CLA-2: OT: RR: CTF: TCM H250634 ERB
Area Port Director, Port of Mobile
U.S. Customs and Border Protection
150 N. Royal Street, Room 3004
Mobile, AL 36602
Attn: Jack Nichols, Senior Import Specialist, and Patty Knight, Supervisory Import Specialist
RE: Internal Advice Request; Tariff Classification – Outokumpu Stainless USA LLC
Dear Area Port Director:
This letter is in reply to your request for Internal Advice, initiated by a letter dated November 8, 2013. At issue, among other things, is the tariff classification for materials resulting from the production of stainless steel in a Foreign Trade Zone (FTZ) Subzone owned and operated by Outokumpu Stainless USA, LLC (Outokumpu). This Internal Advice also requested assistance on the acceptability of the methods of entered value determination for those materials. The instant response will only address the classification component. The other issues will be addressed under separate cover, Headquarters Ruling (HQ) H249192.
A sample of the stainless steel slab at issue here was provided by Outokumpu to this office, which in turn, provided it to the National Commodity Specialist Division (NCSD) of U.S. Customs and Border Protection (CBP) for analysis. No sample of the dust was provided. Follow up communication with Outokumpu and additional information provided by them in emails dated December 18, 2014 were also used in this analysis.
FACTS:
In its Calvert, Alabama Foreign Trade Zone (FTZ) facility, Outokumpu produces stainless coil, hot-rolled plate, bar, and tubular products via an integrated stainless steel mill whereby recycled stainless steel is used to manufacture the final products. At issue here are two products: stainless steel slabs and stainless steel “dust”.
Outokumpu’s production process for the stainless steel slabs can be described thusly: recycled metals, scrap metals, and other stainless steel metals (referred to as “cold” material because they are not hot or molten) are collected and fed into an electric arc furnace (EAF). Once enclosed in the EAF, an electric current is passed through the electrodes contained in the lid to form an arc. The heat generated by this arc melts the scrap. During the melting process, ferro-alloys are added to the steel to give it the required chemical composition. Oxygen is blown into the EAF to purify the steel, and lime and fluorspar are added to combine with the impurities and forms slag. Slag, by its nature, floats to the surface and the furnace tilts to allow the slag to be poured off. The furnace is then tilted in the other direction and the molten steel is poured into a ladle where it undergoes secondary steelmaking.
The secondary steelmaking phase involves an argon oxygen decarburization (AOD). This stage refines crude steel which is high in carbon and sulfide though decarburization, reduction, and desulphurization. After this secondary metallurgical stage is complete, the molten steel moves to the continuous casting line. Once there, the molten steel is poured into a reservoir and passes through a cooled water mould to solidify the outer shell of the steel. The steel is drawn down into a series of rolls and water sprays, which ensure that it is both rolled into shape and fully solidified at the same time. At the end of this step, the slabs are straightened and cut to the desired length. The surface of the slabs are de-scaled to remove oxidation and to prepare the slab for later processing in the hot strip mill. Outokumpu states the variation of scale thickness removed is within 0.5 mm to 6 mm. Outokumpu further states that the grit used to de-scale is 80, 100, or 180, depending on the ultimate use of the slabs or the slabs’ next stage in production. This is the last process in the FTZ. The slabs are then exported outside of the FTZ to a hot-rolling mill for rolling into steel products which are used by Outokumpu’s customers in the manufacturing industry.
Stainless steel “dust” is created in the EAF and AOD manufacturing process stages. The dust contains alloy material. The mill captures the dust emissions through a de-dusting system, forms it into briquettes, and bags the briquettes for recycling. Outokumpu’s submission included copies of four private laboratory reports dated August 9, 2013 analyzing samples of the dust collected from the EAF and AOD stages. It provided a breakdown of the particulates identified and their proportions. However, the precise composition of the dust will vary from heat to heat and depend on the composition of the processed metal from whence it came. The reports were inspected by the NCSD and CBP’s Laboratory for Scientific Services.
ISSUE:
Does the de-scaling surface treatment result in the subject steel slabs being “further worked,” or do the slabs remain semi-finished of heading 7218, of the HTSUS.
Whether stainless steel “dust” is classified as iron ore of heading 2601, HTSUS or as steel waste, under heading 2619, HTSUS.
LAW AND ANALYSIS:
Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRIs). GRI 1 provides that the classification of goods shall be determined according to the terms of the headings of the tariff schedule and any relative section or chapter notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRIs 2 through 6 may then be applied in order.
