CLA-2 RR:CR:TE 963443 jb
Area Director
U.S. Customs Service
9901 Pacific Highway
Blaine, WA 98230
RE: Decision on Application for Further Review of Protest No. 3004-99-100082; classification of end trims or tails and trim blocks
Dear Ms. DiBernardo:
This is a decision on an application for further review of a protest timely filed by Livingston International, on behalf of Macmillan Bloedel Ltd., against your decision regarding the classification under the Harmonized Tariff Schedule of the United States (HTSUS) for end trims or tails and trim blocks.
FACTS:
The merchandise at issue is referred to by the Protestant as “wood waste.” The commercial invoices describe the subject merchandise as “Western red cedar green rough, wood waste (end trims or tails), approx. lengths 9” to 23”, 4 x 6 & wider”, and “Western red cedar green, trim blocks (wood waste blocks) rough, 10.00 x 10.00 W, 8.00 x 8.00 W, 6.00 x 8.00 W, 4.00 x 4.00.”
The Protestant disagrees with Customs classification of this merchandise in heading 4407, HTSUS, in the provision for lumber. It is the Protestant’s opinion that the correct classification for the subject merchandise is as wood waste under heading 4401, HTSUS. In support of this claim the Protestant makes reference to New York Ruling (NY) B89036, dated September 22, 1997, which the Protestant believes classified virtually identical merchandise as wood waste in heading 4401, HTSUS.
Additionally, the Protestant has submitted a video tape showing the overall manufacturing process and resulting “wood waste” from this process, which occur at the Protestant’s two facilities. A summary of this process is basically as follows:
The initial viewing is the waste wood that results from the first pass at cutting a lumber product from the log. Most of the immediate waste is bark and very heavy wane scrap which goes directly to the chipper. All of the material from the first pass goes into the chipper.
The next step shown is the further processing of the western red cedar timber into lumber and the cutting to length of the lumber resulting in the scrap wood or end trims.
The end trims (wood waste) are accumulated into a bin.
This bin is emptied in the lumber yard and manually stacked onto pallets for shipping purposes.
In further support of the claim that the subject merchandise is “wood waste”, the Protestant makes reference to a commercial invoice for the merchandise which shows “the significant gap in price between the waste wood, $300 U.S. funds per MFBM versus the sales of lumber from which the waste is derived from at $1055 U.S. funds….”
ISSUE:
What is the proper classification for the subject merchandise?
LAW AND ANALYSIS:
Classification of goods under the HTSUS is governed by the General Rules of Interpretation (GRI's). GRI 1 provides that classification shall be determined according to the terms of the headings and any relative section or chapter notes. Merchandise that cannot be classified in accordance with GRI 1 is to be classified in accordance with subsequent GRI's taken in order.
Chapter 44, HTSUS, provides for, among other things, wood and articles of wood. This chapter is structured so that less processed wood appears at the beginning of the chapter followed by more advanced wood in later headings within the same chapter. Thus, for example, heading 4403, HTSUS, is a general provision for wood in the rough, whether or not stripped of bark or sapwood or roughly squared, and heading 4421, HTSUS, is a basket provision for more advanced articles of wood that cannot be classified elsewhere in the chapter.
Additional U.S. Rule of Interpretation 1(a) provides that in the absence of context to the contrary, a tariff classification controlled by use, other than actual use, is to be determined by the principal use in the United States at, or immediately prior to, the date of importation, of goods of the same class or kind of merchandise.
In E.C. Lineiro v. United States, 37 CCPA 10, CAD 411, (1949), the court stated that "a designation by use may be established, although the word 'use' or 'used' does not appear in the language of the statute." As such, it is the use of the class or kind of merchandise to which the imported article belongs which must be determined, not the use of the instant merchandise.
Although the introduction of the HTSUSA changed the concept of use from chief use to principal use (chief use requiring that the use exceed all other uses combined, and principal use requiring that the use exceed each other use), it is still informative to see how courts interpreted the former statute since the wording regarding class or kind is nearly identical. In United States
v. Colibri Lighters (USA), Inc, 47 CCPA 106, CAD 739, (1960), in discussing
the concept of chief use the Appeals Court stated that in addition to the
characteristics of the merchandise itself, classification should be based on
the chief use of the articles of that class generally and not on the basis to
which the individual articles should be put. In Pistorino & Co., Inc. v. United
States, 67 CCPA 1, CAD 1234 (1979), the court therein also observed that what has to be determined is the chief use of the class or kind of merchandise.
Further support comes from United States v. the Carborundum Company, 63 CCPA 98, CAD 1172 (1976), in which, in determining whether merchandise is encompassed by a particular class or kind of merchandise, the court considered the general physical characteristics of the merchandise, the channel of trade, and the economic practicality of the "use" of the imported merchandise.
The seminal issue with respect to the appropriate classification of this merchandise thus centers on the identification of the actual merchandise, that is, to what specific “class” of merchandise does this merchandise actually belong? In other words, what is the identity of this product at the time of importation?
