although the merchandise involved herein does have certain defects such as oil spots, overply or underply, or overtwist, it is adaptable for use in textile operations without further conversion. Since the merchandise was classified as yarn and the record establishes affirmatively that the imported merchandise is adaptable for use in textile operations without further conversion, we are of the opinion that it falls within the common meaning of the term, "yarn," and plaintiff has failed to overcome the presumption of correctness attaching to the classification of the collector. Accordingly, the imported merchandise is within the common meaning of the term "yarn" for tariff purposes.
Id. at 283.
Subsequently, the court in E.J. Littman Co. v. United States, 67 Cust. Ct. 136 (Cust. Ct. 1971) distinguished the decision in Cheltanham and found that polystyrene “outfall” from the manufacturing process, subsequently ground and packaged, and used as an ingredient in a blend with "prime" material for the purpose of making plastic was usable for its intended purpose, without the necessity of remanufacture, and hence was not a waste.
In HQ 966673, dated December 22, 2003, CBP held that spent ink-jet cartridges were not classified as waste or scrap as they were not damaged, defective or broken. In so doing, we stated:
There is no definition of waste and scrap in the text or ENs to Chapter 39. However, several cases have discussed the definition of waste and scrap. For instance, in Latimer v. United States, 223 U.S. 501 (1912), the Court held that broken tobacco leaves used in making a cheaper grade of tobacco products were not waste because they were used for the main purpose of making tobacco products. Likewise, in Mawer-Gulden-Annis (Inc.) v. United States, 17 CCPA 270, T.D. 43689 (1929), the court held that imperfect or broken olives, not salable as perfect or whole or stuffed olives, were not waste. The court reached its decision by noting that while inferior to perfect or whole olives, they nevertheless possessed the same food qualities and some of the uses of whole, pitted green olives. In citing these cases, the court in United States v. David Studner, et al., 57 C.C.P.A. 122, 427 F.2d 819, 821, C.A.D. 990 (1970), approved the following definition of waste: "[T]hat which has no original value or no value for the ordinary or main purpose of manufacture" (emphasis in the original). This reading comports with the language of EN 39.15.
Protestant notes that in Headquarters’ Ruling Letter (HQ) 543240, dated August 10, 1984, CBP stated that importers must produce evidence supporting classification of waste or scrap. Based on the submitted photographs and statements protestant contends the merchandise is more properly classified as waste or scrap.
The instant merchandise remains silver nitrate, like the yarn of C.J. Tower, the polystyrene of E.J. Littman, and the ink cartridges of HQ 966673. The chemical compound silver nitrate was manufactured, by defect, into a form which according to the evidence submitted by protestant, was not without value, but merely not acceptable to customers because they could not handle it. The silver nitrate is useable for its original purpose albeit at an increased cost and/or safety risk. For all of the reasons cited above, the merchandise is classified in heading 2843, HTSUS.
II. Value
Merchandise imported into the United States is appraised in accordance with section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (19 U.S.C. §1401a; TAA). The primary method of appraisement is transaction value, defined as "the price actually paid or payable for the merchandise when sold for exportation to the United States" plus the value of certain statutorily enumerated additions thereto. 19 U.S.C. §1401a(b)(1).
In order for transaction value to be used as a method of appraisement, it is essential that a "sale" between the parties is available. In VWP of America, Inc. v. United States, 175 F.3d 1327 (Fed.Cir. 1999), the Court of Appeals for the Federal Circuit found that the term “sold” for purposes of 19 U.S.C. §1401a(b)(1) means a transfer of title from one party to another for consideration (citing J.L. Wood vs. United States, 62 CCPA, 25, 33, C.A.D. 1139, 505 F.2d 1400, 1406 (1974)). Without a sale for exportation to the United States, transaction value must be eliminated as a means of appraisement. In this case, there is no “sale" between the protestant and the manufacturer of silver nitrate. Therefore, there is no transaction value with respect to the transactions between these two related parties.
