CLA-2 CO:R:C:M 955367 DWS

District Director
U.S. Customs Service
P.O. Box 1490
Room 218
St. Albans, VT 05478

RE: Protest 0201-93-100281; Aluminum Alloy Ingot; Titanium; Boron; Grain Refiner; CFTA eligibility; General Note 3(c)(vii)(B); GRI 3(b); Section XV, Notes 3 and 5; De Minimis Test; T.D. 92-8

Dear District Director:

The following is our decision regarding Protest 0201-93- 100281 concerning your action in classifying and assessing duty on aluminum alloy ingot under the Harmonized Tariff Schedule of the United States (HTSUS).

FACTS:

The merchandise consists of aluminum alloy ingot imported from Canada. The ingot possesses a non-North American (i.e., United Kingdom) grain refiner (titanium or boron), the quantity of which is so small that it may be measured in the finished product only in terms of parts per million. During manufacture in Canada, grain refiner is added to the ingot to achieve desired grain characteristics in the final product. The protestant states that, for many reasons, it is not possible to introduce plain titanium or boron into molten aluminum and for it to be adequately dispersed. The accepted technology for dispersal is to use an intermediate product, a waffle of unwrought aluminum, with the desired ingredient uniformly dispersed in a small quantity of the aluminum ingot.

The aluminum alloy ingot was entered under subheading 7601.20.90, HTSUS, which provides for: "[u]nwrought aluminum: [a]luminum alloys: [o]ther: [o]ther." The entries were liquidated on April 16, 1993, under subheading 7601.20.90, HTSUS. The protest was timely filed on July 7, 1993.

There is agreement as to classification of the merchandise under subheading 7601.20.90, HTSUS. However, there is disagreement as to whether the merchandise is eligible for U.S.- Canada Free-Trade Agreement (CFTA) benefits. If the merchandise qualifies for CFTA benefits, the protestant is entitled to a reduced rate in the merchandise processing fees it paid. The merchandise processing fee is a formal entry fee for all importations into the U.S. If CFTA benefits are not granted, the protestant is obliged to pay .19 percent of the entered value per entry. If CFTA benefits are not granted, the protestant is obliged to pay .038 percent of the entered value per entry.

ISSUE:

Whether the aluminum alloy ingot is eligible for benefits under the CFTA.

LAW AND ANALYSIS:

Classification of merchandise under the HTSUS is in accordance with the General Rules of Interpretation (GRI's), taken in order. GRI 1 provides that classification is determined according to the terms of the headings and any relative section or chapter notes.

General note 3(c)(vii)(B), HTSUS, in pertinent part, states:

(vii) United States-Canada Free Trade Agreement Implementation Act of 1988

(B) For the purposes of subdivision (c)(vii) of this note, goods imported into the customs territory of the United States are eligible for treatment as "goods originating in the territory of Canada" only if --

(1) they are goods wholly obtained or produced in the territory of Canada and/or the United States, or

(2) they have been transformed in the territory of Canada and/or the United States, so as to be subject --

(I) to a change in tariff classification as described in the rules of subdivision (c)(vii)(R) of this note, or

(II) to such other requirements subdivision (c)(vii)(R) of this note may provide when no change in tariff classification occurs, and they meet the other conditions set out in subdivisions (c)(vii)(F), (G), (H), (I), (J), and (R) of this note.

(C) - (Q) xxx

(R) Change in Tariff Classification Rules.

(1) - (14) xxx

(15) Section XV: Chapters 72 through 83.

(aa) A change from one chapter to another; provided, that goods subject to rules (ii) or (vv) meet the conditions set forth therein.

* * *

Because the merchandise contains a non-originating grain refiner, it is not "wholly obtained or produced in the territory of Canada." Therefore, for it to be eligible for CFTA benefits, the merchandise must have been "transformed in the territory of Canada" following general note 3(c)(vii)(B), HTSUS.

The protestant claims that, under GRI 3(b), the essential character of the grain refiner is imparted by the titanium and boron, and not the aluminum waffle. Therefore, the grain refiner would not be classifiable under chapter 76, HTSUS, but under the HTSUS chapters describing either titanium or boron. The aluminum alloy ingot would then be eligible for CFTA benefits as there would be a change from one chapter to another (chapter 76), as enumerated in general note 3(c)(vii)(B), HTSUS.

GRI 3(b) states that:

[m]ixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.

Section XV, note 3(b), HTSUS, states:

3. Classification of alloys (other than ferroalloys and master alloys as defined in chapters 72 and 74):

(a) xxx

(b) An alloy composed of base metals of this section and of elements not falling within this section is to be treated as an alloy of base metals of this section if the total weight of such metals equals or exceeds the total weight of the other elements present.

Based upon section XV, note 3(b), HTSUS, the grain refiner is an alloy as it consists of titanium and aluminum, both base metals, and boron, which is an element not falling with section XV, HTSUS.

In part, section XV, note 5, HTSUS, states:

5. Classification of composite articles:

Except where the headings otherwise require, articles of base metal (including articles of mixed materials treated as articles of base metal under the General Rules of Interpretation) containing two or more base metals are to be treated as articles of the base metal predominating by weight over each of the other metals. . .

Based upon section XV, note 5, HTSUS, because the aluminum predominates by weight over the titanium, the grain refiner is classifiable as an aluminum alloy, and, by the authority of GRI 1, it is classifiable under heading 7601, HTSUS. Consequently, there is no need to resort to the subsequent GRIs.

Therefore, because, under general note 3(c)(vii)(B), HTSUS, as both the grain refiner and the aluminum alloy ingot are classifiable under heading 7601, HTSUS, there is no change from one chapter to another, and the aluminum alloy ingot is not "transformed in the territory of Canada" and is not eligible for benefits under the CFTA.

Alternatively, the protestant claims that because the amount of titanium and boron in the final product is so small, it should be regarded as de minimis, and the aluminum alloy ingot should be regarded as being "wholly obtained or produced in the territory of Canada". We disagree.

In T.D. 92-8, 57 Fed. Reg. 2447, 2448 (January 22, 1992), which set forth the Customs Regulations implementing the CFTA, we stated that:

[t]he rules of origin set forth in the CFTA do not provide for a de minimis test on third country content.

Therefore, because a de minimis test does not exist in the CFTA, the grain refiner cannot be discounted, and the aluminum alloy ingot cannot be regarded as being "wholly obtained or produced in the territory of Canada". It is our position that if the drafters of the CFTA intended for a de minimis test to exist, they would have included such a test in the document. It is noted that the drafters of the North American Free Trade Agreement have included such a test. See general note 12(f), HTSUS (1994).

HOLDING:

Because the aluminum alloy ingot is not "transformed in the territory of Canada", it is not eligible for benefits under the CFTA. Therefore, the protestant is not entitled to a reduced rate in merchandise processing fees.

The protest should be DENIED in full. In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision, together with the Customs Form 19, should be mailed by your office 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 the decision the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Lexis, Freedom of Information Act, and other public access channels.

Sincerely,

John Durant, Director
Commercial Rulings Division