CLA-2:OT:RR:CTF:TCM H075337 RM
Leslie Alan Glick, Esq.
Porter Wright Morris & Arthur LLP
1919 Pennsylvania Ave., N.W., Suite 500
Washington, DC 20006
Re: Ruling Request Regarding Coiled Flat Springs
Dear Mr. Glick:
This is in response to your letter, dated September 4, 2009, to U.S. Customs and Border Protection (“CBP”), on behalf of Kern-Liebers USA, Inc., in which you request a determination on: (1) entry issues concerning coils of flat-rolled stainless steel strips from Germany imported temporarily under bond and (2) the classification under the Harmonized Tariff Schedule of the United States (“HTSUS”) of coiled flat springs imported from Mexico and their eligibility for preferential tariff treatment under the North American Free Trade Agreement (“NAFTA”).
FACTS:
Kern-Liebers USA, Inc. (“K-L”) intends to import coiled flat springs from Mexico. You described the manufacturing process as follows:
K-L would enter coils of flat-rolled stainless steel strips from Germany (of various widths, ranging from 4 to 7.8 inches) into the U.S. under a temporary importation bond (“TIB”).
While in the bonded warehouse, the steel would be slit into thinner strips (of various widths, ranging from 0.25 to 1 inch).
The resulting steel strips would be exported to Mexico in coils. Any scrap steel would be entered into the U.S. and accounted for, and the bond would be cancelled.
In Mexico, the steel strips would be edged, coiled into springs and heat-treated for 20 minutes at 203 degrees Celsius.
The springs would be imported into the U.S. in coils (see picture below) for use as window balancing springs.
ISSUES:
Does the proposed slitting operation qualify as “processing” for purposes of temporary importation under bond pursuant to subheading 9813.00.05, HTSUS?
Is the slit steel exported to Mexico exempt from general duty drawback pursuant to 19 U.S.C. § 3333, 19 C.F.R. § 181.45(b)(1)(iv), and U.S. Note 1(c) to Subchapter XIII, Chapter 98, HTSUS?
Are the coils of flat-rolled stainless steel strips from Germany imported temporarily under bond subject to antidumping duties?
What is the correct tariff classification of the flat springs imported from Mexico under the HTSUS?
Are the flat springs eligible for preferential tariff treatment under the NAFTA?
LAW AND ANALYSIS:
I. Entry
i. Temporary Importation under Bond
Subheading 9813.00.05, HTSUS, provides for the temporary, duty-free entry, under a Temporary Importation Bond (“TIB”), of merchandise imported into the U.S. “…to be repaired, altered or processed.” U.S. Note 1(a) to Chapter 98, Subchapter XIII, HTSUS, provides in pertinent part:
The articles described in the provisions of this subchapter, when not imported for sale or for sale on approval, may be admitted into the United States without the payment of duty, under bond for their exportation within 1 year from the date of importation, which period, in the discretion of the Secretary of the Treasury, may be extended, upon application, for one or more further periods which, when added to the initial 1 year, shall not exceed a total of 3 years.
CBP has consistently held that slitting steel constitutes “processing” for purposes of subheading 9813.00.05, HTSUS. See HQ 224283, dated March 17, 1993. See also, HQ 230110, dated December 12, 2003, HQ 228509, dated April 9, 2002, and HQ 957424, dated May 12, 1995. In the scenario you propose, stainless steel strips 4 to 7.8 inches wide imported into the U.S. under bond would be slit into strips 0.25 to 1 inch wide. No other physical characteristic would be altered. Based on the foregoing, we find that the slitting operation you propose constitutes “processing” for purposes of subheading 9813.00.05, HTSUS.
ii. NAFTA Drawback Exemption
U.S. Note 1(c) to Subchapter XIII, Chapter 98, HTSUS, provides:
For purposes of this subchapter, if an article imported into the United States, for processing, under heading 9813.00.05 is withdrawn for exportation to the territory of Canada or of Mexico, the duty assessed shall be waived or reduced in an amount that does not exceed the lesser of the total amount of duty payable on the article that would have been payable on importation under chapters 1 through 97, inclusive, of the Harmonized Tariff Schedule of the United States or the total amount of customs duties paid to Canada or to Mexico on the exported article, unless such article is covered by section 203(a)(1) through 203(a)(8), inclusive, of the NAFTA Implementation Act. The amount of duties or refunds calculated on such articles pursuant to this note shall be adjusted to take into account any subsequent claim for preferential tariff treatment made to another NAFTA country. This note shall apply to shipments to Canada on or after January 1, 1996, and to Mexico on or after January 1, 2001.
Section 203(a)(2) of the NAFTA Implementation Act (Public Law 103-82; 107 Stat. 2057, 2086; 19 U.S.C. § 3333) exempts from the general duty drawback (i.e., the “lesser of” rule) and duty referral rules of article 303 of NAFTA, merchandise which is exported to another NAFTA party in the same condition as when imported into the United States. 19 C.F.R. § 181.45(b)(1)(iv) of the CBP Regulations (adopted pursuant to Article 511 of the NAFTA) provides:
(1) Same condition defined. For purposes of [drawback claims of goods imported into the U.S. and subsequently exported to Mexico], a reference to a good in the “same condition” includes a good that has been subjected to any of the following operations provided that no such operation materially alters the characteristic of the good:
(iv) Trimming, filing, slitting or cutting …
(Emphasis added)
You assert that after undergoing the slitting operation while under bond in the U.S., the steel strips would be exported to Mexico for further processing. Based on the definition provided in 19 C.F.R. § 181.45(b)(1)(iv), the good would remain in the “same condition” for purposes of 19 U.S.C. § 3333(a)(2) and would not be subject to the limitation set by U.S. Note 1(c) to Subchapter XIII, Chapter 98, HTSUS. As such, an entry for consumption would not be required as a result of the shipment to Mexico.
