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HQ 966956




August 4, 2004

CLA-2 RR:CR:GC 966956 DSS

CATEGORY: CLASSIFICATION

TARIFF NO.: 7225.19.0000; 9903.73.02

Port Director
U.S. Customs and Border Protection
10 Causeway Street
Boston, MA 02222

RE: Protest No. 0401-03-100313; Silicon Electrical Steel from Russia; Exclusion from Steel 201 duties

Dear Port Director:

This is our decision on Protest No. 0401-03-100313, which was timely filed on October 23, 2003 by Sujani Enterprises Inc., (protestant) against your decision to assess additional duties on certain silicon electrical steel from Russia under subheading 9903.73.02, Harmonized Tariff Schedule of the United States Annotated (HTSUSA). Our decision follows.

FACTS:

Protest No. 0401-03-100313 concerns certain silicon non-oriented electrical steel from one entry, No. 851-xxxxxxx-9, which was entered on January 8, 2003, and which was liquidated on July 25, 2003, under subheading 9903.73.02/7225.19.0000, HTSUSA, and subject to duties of 30 percent ad valorem in addition to the duties of 0.6 percent. It is not disputed that the instant silicon electrical steel is classified under subheading 7225.19.0000, HTSUSA, which provides for “Flat-rolled products of other alloy steel: Of a width of 600 mm or more: Of silicon electrical steel: Other.” However, the protestant contends that the steel falls under a product exclusion and thus is not subject to additional duties under subheading 9903.73.02, HTSUSA.

The United States Trade Representative (USTR), under the authority of the President of the United States, administered “safeguard measures” following a determination by the International Trade Commission of import injury with respect to certain steel products. These safeguard measures, commonly known as “Section 201 Duties,” went into effect on March 20, 2002. See Presidential Proclamation 7529, issued on March 5, 2002. Some steel products were excluded from these measures via Federal Register notice 67 FR 46221, dated July 12, 2002. The exclusionary note at issue was added in that notice, and was effective at the time the steel was entered. Presidential Proclamation 7741 terminated the assessment of these duties with respect to goods entered or withdrawn from warehouse for consumption, December 5, 2003. See 68 Fed. Reg. 68483, 68485 (Dec. 8, 2003). However, the duties were in effect at the time of entry and are applicable to the instant articles.

The protestant argues that the steel satisfies the conditions set forth in U.S. Note 11(b)(xxxiv)(K) to Subchapter III, Chapter 99, and should not have been subjected to the additional duties set out in Subchapter III of Chapter 99. Protestant contends the steel should have been classified instead under subheading 9903.72.96, HTSUSA. Note 11(b)(xxxiv)(K) excludes:

Products described in industry usage as finally annealed electrical steel strip, the foregoing being flat-rolled silicon steel, coated with an insulating lacquer modified according to customer’s specification (C3/C5 type), low thickness deviation across the width (value for 0.50 mm thick material: maximum 0.02 mm, value for 0.65 mm thick material: 0.03 mm); grade: finally annealed electrical steel product according to EN 10106 (specific grades M530-50A, M530-65A with customer specified maximum core losses of 6.05 W/kg P 1.5 at 60 Hz and 5.80 W/kg P 1.5 at 60 Hz); finally annealed and coated; thickness 0.50 mm to 0.65 mm and width 1250 mm maximum;

In response to information inquiries from CBP and a February 24, 2003 Notice of Action stating that the steel would not be excluded from the duties, protestant stated that the conversion factor that should be used was 1.20 multiplied to the figures for 15/50 Hz (or a factor 0.8333 times the 15/60 Hz. figure, see below).

The original purchase order for the steel, dated August 9, 2002, and contained in the file indicates that the customer for this steel specified a maximum loss (core loss) of 5.30 W/kg (watts per kilogram or P) at 15/50 Hz (hertz). The mill certificate shows cold-rolled non-oriented steel, M530-65A, EN 10106, with actual core losses ranging from 4.31 to 4.69 P at 1.5/50 Hz.