The HTSUS provisions at issue are as follows:
2601 Iron ores and concentrates, including roasting iron pyrites:
Iron ores and concentrates, other than roasted iron pyrites:
2601.11 Non-agglomerated
***
2619 Slag, dross (other than granulated slag), from the manufacture of iron or steel:
2619.00.90 Other
***
7218 Stainless steel in ingots or other primary forms; semi-finished products of stainless steel:
7218.99 Other
Note 2 to Chapter 26, which provides for Ores, Slag and Ash, provides the following:
For the purposes of heading 2601 to 2617, the term “ores” means minerals of mineralogical species actually used in the metallurgical industry for the extraction of mercury, of the metals of heading 2844 or of the metals of section XIV or XV, even if they are intended for nonmetallurgical purposes. Headings 2601 to 2617 do not, however, include minerals which have been submitted to processes not normal to the metallurgical industry.
Note 1 (ij), to Chapter 72 defines “semi-finished products” as follows:
Continuous cast products of solid section, whether or not subjected to primary hot-rolling; and other products of solid section, which have not been further worked than subjected to primary hot-rolling or rough shaped by forging, including blanks for angles, shapes or sections. These products are not presented in coils.
Additional U.S. Note 2 to Chapter 72 provides as follows:
For the purposes of this chapter, unless the context provides otherwise, the term “further worked” refers to products subjected to any of the following surface treatments: polishing and burnishing; artificial oxidation; chemical surface treatments such as phosphatizing, oxalating and borating; coating with metal; coating with nonmetallic substances (e.g., enameling, varnishing, lacquering, painting, coating with plastics materials); or cladding.
The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the Harmonized System. While not legally binding nor dispositive, the ENs provide a commentary on the scope of each heading of the Harmonized System at the international level and are generally indicative of the proper interpretation of these headings. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
The EN 26.19 states the following, in relevant part:
The heading also includes dust from blast furnaces and other kinds of waste resulting from the manufacture of iron and steel, but not scrap metal produced during cutting, shaping or other metal working processes, which falls in heading 72.04.
The General EN to Chapter 72, regarding iron and steel products provides the following, in relevant part:
(IV) Production of finished products
Semi-finished products and, in certain cases, ingots are subsequently converted into finished products.
***
For the purpose of this Note, the following expressions have the meanings hereby assigned to them:
(C) Subsequent manufacture and finishing
The finished products may be subjected to further finishing treatments or converted into other articles by a series of operations such as:
Mechanical working, i.e. turning, milling, grinding, perforation or punching, folding, sizing, peeling, etc.; however, it should be noted that rough turning merely to eliminate the oxidation scale and crust and rough trimmings are not regarded as finishing operations leading to a change in classification.
Surface treatments, or other operations, including cladding, to improve the properties of appearance of the metal, protect it against rusting and corrosion, etc. Except as otherwise provided in the text of certain headings, such treatments do not affect the heading in which the goods are classified. They include:
Annealing…
Descaling, pickling, scraping and other processes to remove the oxide scale and crust formed during the heating of the metal;
Rough coating intended solely to protect products from rust or other oxidation…
Surface finishing treatment, including;
Polishing and burnishing or similar treatment
Artificial oxidation (by various chemical processes, such as immersion in an oxidising solution), patina finishing, …
Stainless Steel Slabs
Heading 7218, HTSUS, provides for stainless steel products which are in a “semi-finished” state. However, by operation of Note 1 to Chapter 72, if the subject merchandise is “further worked,” then it is not “semi-finished.” Semi-finished products are thus, by definition, not finished products which are usually intended for further working or processing. See Headquarters Ruling (HQ) 088116, dated February 27, 1991.
Additional U.S. Note 2 to Chapter 72 clarifies what “further worked” means for tariff classification purposes, and therefore what products remain in heading 7218, HTSUS, and what products would be classified elsewhere. If an article has received one or more of the following surface treatments, this means that product is considered “further worked”: polishing and burnishing; artificial oxidation; chemical surface treatments such as phosphatizing, oxalating and borating; coating with metal; coating with nonmetallic substances (e.g., enameling, varnishing, lacquering, painting, coating with plastics materials); or cladding.
Thus, CBP’s analysis begins at whether the process the subject articles received - whereby the stainless steel slabs are ground once with a grit coarseness of 80, 100, or 180 - is “de-scaling” to remove oxidation which does not constitute an article “further worked”, or if the process constitutes a “polishing” which means the slabs have been “further worked”.
Customs discussed this quandary in HQ 952495, dated December 23, 1992. There, Customs determined that certain wood band saw steel strips were considered “further worked” when a two-step roll-grinding process to remove the oxide scale occurred after cold-rolling. The first set of grinding wheels used an abrasive with an 80 grit size. The steel was then passed through a second set of wheels with a similar type of abrasive with a grit fineness of 220. Based upon the entire manufacturing process, and specifically based upon the two-step process of grinding followed by polishing, Customs held that the subject wood band saw steel strips underwent a “polishing” operation and was therefore “further worked.” Similarly, in HQ 955310, dated December 16, 1996, Customs considered eleven types of steel strips used in band saws underwent a two-step operation for the purpose of imparting a better surface finish to the products. The strips were first ground using belts in with a grit size of 80 in fineness, followed by a second annealing process utilizing a grit fineness between 400 and 600. Ultimately Customs followed the reasoning crafted in HQ 252495 and found that the subject steel strips had been “further worked” because of the two-step manufacturing process after the steel had been cold-rolled.
