Court Opinion

ID: 818898
Source: CourtListenerOpinion
Date Created: 2013-02-04 05:59:50.105529+00
Date Added: 2024-06-11T09:02:53.611992
License: Public Domain

Slip Op. 03 - 100

           UNITED STATES COURT OF INTERNATIONAL TRADE

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WASHINGTON INTERNATIONAL INSURANCE CO.,:

                             Plaintiff,   :
                                              Consolidated
                 v.                       :   Court No. 92-04-00252

                                          :
UNITED STATES,
                                          :
                             Defendant.
                                       :
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                             Memorandum

[Upon stipulation of the facts in lieu
 of trial regarding steel imports,
 judgment for the defendant.]

                                              Decided: August 8, 2003

     Sandler, Travis & Rosenberg, P.A. (Beth C. Ring) for the
plaintiff.

     Peter D. Keisler, Assistant Attorney General; John J. Mahon,
Acting Attorney in Charge, International Trade Field Office,
Commercial Litigation Branch, Civil Division, U.S. Department of
Justice (Aimee Lee); and Office of Assistant Chief Counsel, Inter-
national Trade Litigation, U.S. Bureau of Customs and Border
Protection (Chi S. Choy), of counsel, for the defendant.

          AQUILINO, Judge:    This action consolidates claims by the

plaintiff for refunds of duties assessed by the U.S. Customs

Service on the full value of imports of stainless steel, as opposed

to only on the value of its processing outside the United States

per item 806.30 of the Tariff Schedules of the United States

("TSUS"), which duty exemption applied to
Consolidated
Court No. 92-04-00252                                                 Page 2

     [a]ny article of metal (except precious metal) manufac-
     tured in the United States or subjected 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 processing outside of the United States, is returned
     to the United States for further processing[.]

                                       I

              To be "manufactured in the United States", there "must be

transformation; a new and different article must emerge, 'having a
distinctive name, character, or use.'" Anheuser-Busch Brewing Ass'n

v. United States, 207 U.S. 556, 562 (1908).             An article may be

"subjected to successive processes of manufacture, each one of

which is complete in itself, but several of which may be required

to make the final product." Tide Water Oil Co. v. United States,

171 U.S. 210, 216 (1898).         A "process of manufacture" advances an

article in condition or value such that the article is more than it

was in its original state.          See, e.g., United States v. Oxford

Int'l Corp., 62 CCPA 102, 106, 517 F.2d 1374, 1377-78 (1975); Unit-

ed States v. Flex Track Equip. Ltd., 59 CCPA 97, 101, 458 F.2d 148,

151-52 (1972); Ford Motor Co. v. United States, 19 CCPA 69, 71,

T.D. 44897 (1931).      It is well-established, though, that certain

processes are not manufacturing.           See, e.g., Lackawanna Steel Co.

v. United States, 10 Ct.Cust.Appls. 93, 94-95, T.D. 38359 (1920)

(crushing rock such that it was "rendered into the imported sizes

solely   to    facilitate   and   economize    in   transportation"   not   a

manufacturing process); Firestone Tire & Rubber Co. v. United

States, 71 Cust.Ct. 63, 66, C.D. 4474, 364 F.Supp. 1394, 1397
Consolidated
Court No. 92-04-00252                                        Page 3

(1973) ("mere cleansing of an article, or 'getting it by itself',

[] not a manufacturing process"). Morever, "[e]very application of

labor is not a manufacturing process[,] and it has long been held

that an operation which is necessary to get an article of commerce

by itself is not such a process."     George Beurhaus Co. v. United

States, 32 Cust.Ct. 269, 271, C.D. 1612 (1954), citing United

States v. Sheldon & Co., 2 Ct.Cust.Appls. 485, T.D. 32245 (1912);
Cone & Co. v. United States, 14 Ct.Cust.Appls. 133, T.D. 41672

(1926); United States v. U.S. Rubber Co., 31 CCPA 174, C.A.D. 269

(1944); V.W. Davis v. United States, 10 Cust.Ct. 189, C.D. 751

(1943); J.E. Bernard & Co. v. United States, 30 Cust.Ct. 122, C.D.

1509 (1953).   In Beurhaus, for example, pumpkin seed kernels were

held to have been imported unmanufactured where their foreign

processing consisted of removing the kernels from whole seeds and

drying them out:

     . . . Defendant claims that the imported merchandise has
     been partially manufactured because shelling or peeling
     the seeds was one of the steps necessary to the develop-
     ment of the finished article.      It might likewise be
     claimed that removing the seeds from the pumpkin and
     taking the pumpkin from the vine were such steps. All of
     those operations were, of course, necessary to the pro-
     duction of the finished article, but they were primarily
     required for the purpose of obtaining the seed kernels
     free from the pods.

32 Cust.Ct. at 271.     Similarly,   in United States v. Salomon, 1

Ct.Cust.Appls. 246, 249, T.D. 31277 (1911), the court held that

cotton waste, which had been treated and bleached, was not "advanc-

ed in value by a[] . . . manufacturing process".
Consolidated
Court No. 92-04-00252                                        Page 4

                                 II

          In the light of this law long settled, come the parties

to this action with a Stipulation of Material Facts in Lieu of

Trial, which the court has reviewed and approved as having "be[en]

submitted for decision in lieu of trial on" its contents.1   They

include the following:

          4. Plaintiff . . . is the surety on the customs
     bonds for the entries subject to this action.

          5. The importer of record on the subject entries
     during the relevant time period[] was either Newmet
     Corporation or Newmet Steel Corporation (collectively
     referred to as "Newmet"). . . .

          6. Newmet was engaged in the business of selling in
     the United States[] finished or semi-finished stainless
     and electrical steel products which were purchased from
     foreign steel mills on a scrap conversion basis, meaning
     that Newmet supplied scrap to the foreign steel mills and
     paid them for converting the scrap into the imported
     stainless steel sheets, plates and strips.

          7. Newmet obtained orders for the imported semi-
     finished or finished stainless steel sheets, plates or
     strips from steel fabricators in the United States, which
     such fabricators would further process by straightening,
     slitting and cutting to size for further sale to manufac-
     turers of a variety of stainless steel products.

                             *   *    *

          9. The imported merchandise consists of stainless
     steel sheets, plates and strips and are articles of metal
     other than precious metal.

     1
       The court's jurisdiction over this consolidated action is
pursuant to 28 U.S.C. §§ 1581(a), 2631(a).

     In addition to their stipulation, the plaintiff has filed a
motion for summary judgment, and the defendant has countered with
a motion for judgment upon the stipulation.
Consolidated
Court No. 92-04-00252                                      Page 5

          10. The merchandise covered by the subject entries
     . . . [was] processed abroad by foreign steel mills from
     stainless steel scrap that had been exported from the
     United States.

          11. The exported scrap (hereinafter also referred
     to, for purposes of this stipulation, as "prepared
     scrap")[] was the raw material from which the imported
     products were manufactured . . . by the foreign steel
     mills.

          12. The subject imported stainless steel sheets,
     plates and strips were imported into the United States
     for further processing into various stainless steel
     products.

          13. The subject entries were liquidated with duty
     assessed on the full value of the imported merchandise.

                             *   *   *

          15. The "scrap" as it enters the . . . yard (here-
     inafter also referred to as "incoming scrap") was not
     solely of U.S. origin but consisted of scrap of U.S. and
     foreign origin that were commingled.

                             *   *   *

          17. The Customs Service issued 2 rulings in connec-
     tion with this matter: HQ 555096, July 7, 1989 and HQ
     555557, April 15, 1991, which are attached to this
     stipulation.

                             *   *   *

          19. The scrap yards dealt with two types of scrap:
     "obsolete" and "industrial" . . ..

          20. "Obsolete" scrap, also known as "old solids,"
     consist of metal machinery that is no longer usable.

          21. "Industrial" scrap is comprised of two types:
     (i) "turnings," and (ii) "new solids". "Turnings" are
     small pieces of metal, approximately 1 inch in size or
     smaller and less than 1/8 inch thick, that result from
     milling bars of stainless steel into the correct size,
     such as in the manufacture of screwdrivers or screws.
     About 10 percent of the incoming scrap consisted of
Consolidated
Court No. 92-04-00252                                       Page 6

     turnings.   "New solids" are the discarded trimmings
     resulting from the process of manufacturing articles and
     components from stainless steel sheets and bars.

                             *   *   *

          23. The scrap yards generally perform three
     categories of operations on the incoming scrap: (i)
     testing and segregating; (ii) sizing; and (iii) packag-
     ing.

           24. Testing and segregating consisted of identify-
     ing the alloy metal content of the incoming scrap and
     segregating it into containers based on its chemical
     composition. All incoming scrap was tested with a magnet
     after being unloaded from rail cars onto a conveyer belt
     with hydraulic or rail cranes. . . . The incoming scrap
     was then spark tested by placing the scrap against a
     grinding wheel to produce a spark.     The color of the
     spark identified the metal. Where those tests did not
     definitively identify the chemical composition, further
     testing was performed by placing acid on the scrap or on
     grindings resulting from drilling a hole in the metal.
     . . .

          These tests would be sufficient to identify about 90
     percent of the incoming scrap. For the remaining 10 per-
     cent . . ., the scrap yards had laboratories equipped
     with x-ray spectrometers and atomic absorption analyzers
     to test tiny pieces of scrap called grindings obtained
     from drilling a hole in the scrap. . . .

          Large and irregularly-shaped incoming scrap was
     compacted or crushed before being tested, which allowed
     for a composite piece . . . for testing. Incoming scrap
     was sometimes decontaminated or upgraded.      Decontam-
     ination was the process of cleaning and cutting out sec-
     tions of non-alloy material from the scrap metal and was
     performed by cutting with an automatic torch or an
     abrasive saw. Upgrading was the separating out of non-
     stainless steel material from mixed shipments of stain-
     less and non-stainless steel scrap received by the . . .
     yards. . . .

          After the . . . alloy content was identified the
     scrap was sorted into containers corresponding to its
     grade. There were hundreds of grades . . ..
Consolidated
Court No. 92-04-00252                                       Page 7

          25. Sizing was the operation of cutting scrap to a
     size that would fit in the steel mill's furnaces and
     depended upon the shape and size of each individual piece
     of scrap. Sizing includes cutting, crushing, ripping,
     shearing or shredding. . .. Cutting refers to the cutting
     of scrap into smaller pieces using an automatic torch.
     Ripping, which was rarely needed, is the term used to
     separate stainless steel from non-stainless material.
     Shearing is the cutting of long strips of scrap into
     smaller pieces using alligator or heavy shears. Shred-
     ding is the cutting of scrap in a shredder into small
     thin pieces and was occasionally performed on special
     kinds of incoming scrap. Larger pieces of scrap were put
     through a crusher to break up big pieces of castings
     which could not be cut by other methods and could also be
     subject to another method of cutting, such as shearing
     and/or cutting, depending upon . . . size.     . . .

          26. Packaging was the weighing and accumulating of
     truck loads or railcar loads of a specific grade of
     solids or a sufficient amount of briquettes or bales of
     turnings to comprise a railcar load or truck load, to
     fill a customer order. Briquetting is the forcing, by
     using a briquetting machine, of turnings and small solids
     into blocks no larger than 3 ft. by 5 ft. by 2 ft. for
     ease of transport and utilization in the customer's fur-
     nace. Baling is performed by compressing very thin scrap
     into small square sized packs for the convenience of
     handling, transporting and furnace size.

                             *   *   *

          29. The truck loads and railcar loads of prepared
     scrap were then exported to foreign steel mills in order
     to be processed into stainless steel sheets, plates, and
     strips.

The parties further agree in paragraph 14 of this stipulation that

the crux of their controversy is whether or not the merchandise was

"manufactured in the United States or subjected to a process of

manufacture in the United States" within the meaning of TSUS item

806.30, supra, and that "[a]ll other conditions of [that] item

. . . are met."
Consolidated
Court No. 92-04-00252                                         Page 8

                                  A

            The imports underlying this action, as described in their

entry papers and also in the foregoing stipulation, were stainless

steel sheets, plates, and strips produced overseas. And those pro-

ducts were "manufactured" there within any definition of that term.

That is, plaintiff's exported pieces of metal underwent transforma-

tion, resulting in new and different articles, having distinctive
names, characters or uses of the kind contemplated by Anheuser-

Busch, supra, and other cases.        Nothing which occurred in the

United States prior thereto, as stipulated above by the parties,

amounted to such manufacture.

            The plaintiff does not argue otherwise, but it does

contend that the afore-described preparation of the scrap for

shipment for that foreign transformation was itself manufacture --

in this country.     Its briefs characterize the incoming metal as

"junk"2, perhaps in the hope that this court could and therefore

would divine transformation into scrap.    The court cannot do so on

the evidence adduced, although at least some sources of that metal

surely could satisfy someone's definition of junk3.    But that def-

inition would not necessarily differ materially from that for

scrap4.   Whichever definition, the substance of interest which en-

     2
       Memorandum in Support of Plaintiff's Motion for Summary
Judgment [hereinafter "Plaintiff's Memorandum"], pp. 1, 2, 7, 12,
15; Plaintiff's Memorandum in Reply, pp. 2, 7, 15, 19.
     3
       See, e.g., Webster's Third New International Dictionary of
the English Language Unabridged, pp. 1226-27 (1981).
     4
         Compare, e.g., id. with id. at 2039.
Consolidated
Court No. 92-04-00252                                         Page 9

tered the Newmet yard(s) remained that substance upon exit for

export, including some originally from other lands.    In short, the

court is unable to conclude that Newmet's preparation of the

articles of metal for export was "manufacture[] in the United

States" in satisfaction of the statutory standard to support, if

not save, dissipating U.S. industry.

            This action thus comes down to consideration of whether

that preparation subjected those articles to a "process of manu-

facture in the United States". On this issue, the plaintiff argues

that,

       in enacting item 806.30, TSUS, Congress did not intend
       the phrases "manufactured in the United States" and
       "subject to a process of manufacture in the United
       States" to mean the same. A contrary conclusion would
       render the words of the statute superfluous, a result the
       courts seek to avoid.5

            This court concurs.   And the plaintiff also points out

that

       "Congress used the expression 'subjected to a process of
       manufacture' as synonymous with processing." . . .
       "Processing generally connotes an advancement of the
       material or article, as distinguished from manufacturing
       which is broader in scope," said the Customs Service in
       Headquarters Ruling 055038 dated June 16, 1978. Thus,
       less has to be done to "process" an article than to
       "manufacture" one.6

       5
       Plaintiff's Memorandum, p. 11, citing Carey & Skinner,
Inc. v. United States, 42 CCPA 86, C.A.D. 576 (1954).
       6
       Plaintiff's Memorandum, pp. 11-12, erroneously attribut-
ing in toto the first quoted sentence to A.F. Burstrom v. United
States, 44 CCPA 27, [31,] C.A.D. 631 (1956).
Consolidated
Court No. 92-04-00252                                                  Page 10

Cited by counsel for the last proposition is Firestone Tire &

Rubber Co. v. United States, supra, which does indeed support it.

In that case, metal top and bottom domes for liquid containers were

manufactured in the United States and then sent to Canada for

coating with rubber before return to this country.             The court held

that application to be "further processing" under TSUS item 806.30,

overruling the contrary view of Customs, which had resulted in
imposition of duties on the full appraised value of the returned,

rubberized, metal domes.      That view of the government was that,

      to come within the purview of item 806.30, TSUS, some
      process of manufacture comparable to machining, grinding,
      drilling, tapping, threading, punching, or forming must
      be performed on the metal itself. Defendant urges that
      these enumerated operations were the types of "further
      processing" contemplated by Congress in item 806.30, and
      that the rubber coating operation performed by Uniroyal
      in Canada was not comparable to any of the above enumer-
      ated operations.

71 Cust.Ct. at 66, 364 F.Supp. at 1397.             The court concluded that

Congress had not intended this "highly restrictive interpretation"

and   that   the   process   at   bar   was   a     "manufacturing   operation

performed by Uniroyal in [Canada]".           Id.

             The result of that operation in that case, however, was

a genuine change or advancement in the character of the merchan-

dise.   This the plaintiff does not show herein.            Whatever the pro-

cessing of its goods, as stipulated above, the unaltered facts are

that scraps of stainless steel entered the Newmet yard(s) and that
Consolidated
Court No. 92-04-00252                                      Page 11

scraps of stainless steel exited those premises.   Ergo, the plain-

tiff is not entitled to the benefit of item 806.30, TSUS, supra.

                                III

           In view of the foregoing, plaintiff's motion for summary

judgment must be denied; judgment for the defendant, dismissing

this action, will enter accordingly.
Decided:   New York, New York
           August 8, 2003

                                                Judge