When imported merchandise cannot be appraised on the basis of transaction value, it has to be appraised in accordance with the remaining methods of valuation, applied in sequential order. The alternative bases of appraisement, in order of precedence, are: the transaction value of identical merchandise; the transaction value of similar merchandise; deductive value; and computed value. If the value of imported merchandise cannot be determined under these methods, it is to be determined in accordance with section 402(f) of the TAA, known as the "fallback method." 19 U.S.C. §1401a(a)(1). We have determined that the remaining methods of appraisement are inapplicable in the present circumstances.
Section 402(f) of the TAA provides that the imported merchandise is to be appraised on the basis of a method derived from one of the methods set forth in sections 402(b)-(e), such methods reasonably adjusted to the extent necessary to arrive at a value. See 19 U.S.C. §1401a(f) and 19 CFR §152.107. Hence, under section 500 of the Tariff Act of 1930, as amended, which sets forth CBP general appraisement authority, the appraising officer may:
Fix the final appraisement of merchandise by ascertaining or estimating the value thereof, under section 1401a of this title, by all reasonable ways and means in his power, any statement of cost or costs of production in any invoice, affidavit, declaration, other document to the contrary notwithstanding . . .
19 U.S.C. § 1500(a).
In this regard, the Statement of Administrative Action (SAA), which forms part of the legislative history of the TAA, provides in pertinent part:
Section 500 allows Customs to consider the best evidence available in appraising merchandise . . . [It] authorize (sic) the appraising officer to weigh the nature of the evidence before him in appraising the imported merchandise. This could be the invoice, the contract between the parties, or even the recordkeeping of either of the parties to the contract.
Statement of Administrative Action, H.R. Doc. No. 153, 96 Cong., 1st Sess., pt 2, reprinted in, Department of the Treasury, Customs Valuation under the Trade Agreements Act of 1979 (October 1981), at 67. However, there are certain prohibited bases of appraisement under section 402(f), including the selling price of merchandise produced in the United States, minimum values and arbitrary or fictitious values. See 19 U.S.C. §1401a(f)(2).
Protestant proposes to declare a value under the fallback method of valuation that is based on the disposal fee, as identified in HQ H019073, dated November 2, 2007; HQ 545017, dated August 19, 1994; HQ 547061, dated March 19, 1999; and, HQ 547147, dated March 23, 1999, with regard to the importation and disposal of waste materials. Specifically, protestant proposes to appraise the merchandise under 402(f) of the TAA as follows: the value of silver less the cost of production in the United Kingdom, less the cost of recovery in the United States. CBP, on the other hand, levied the duty on the invoice value of the merchandise stated in the protestant’s Entry Summary. The protestant claims that the declared value was for insurance purposes only and argues for the alternate method of appraisement.
It is our position that since the value of the imported silver nitrate cannot be determined on the basis of a method derived from sections 402(b)-(e), its value may be determined using all other reasonable ways and means. Thus, based on the above referenced information and under the circumstances of this case, we find that the imported silver nitrate can be appraised under 402(f) of the TAA. Therefore, we find that the silver nitrate should be appraised on the basis of the intrinsic silver value, determined in accordance with the NY Spot price of silver on April 28, 2008, plus the cost of production of silver nitrate in the United Kingdom. However, since silver nitrate was imported in the defective form, we find that the cost of recovery of silver in the United States can be deducted from the value of the merchandise. Thus, according to the information provided by the protestant, the value of silver nitrate for the entry subject to this protest should be calculated as provided in the attached chart, which is afforded confidential treatment.
HOLDING:
At GRI 1 and 6, the instant merchandise is classified in subheading 2843.21.00, HTSUS, the provision for Colloidal precious metals; inorganic or organic compounds of precious metals, whether or not chemically defined; amalgams of precious metals: Silver compounds: Silver nitrate. The column 1, “General” duty rate for 2008 is 3.7% ad valorem.
Duty rates are provided for the protestant’s convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the World Wide Web at www.usitc.gov.
The imported silver nitrate shall be appraised under section 402(f) of the TAA (the “fallback” method) using the intrinsic silver value plus the cost of production in the United Kingdom and less the cost of recovery of silver in the United States.
In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of this letter, the Office of International Trade will make this letter available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by
means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division
Attachment