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HQ 555691


May 10, 1991

CLA-2 CO:R:C:S 555691 KCC

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.60

Yong Hak Kim, Esq.
Freeman, Wasserman & Schneider
90 John Street
New York, New York 10038

RE: Steel concrete reinforcing bars produced from prepared steel scrap. Eligible article; obsolete scrap; manufacturing process; dismantling; shredding; crushing; 554750; x554750; 555557; 555096

Dear Mr. Kim:

This is in response to your letters dated July 12, October 8, and November 2, 1990, on behalf of Dongkuk Steel Mill Co., Ltd., requesting a ruling on the applicability of subheading 9802.00.60, Harmonized Tariff Schedule of the United States (HTSUS), to steel concrete reinforcing bars produced in Korea from steel scrap processed in the U.S. We regret the delay in responding to your request.

FACTS:

Dongkuk Steel Mill Co. (Dongkuk) exports prepared steel scrap from the U.S. to Korea where it is melted, continually cast into billets, and rolled into steel concrete reinforcing bars (rebars).

The prepared steel scrap is created in the U.S. from a variety of discarded, obsolete and worn-out metal articles, including automobiles, railroad rails and equipment, ships and marine equipment, aircraft and industrial machinery, of U.S.- and foreign-origin. The prepared scrap is created as follows:

1) the discarded and obsolete metal articles are dismantled, and all reusable and unwanted parts and components are separated and removed to create skeleton scrap;

2) the skeleton scrap is chemically analyzed, decontaminated, sized, sorted by thickness and chemical composition, classified and segregated by type, and blended and grouped with similar types of skeleton scrap to create graded scrap; and

3) graded scrap is transformed into prepared scrap by one of three processes depending on the class of scrap to be produced. The classes of prepared scrap are commercially known as No. 1 heavy melting steel, No. 2 heavy melting steel, No. 1 bundles, No. 2 bundles, and shredded scrap.
a) To obtain No. 1 and No. 2 heavy melting steel, graded scrap is cut by acetylene torches into industry- specified pieces of given dimensions. The cut pieces are forced into a "squeeze box," which compresses and hoppers the cut pieces into the mouth of a "guillotine shear" where they are further sliced into specified dimensions. Finally, the sheared pieces enter a hydraulic bailing press where they are further compressed into a bale not over 60 x 24 inches in size.
b) To obtain No. 1 and No. 2 bundles, graded scrap is cut by acetylene torches to pieces not exceeding specified dimensions. The cut pieces are transferred to a hydraulic baling press where the pieces are compressed into a bundle which meets the size of the electric furnace's charging box but which weighs not less than 75 pounds per cubic foot.
c) To obtain shredded scrap, graded scrap is flattened by presses. The flattened pieces are shredded and crushed into fist-size pieces, passed through a ferrous cleaner where nonferrous and nonmetallic materials are separated, passed through a wet scrubber system where they are cleaned to remove dirt and dust, and finally passed through a magnetic drum separator in order to separate the remaining nonferrous and nonmetallic materials. The resulting shredded ferrous pieces are homogeneous and have the average density of 50 pounds per cubic foot.

The various types of prepared scrap are exported to Korea where Dongkuk melts the scrap, continuously casts it into billets, and then rolls it into rebars which are exported to the U.S. After importation into the U.S., the rebars are sold to fabricators which cut, bend and fabricate the rebars into forms which are then sold to concrete contractors.

ISSUE:

Whether subheading 9802.00.60, HTSUS, is applicable to the returned rebars derived from prepared scrap created in the U.S. from U.S.- and foreign-origin discarded and obsolete metal articles.

LAW AND ANALYSIS:

Subheading 9802.00.60, HTSUS, provides a partial duty exemption for:

[a]ny article of metal (as defined in U.S. note 3(d) of this subchapter) manufactured 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.

This tariff provision imposes a dual "further processing" requirement on eligible articles of metal--one foreign, and when returned, one domestic. Metal articles satisfying these statutory requirements may be classified under this tariff provision with duty only on the value of such processing performed outside the U.S., provided there is compliance with the documentary requirements of section 10.9, Customs Regulations (19 CFR 10.9)

We have consistently ruled that "obsolete scrap" metal is eligible under subheading 9802.00.60, HTSUS, if it is shown that all of the metal articles from which the scrap was obtained were manufactured in the U.S. or subjected to a final process of manufacture in the U.S. See, Headquarters Ruling Letter (HRL) 554750 dated March 14, 1988, HRL x554750 dated September 23, 1988, and HRL 555557 dated April 15, 1991. "Obsolete scrap" is defined as worn-out or discarded metal articles.

We do not consider processes such as dismantling (by whatever means), shredding, and crushing of obsolete scrap to be a manufacturing process, whether or not accompanied by sorting, grading, or other similar activities to promote the salability or utility of scrap. We are of the opinion that manufacturing begins once raw materials are available and does not include reclamation activities undertaken with respect to previously-used materials prior to the creation of raw material for new manufacturing. See, HRL x554750, HRL 555557, and HRL 555096 dated July 7, 1989.

Therefore, the various types of prepared scrap will be considered an article of metal eligible under subheading 9802.00.60, HTSUS, only if the discarded and obsolete metal articles from which the prepared scrap was obtained were manufactured or subjected to a final process of manufacture in the U.S. Since your client is unable to establish that the
discarded and obsolete metal articles subjected to previously- described operations in the U.S. are manufactured in the U.S. or subjected to a process of manufacture in the U.S., the imported rebars fail to meet the requirements of subheading 9802.00.60, HTSUS.

HOLDING:

For the reasons set forth above, as your client is unable to establish that all the various types of prepared scrap exported for processing aboard were derived from metal articles manufactured or subjected to a final process of manufacture in the U.S., we find that the imported steel concrete reinforcing bars are not entitled to entry under subheading 9802.00.60, HTSUS.

Sincerely,

John Durant, Director
Commercial Rulings Division

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