OT:RR:CTF:VS H315292 CMR
Michael Roll, Esq.
Roll & Harris LLP
1999 Avenue of the Stars
Suite 110
Los Angeles, CA 90067
RE: Subheading 9802.00.60, HTSUS; copper scrap; FIFO inventory management
Dear Mr. Roll:
This is in response to your submission dated November 23, 2020, on behalf of your client, Aurubis AG, regarding the eligibility of certain copper products containing United States (U.S.) copper scrap for a partial duty exemption under subheading 9802.00.60, Harmonized Tariff Schedule of the United States. Your client is seeking Customs and Border Protection’s (CBP’s) approval to use an inventory management system, that is, first in, first out (FIFO), for identifying U.S. copper scrap contained in the copper products entered under subheading 9802.00.60, HTSUS.
FACTS:
Your client, Aurubis, is a copper producer and recycler with facilities in Germany, the United States, and several other countries. Aurubis received Headquarters Ruling Letter (HQ) H281558, dated January 5, 2017, on the eligibility of certain copper products for a partial duty exemption under subheading 9802.00.60, HTSUS. In that ruling, CBP held that copper rods and shapes manufactured in Germany using “customer scrap” and “dealer scrap” from the United States would be eligible for a partial duty exemption under subheading 9802.00.60, HTSUS, when they are imported into the United States, provided further processing would occur to the copper rods and shapes after importation.
You indicate that the facts of the production differ in this case in that your client will commingle the U.S. copper scrap with non-U.S. scrap in inventory and will use both in the production process. As the U.S. and non-U.S. scrap is commingled, your client will be unable to determine which scrap products are used, or the amounts of U.S. or non-U.S. scrap used in production on any particular day. You request that CBP assume that the requirements of subheading 9802.00.60, HTSUS, as stated in HQ H281558, are met. Your client seeks approval from CBP for the use of an inventory management method based upon FIFO to identify the U.S. copper scrap contained in the imported copper rods and shapes for purposes of receiving the partial duty exemption provided for in subheading 9802.00.60, HTSUS.
ISSUE:
Whether an importer may use an inventory management system, such as FIFO, to identify U.S. copper scrap content in copper products eligible for a partial duty exemption under subheading 9802.00.60, HTSUS.
LAW AND ANALYSIS:
Subheading 9802.00.60, HTSUS, provides a partial duty exemption for:
Any article of metal (as defined in U.S. note 3(e) of this subchapter) manu- factured in the United States or subject to a process of manufacture in the United States, if exported for further processing, and if the exported article as processed outside the United States, or the article which results from the processing outside the United States, is returned to the United States for further processing.
Subheading 9802.00.60, HTSUS, therefore imposes four requirements: (1) the merchandise must be an article of metal; (2) the metal must either be manufactured in the United States or subject to a process of manufacture in the United States; (3) the metal must be exported for further processing; and (4) the metal must be returned to the United States for further processing.
For purposes of subheading 9802.00.60, HTSUS, “metal” includes “base metals enumerated in note 3 to section VX,” which in turn includes copper. See U.S. Note 3(e) to Chapter 98, HTSUS.
You have asked CBP to assume that all the element necessary for eligibility to receive the partial duty exemption afforded to imported metal products in subheading 9802.00.60, HTSUS, are met and to only address the use of a FIFO inventory system to account for the U.S. copper scrap. In support of your position, you rely upon HQ H271449, dated August 23, 2016, involving the apportionment of assists; and, HQ W231533, dated December 17, 2009, and HQ H289067, dated August 30, 2019, both of which deal with a Temporary Importation under Bond (TIB) provision in the tariff, subheading 9813.00.05, HTSUS.
As stated in Ford Motor Co. v. United States, “. . . where – as here – ‘Congress has directly spoken to the precise question at issue . . . and where – as here – the language of the statute is clear, ‘that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.’” [citing Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984). See also, Dongbu Steel Co. v. United States, 61 F. Supp. 3d 1377 (May 5, 2015), wherein the Court of International Trade states:
“[T]he 'starting point in every case involving construction of a statute is the language itself.'" United States v. Hohri, 482 U.S. 64, 69, 107 S. Ct. 2246, 96 L. Ed. 2d 51 (1987) (quoting Kelly v. Robinson, 479 U.S. 36, 43, 107 S. Ct. 353, 93 L. Ed. 2d 216 (1986)). "Absent a clearly expressed legislative intention to the contrary, [the] language [of the statute] must ordinarily be regarded as conclusive." Consumer Prod. Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S. Ct. 2051, 64 L. Ed. 2d 766 (1980). "[A]lthough agencies are generally entitled to deference in the interpretation of statutes that they administer, a reviewing 'court, as well as the agency, must give effect to the
unambiguously expressed intent of Congress.'" Food and Drug Admin. v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 125- 26, 120 S. Ct. 1291, 146 L. Ed. 2d 121 (1999) (citing Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984)).
Under the FIFO inventory system proposed by your client, it is conceivable that based upon such an accounting system, your client could enter metal products under subheading 9802.00.60, HTSUS, which contain no U.S. copper scrap metal. The provision at issue is clear. When a statute is clear, the agency has no room for interpretation. The metal product that is entered under subheading 9802.00.60, HTSUS, must contain metal which was either manufactured in the United States or subject to a process of manufacture in the United States, exported for further processing, and returned to the United States for further processing. The requirements of the provision preclude the use of an inventory management method, such as FIFO, for merchandise entered under this provision.
Furthermore, the CBP regulations at 19 CFR § 10.9 require a declaration by the person who performed the processing abroad of the exported article of metal. The declaration is to include a statement “that no substitution whatever has been made to replace any of the articles originally received by [the processor] from the owner or exporter” of the articles of metal. In addition, a declaration is required from the owner, importer, consignee, or agent which includes a statement that “the articles entered in their processed condition are otherwise the same articles that were exported.”
The rulings you rely upon for support of your argument have no bearing on this matter as they involve other customs issues, i.e., valuation and TIBs. We also draw your attention to a publication of the International Trade Commission entitled “Imports Under Items 806.30 and 807.00 of the Tariff Schedules of the United States, 1980-83, USITC Publication 1688 (April 1985), available on the internet at https://www.usitc.gov/publications/332/pub1688.pdf. Stated on page 26 of this publication, with regard to item 806.30, Tariff Schedules of the United States (TSUS), the predecessor provision for subheading 9802.00.60, HTSUS, and item 807.00, TSUS, the predecessor provision for subheading 9802.00.80, HTSUS, is the following:
For example, a prerequisite to the allowance of the partial duty exemptions is proof of the presence in the imported article of the exported U.S. metal article or
fabricated component--not a substitute foreign equivalent. It is necessary to
know precisely what U.S. articles were exported from the United States, that
they were effectively segregated from and not commingled with foreign articles
prior to their being processed or assembled, and exactly how they were used
abroad in the production or manufacture of the imported article. [Bold added]
It is clear from the language of subheading 9802.00.60, HTSUS; the requirements of the pertinent regulation at 19 CFR § 10.9; and the history of the predecessor provision item 806.30, TSUS, as discussed in the referenced ITC publication; the exported articles of metal to be processed abroad and returned under subheading 9802.00.60, HTSUS, cannot be treated as fungible goods as your client proposes.
HOLDING:
Your client’s request for CBP’s approval to use an inventory management system, such as FIFO, to identify U.S. copper scrap content in copper products eligible for a partial duty exemption under subheading 9802.00.60, HTSUS, is denied.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch