H310256

May 8, 2020 HQ H310256 FTZ 01; LIQ 08 OT:RR:CTF:ER H310256 ECG Shannon Fura, Esq. Page Fura, P.C. 311 West Superior, Suite 306 Chicago, IL 60654 Re: Request for a Ruling on the Application of Section 232 and AD/CVD Duties to Recoverable Waste Withdrawn and Entered from a Foreign Trade Zone Dear Ms. Fura: This is in response to your ruling request dated November 27, 2018, on behalf of U.S. Granules Corporation (“USGC”), regarding whether recovered waste generated by a manufacturing process in a foreign trade zone (“FTZ”) may be withdrawn and entered under non-privileged foreign status (“NPF”) pursuant to 19 C.F.R § 146.42(b), when the admitted merchandise is subject to the action on certain imports of aluminum metals pursuant to Section 232 of the Trade Expansion Act of 1962, as amended (19 U.S.C. § 1862) (“Sec. 232” or “232 duties”), and antidumping and countervailing (“AD/CVD”) orders. We regret the delay in our response. FACTS: USGC operates facilities that recover aluminum foil from industrially generated items such as juice pouches, yogurt lidding, and chewing gum wrappers. It subjects these items to a thermal process that segregates the organic laminates, i.e., paper and plastic, from the aluminum foil, which it then processes into aluminum granules. For its recovery operation, USGC purchases aluminum laminate waste and scrap from various suppliers. These suppliers produce the finished items, such as the juice pouches or yogurt lidding, through operations conducted in an FTZ located in the United States and then sell USGC the recoverable waste and scrap, such as aluminum laminate trimmings, generated by the suppliers’ manufacturing operations. More specifically, USGC states that its suppliers admit to their FTZ, certain aluminum foil classified under subchapter 7607 of the Harmonized Tariff Schedule of the United States (“HTSUS”). Additionally, it further elaborates that the admitted merchandise’s classification subjects it to 232 duties. See Presidential Proclamation 9704 (Mar. 8, 2018), published in 83 Fed. Reg. 11619 (Mar. 15, 2018). Furthermore, it also states that the admitted merchandise is subject to the AD/CVD orders on aluminum foil from the People’s Republic of China. See Certain Aluminum Foil from the People’s Republic of China: Amended Final Determination of Sales at Less than Fair Value and Antidumping Duty Order, 83 Fed. Reg. 17362 (Apr. 19, 2018); and Certain Aluminum Foil from the People’s Republic of China: Amended Final Affirmative Countervailing Duty Determination and Countervailing Duty Order, 83 Fed. Reg. 17360 (Apr. 19, 2018). Both the Sec. 232 action and AD/CVD orders dictate that merchandise subject to those actions must be admitted under privileged foreign (“PF”) status upon admittance to an FTZ to preserve the additional duties for assessment at withdrawal and entry. See Presidential Proclamation 9710 (Mar. 22, 2018), published in 83 Fed. Reg. 13355 (Mar. 28, 2018) and 15 C.F.R. § 400.14(e)(2). Furthermore, USGC states that its suppliers’ manufacturing process generates recoverable aluminum waste that is classified under 7602.00.0090, HTSUS, and ultimately sold to USGC for its aluminum recovery operations. In the suppliers’ FTZ, the admitted aluminum foil, subject to both Sec. 232 action and AD/CVD orders, is processed to produce the finished items such as the juice packs, with the trim or excess portion of those items resulting in the recoverable aluminum waste that contains a portion of the originally admitted aluminum foil. Additionally, USGC states that the recovered aluminum waste is subject to neither the Sec. 232 action nor the AD/CVD orders. Moreover, CBP regulations dictate that recoverable waste is an exception to PF status and such waste must be designated as non-privileged foreign (“NPF”) status so that it is dutiable and taxable based on its condition at the time of its withdrawal and entry for consumption. See 19 U.S.C. § 81c; 19 C.F.R. §§ 146.41(e); 146.42(b); 146.65(a)(2). USGC further notes that seemingly two sets of contradictory instructions exist for the treatment of the recovered aluminum waste upon its withdrawal and entry from the FTZ. One set of instructions, the Sec. 232 action and the AD/CVD orders, requires that the admitted aluminum foil obtain PF status, which would assess duty on the withdrawn article based on the article’s condition at time of admittance to the FTZ, i.e., the aluminum foil subject to additional Sec. 232 and AD/CVD duties. However, another set of instructions, CBP’s regulations, requires that recoverable waste generated in an FTZ must be in NPF status, which would assess duty on the withdrawn article based on the article’s condition