Applicability of Antidumping Duties
19 C.F.R. § 10.31(f) provides in relevant part:
With the exceptions stated herein, a bond shall be given on Customs Form 301, containing the bond conditions set forth in Sec. 113.62 of this chapter, in an amount equal to double the duties, including fees, which it is estimated would accrue (or such larger amount as the port director shall state in writing or by the electronic equivalent to the entrant is necessary to protect the revenue) had all the articles covered by the entry been entered under an ordinary consumption entry.
19 C.F.R. § 141.0a(f) provides:
Entered for consumption. “Entered for consumption” means that an entry summary for consumption has been filed with Customs in proper form, with estimated duties attached. “Entered for consumption” also means that the necessary documentation has been filed with Customs to withdraw merchandise from a duty-deferral program in the United States for exportation to Canada or Mexico or for entry into a duty-deferral program in Canada or Mexico (see § 181.53 of this chapter).
Stainless steel sheet and strip from Germany is subject to a 13.48% antidumping duty. See Stainless Steel Sheet and Strip in Coils from Germany, AD Order No. A-428-825, 71 Fed. Reg. 74897 (December 13, 2006). However, antidumping duties are not applicable to TIBs because they are not “entered for consumption” as defined by 19 C.F.R. § 141.0a(f). See, e.g., HQ 225700, dated June 16, 1995 and HQ 224187, dated February 23, 1993.
In this case, since the slit steel is in the same condition after it is processed in the U.S. as when imported under bond, as noted above, an entry for consumption in connection with the shipment exported to Mexico is not required. As such, the steel strips from Germany would not be subject to antidumping duties. However, pursuant to 19 C.F.R. § 10.31(f), the bond may be set in an amount that takes into account the antidumping duties that would otherwise be collected if the conditions set forth in the U.S. Notes to Subchapter XIII, HTSUS, are not met.
III. Classification
The classification of merchandise under the HTSUS is governed by the General Rules of Interpretation (“GRIs”). GRI 1 provides, in part, that “for legal purposes, classification shall be determined according to terms of the headings 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 may then be applied in order.
The Harmonized Commodity Description and Coding System Explanatory Notes (“ENs”) constitute the official interpretation of the Harmonized System at the international level. While not legally binding nor dispositive, the ENs provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of these headings. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
Heading 7320, HTSUS, provides eo nomine for “Springs and leaves for springs, of iron or steel.” EN 73.20 reads, in pertinent part:
The heading covers iron or steel springs of all types, irrespective of their use …
Springs are made from sheet metal … in such a way that they have the property of returning to their original form even after considerable displacement.
The heading includes the following type of springs:
…
(C) Flat springs and flat spiral springs as used in operated motors, in locks, etc.
The goods at issue are coiled flat springs. They are “made from sheet metal” (stainless steel) and “have the property of returning to their original form even after considerable displacement.” See EN 73.20. Therefore, applying GRI 1, we find that they are classified under heading 7320, HTSUS, as steel springs.
NAFTA Eligibility
To be eligible for tariff preferences under the NAFTA, goods must be “originating goods” pursuant to General Note 12(b) of the HTSUS, which provides that:
For the purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as "goods originating in the territory of a NAFTA party" only if –
they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or
(ii) they have been transformed in the territory of Canada, Mexico
and/or the United States so that –
(A) except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein ...
General Note 12(t) provides, in relevant part:
Chapter 73
A change to headings 7319 through 7320 from any heading outside that group.
In the scenario you describe, non-originating flat-rolled stainless steel strips of various widths ranging from 0.25 to 1 inch (6.35 to 25.4 mm), classified under heading 7220, HTSUS (“Flat-rolled stainless steel, of a width less than 600 mm”), would be manufactured in Mexico into flat springs of heading 7320, HTSUS. It follows that, as a result of the processing in Mexico, the non-originating steel strips from Germany used to produce the springs would undergo the tariff shift required by General Note 12(t)/73(16). Accordingly, the flat springs imported into the U.S. would be eligible for preferential tariff treatment under the NAFTA.
HOLDING:
The proposed slitting operation qualifies as “processing” for purposes of admission under TIB pursuant to subheading 9813.00.05, HTSUS.
The coils of flat-rolled stainless steel strips entered under TIB are not subject to antidumping duties because the processing they undergo in the U.S. does not result in a change in condition for purposes of U.S. Note 1(c) to Subchapter XIII, Chapter 98, HTSUS, and no consumption entry is required in order to export the TIB goods to Mexico.
By application of GRI 1, the coiled flat springs are classified under heading 7320, HTSUS, specifically in subheading 7320.90.50, which provides for: “Springs and leaves for springs, of iron or steel: Other: Other.”
The coiled flat springs are eligible for preferential tariff treatment under the NAFTA. The 2009 column one, special rate of duty for articles of subheading 7320.90.50, HTSUS, is Free.
Duty rates are provided for convenience only 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/tata/hts/.
A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Gail A. Hamill, Chief
Tariff Classification and Marking Branch