In the instant case, however, the steel slabs are only exposed to one de-scaling process, and the grit size is either 80, 100, or 180. In any case, this is below the grit size in which CBP determined in a two-step process constituted “further working” because of the high grit level used there. In additional information provided to this office, Outokumpu stated that the slab grinding process varies from heat to heat, but usually removes within minimum 0.5 mm to a maximum of 6mm of the surface of the slab. This describes a superficial scale removal process. Additionally, slabs are not a final product in themselves. The subject slabs are further processed outside the FTZ pursuant to the customer’s requests, and thus they are considered to be in a semi-finished state at the point in time at issue here. The subject merchandise satisfies Note 1 (ij) to Chapter 72 as a “semi-finished” product, and the slabs are fully described by heading 7218, HTSUS. They are not more specifically provided for elsewhere as being “further worked,” as it is understood by Additional U.S. Note 1 to Chapter 72.
This is also supported by the EN to Chapter 72 (IV)(C)(1) whereby oxidation scale removal does not lead to a change in classification, and the EN to Chapter 72 (IV)(C)(2)(b) whereby a descaling treatment does not affect the heading in which the goods are classified.
Stainless Steel “Dust”
Note 2 to Chapter 26 states, “For purposes of headings 2601 to 2617, the term “ores” means minerals of mineralogical species actually used in the metallurgical industry for the extraction of mercury, of the metals of heading 2844 or of the metals of section XIV or XV, even if they are intended for non-metallurgical purposes. Headings 2601 to 2617 do not, however, include minerals which have been submitted to processes not normal to the metallurgical industry.” The subject dust is not used in the metallurgical industry for the extraction of metal, and it is not a mineral of mineralogical species which is described in Note 2 to Chapter 26. Thus, it is not classified as an ore in subheading 2601.11.00, HTSUS.
Slag is the byproduct after a metal has been smelted from its raw ore. It is usually a mixture of metal oxides and silicon dioxide, however, it can contain metal sulfides or elemental metals. It is a liquid waste byproduct. Dross is a mass of solid impurities on a molten metal or dispersed in the metal. It forms on certain low-melting-point metals, such as tin, lead, zinc, or aluminum or alloys by oxidation of the metals. Various treatments can remove dross, and the dissolved oxides form a slag. Dross itself is a solid byproduct. Both can be recycled or used in secondary steelmaking.
The subject dust will be recycled. Though the precise elemental content of the dust will fluctuate from heat to heat, and depend on variables such as the grade of the stainless steel being produced at the time, the EN 26.19 clarifies that for classification therein, the dust (waste) need only be generated from iron or steel production from a blast furnace. See EN 26.19. After reviewing all the relevant factors, as well as Outokumpu’s production processes, it has satisfied this requirement. Outokumpu provided copies of a private laboratory report which analyzed four samples of the subject dust. The Reports of Analysis provided confirms the dust is from EAF and AOD blast furnace sources consisting of Aluminum, Chromium, Cobalt, Chromium, Copper, Iron, Lead, Magnesium, and other metals collected from the Baghouse Dedusting System.
It should be noted that CBP has statutory authority to inspect all merchandise entering the United States, and this includes at its discretion, requesting samples and submitting those samples to laboratory testing by CBP’s Laboratories and Scientific Services (LSS). See 19 U.S.C. § 1499 – Examination of merchandise. Thus, the Port may request samples of the dust and submit those samples to CBP’s Laboratory for confirmation that the elemental content is consistent with dust as a waste product of heading 2619, HTSUS. This is preferable to the submission of private laboratory reports.
The subject dust is generated from Outokumpu’s steel production and is not excluded by Note 2 to Chapter 26, because it is not a mineral of mineralogical species which is described therein. It is thus fully described under subheading 2619.00.90, HTSUS, which provides for “Slag, dross (other than granulated slag), scalings and other waste from the manufacture of iron or steel: Other.”
HOLDING:
By application of GRI 1, the subject stainless steel slabs are provided for in heading 7218, HTSUS. Specifically, the stainless steel slabs were provided for in 7218.99.00, HTSUS, which provides for, “Stainless steel in ingots or other primary forms; semi-finished products of stainless steel: Other: Other.” The column one, general rate of duty is free.
By application of GRI 1, the subject dust is provided for in heading 2619, HTSUS. It is specifically provided for in subheading 2619.00.90, HTSUS, which provides for “Slag, dross (other than granulated slag), scalings and other waste from the manufacture of iron or steel: Other.” The column one, general rate of duty is free.
Sixty days from the date of this decision, the Office of International Trade, Regulations and Rulings, will make this decision available for CBP personnel, and to the public on the CBP Home Page at http://www.cbp.gov by means of the Freedom of Information Act, and other methods of publication.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division