The maximum core loss figures must be converted from 50 Hz to 60 Hz to determine whether the core loss of the subject electrical steel does or does not exceed the maximum core losses specified in the exclusionary note. ASTM Specification A677, the Standard Specification for Nonoriented Electrical Steel Fully Processed Types, states that maximum cores losses at 15 kG and 50 Hz are 0.79 times maximum core losses at 60 Hz. The core loss indicated on the purchase order, 5.30 W/kg at 15/50 Hz converts to 6.7008 W/kg at 60 Hz, which exceeds the maximum core loss requirement specified in the note. The core losses on the mill certificate range from 5.456 to 5.937 P at 15/60 Hz. However, three of the four lots on the mill certificate for the instant steel exceed the core loss permitted to meet the exclusion. Indeed, other conversion charts, such as that published by the International Electrotechnical Commission (IEC), provide for conversions that would result in a greater core loss figure. For example, the IEC chart converts 5.30 W/kg at 15/50 Hz to 6.84 W/kg at 1.5/60 Hz.

Based on these conversion factors and the information in the customer’s product order, CBP issued a Customs Form 29 for the entry and subsequently liquidated the entry under subheading 9903.73.02/7225.19.0000, HTSUSA, dutiable at 30.6 percent ad valorem.

ISSUE:

Whether the instant steel coils fall under the instant specific product exclusion note.

LAW AND ANALYSIS:

Initially we note that the protest was timely filed (i.e., within 90 days after but not before the notice of liquidation; see 19 U.S.C. 1514 (c)(3)(A)) and the matter is protestable (see 19 U.S.C. 1514 (a)(2) and (5)).

Classification of the silicon electrical steel under subheading 7225.19.0000, HTSUSA, is not at issue. The sole issue concerns the maximum core loss information required for a product to be excluded from additional Section 201 Steel duties. Protestant argues that because the note states that maximum core losses are “customer specified,” all that is required is for the customer to specify core losses to meet the terms of the note in its product specification, even if the actual core losses exceed the limits set in the note. Protestant also supplied an October 25, 2002 message from the protestant to the manufacturer, which changes the terms of the contract to meet the terms of the exclusionary note.

In industry usage, the lower the core loss of a product, the higher quality of the steel product. The higher the quality of the product, the higher the price. Thus, the steel specified on the original purchase order and described by the mill certificate is different than that described in the exclusionary note. Indeed, three of the four lots included on the mill certificate provided by the protestant show maximum core loss figures that exceed the maximum core loss permitted in the note, thus making it apparent that the steel does not meet the terms of the exclusion.

CBP looks at all available data to determine what a customer ordered and received, including mill certificates. In this case, the original August 9, 2002 purchase order and the actual mill certificates evidence an intent that the customer was purchasing steel that did not meet the maximum core loss requirement of the exclusionary note. Moreover, under common conversions in the steel industry, lots produced at the same time exceeded that of the core loss requirement in the exclusionary note.

The ASTM and ICE conversions are appropriate measures to convert core loss figures from 15/50 Hz to 15/60 Hz. See HQ 965364, dated July 16, 2002, where ASTM standards were shown to be appropriate standards. However, protestant has not provided support for its figure of 1.20.

Moreover, in this instance, the protestant has failed to show that the steel falls within the product description. The original purchase order and mill testing certificates evidence an intent on the part of the customer to purchase steel that did not meet the terms of the exclusionary note. The role of CBP in this case is ministerial and would not include the authority to narrow or interpret the meaning of customer specified core loss as used in the exclusionary note.

HOLDING:

The instant silicon electrical steel is classified under subheading 7225.19.0000, HTSUSA, which provides for, “Flat-rolled products of other alloy steel: Of a width of 600 mm or more: Of silicon electrical steel: Other.” The 2003 general rate of duty is 0.6 percent. The protestant should be aware that 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.

The steel is also subject to duty under subheading 9903.73.02, HTSUSA. The rate of duty is 30 percent ad valorem.

You should DENY the protest. In accordance with the Protest/Petition Processing Handbook (CIS HB, January 2002, pp. 18 and 21), 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 in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.

Sincerely,

Myles B. Harmon

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