Upon review of the video submitted by Protestant it is clear that this merchandise goes through several tiers of segregation. At the first level we observe a lumber product resulting from the log in addition to some bark and other heavy wane scrap which is sent directly to the chipper. Secondly, we observe further processing of the timber into lumber, the cutting to length of that lumber and the resulting scrap wood or end trims caused by the cutting. The cut lumber passes along on a mechanical belt which is not solid but features a
number of gaps allowing for the scrap wood/end trims to fall through to an underlying belt which carries the scrap wood/end trims to a bin. The underlying belt also features a number of gaps which further separate the scrap by length. Subsequently, we observe that the “scrap” wood is situated in a pile, at which time the final manual segregation takes place. Although the Protestant states that “for shipment purposes all of the wood waste contained in the bin is stacked on pallets”, and that “to ensure the pile on the pallet does not collapse, the stacking is done by thickness with no attention to the width or length of the wood waste”, we believe otherwise. It is our observation that during this final stage of segregation there is still further segregation which occurs according to length (we note the gentleman in the video who is selecting certain pieces of wood, creating another pile).
Additional U.S. Note 1(a) to chapter 44, HTSUS, states that “the term “wood waste” means residual material other than firewood resulting from the processing of wood, including scraps, shavings, sawdust, veneer clippings, chipper rejects and similar small wood residues, as well as larger or coarser solid types of residual wood such as slabs, edgings, cull pieces and veneer log cores.” The Explanatory Notes to the Harmonized Commodity Description and Coding System (EN) to heading 4401, HTSUS, state, in part, that this heading covers:
(D) Wood waste and scrap, not useable as timber. These materials are used in particular for pulping (manufacture of paper) and in the manufacture of particle board and fibreboard and as fuel. Such waste and scrap includes, saw mill or planing mill rejects; manufacturing waste; broken planks; old crates unusable as such; bark and shavings (whether or not agglomerated in logs, briquettes, pellets or similar forms); other waste and scrap of joinery and carpentry; spend dyewood and tanning wood or bark.
The term “waste”, as defined by Webster’s Ninth New Collegiate Dictionary, 1991, at 1330, states, “a damaged, defective, or superfluous material produced by a manufacturing process…” Furthermore, as is explicitly clear from the terms of the notes above, for merchandise to qualify as waste, it cannot be useable as anything else. Specifically, the EN to heading 4401, HTSUS, require that waste not be used as timber. Customs has been consistent in its position that the composition of merchandise classifiable as “waste” means an undifferentiated or unsegregated batch of lumber production scraps. This batch will include a large volume of material not useable as timber. Once any segregation occurs, it is an indication that what is occurring is a conscious separation of true waste from useable timber.
Similarly, although the Protestant claims that his merchandise is identical to the merchandise addressed in NY B89036, we disagree. Even a cursory reading of the facts in NY B89036 clearly indicates that the determination that the merchandise therein is classifiable in heading 4401, HTSUS, is premised on the fact that “the subject wood will not be segregated in Canada in any way, that is, by length, width, thickness, color, grade or other criteria.” That is obviously not
the case with the imported merchandise. Additionally, the fact that the merchandise may be transported stocked on pallets or in dump trucks is not determinative to the final tariff classification. Nor do we find convincing any comparisons which are made between the price of waste wood and the lumber from which the waste is derived. We find a more convincing comparison to be between what Customs would classify as true waste of heading 4401, HTSUS, and the Protestant’s merchandise being claimed as “waste”, but actually useable as timber.
Heading 4407, HTSUS, provides for wood sawn or chipped lengthwise, sliced or peeled, whether or not planed, sanded or finger-jointed, of a thickness exceeding 6mm. The Explanatory Notes to the Commodity Description and Coding System (EN) to heading 4407, HTSUS, state in relevant part:
The products of this heading may be planed (whether or not the angle formed by two adjacent sides is slightly rounded during the planing process), sanded, or end-jointed, e.g. finger-jointed (see the General Explanatory Note to this Chapter).
Accordingly, in the case of the subject merchandise, in its condition as imported, we find that this merchandise is best described as general lumber, classified in heading 4407, HTSUS.
HOLDING:
The subject merchandise is properly classified in subheading 4407.10.0068, HTSUS, which provides for wood sawn or chipped lengthwise, sliced or peeled, whether or not planed, sanded or finger-jointed, of a thickness
exceeding 6mm: coniferous: other: not treated: other: western red cedar: rough. The applicable general column one rate of duty is “Free”.
Articles classifiable under subheading 4407.10.00, HTSUSA, which are products of Canada are subject to entry requirements based on the U.S.-Canadian Softwood Lumber Agreement of 1996. All invoices of such articles must be annotated with the Canadian province of manufacture. If manufactured in Ontario, Quebec, British Columbia or Alberta, a permit is required.
The protest should be denied. In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision.
Sixty days from the date of the decision, the Office of Regulations
and Rulings will make the decision available to Customs personnel, and to
the public on the Customs Home Page on the World Wide Web at www.customs.ustreas.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
John Durant, Director
Commercial Rulings Division