at time of withdrawal from the FTZ, i.e., the recovered aluminum waste not subject to additional Sec. 232 and AD/CVD duties. Accordingly, USGC inquires as to which FTZ zone status should apply to the recovered aluminum waste generated in the suppliers’ FTZ, ultimately dictating the application, or not, of Sec. 232 and AD/CVD duties. ISSUE: Whether recoverable aluminum waste is required to be withdrawn from an FTZ for consumption under privileged foreign status and subject to Sec. 232 and AD/CVD duties. LAW AND ANALYSIS: In general, FTZs operate pursuant to the Foreign Trade Zone Act of 1934 (FTZ Act), 19 U.S.C. §§ 81a-81u, as amended. Furthermore, FTZs also operate in accordance with two sets of regulations: the FTZ Board regulations (15 C.F.R. part 400) and CBP regulations (19 C.F.R. part 146). FTZ Board regulations provide guidelines and procedures on the establishment and modification of zones, their management and administration by zone grantees and operators, and the conduct of the FTZ Board’s business. By contrast, CBP’s FTZ regulations ensure compliance with the FTZ Act and establish record keeping and reporting requirements. Additionally, the FTZ Board, consisting of the Secretary of Commerce and Secretary of the Treasury, has the authority to perform activities such as approve manufacturing and processing activity in FTZs, restrict or prohibit zone operations, and determine if zone activity is or would be in the public interest. See 19 U.S.C. § 81a(b); 19 C.F.R. § 400.11. CBP’s role, however, differs from the FTZ Board’s in that CBP carries out the duties and responsibilities of the Secretary of the Treasury under the FTZ Act, but does not represent the Secretary of the Treasury in any matter pertaining to zones which is: 1) of a policy-making nature; or 2) within the authority of another agency of the Department of the Treasury that has not been delegated to CBP, such as the Internal Revenue Service. See generally, 19 U.S.C §§ 81c-e; 81o(b). Accordingly, CBP’s primary interest and concern is the control of merchandise moving to and from the zone, and the FTZ user’s compliance with zone procedures and all regulations pertaining to zone use. CBP, however, will generally defer to the FTZ Board for policy-based decisions. Additionally, CBP administers rules, orders, and guidance issued by other agencies, including both the United States Department of Commerce’s (“Commerce”) Bureau of Industry and Security (“BIS”) and International Trade Administration (“ITA”). In general, a trade remedy, action, or measure dictates how to determine the application of that remedy, action, or measure. For example, Commerce BIS and the President of the United States instruct CBP on the application of the Sec. 232 action to certain aluminum products through various Presidential Proclamations. These Presidential Proclamations dictate that Sec. 232 merchandise may be admitted and withdrawn from an FTZ, provided that such merchandise “may only be admitted as ‘privileged foreign status’ as defined in 19 C.F.R. § 146.41, and will be subject upon entry for consumption to any ad valorem rates of duty related to the classification under the applicable HTSUS subheading.” Presidential Proclamation 9710 (Mar. 22, 2018), published in 83 Fed. Reg. 13355 (Mar. 28, 2018). 

In general, FTZs operate pursuant to the Foreign Trade Zone Act of 1934 (FTZ Act), 19 U.S.C. §§ 81a-81u, as amended. Furthermore, FTZs also operate in accordance with two sets of regulations: the FTZ Board regulations (15 C.F.R. part 400) and CBP regulations (19 C.F.R. part 146). FTZ Board regulations provide guidelines and procedures on the establishment and modification of zones, their management and administration by zone grantees and operators, and the conduct of the FTZ Board’s business. By contrast, CBP’s FTZ regulations ensure compliance with the FTZ Act and establish record keeping and reporting requirements. Additionally, the FTZ Board, consisting of the Secretary of Commerce and Secretary of the Treasury, has the authority to perform activities such as approve manufacturing and processing activity in FTZs, restrict or prohibit zone operations, and determine if zone activity is or would be in the public interest. See 19 U.S.C. § 81a(b); 19 C.F.R. § 400.11. CBP’s role, however, differs from the FTZ Board’s in that CBP carries out the duties and responsibilities of the Secretary of the Treasury under the FTZ Act, but does not represent the Secretary of the Treasury in any matter pertaining to zones which is: 1) of a policy-making nature; or 2) within the authority of another agency of the Department of the Treasury that has not been delegated to CBP, such as the Internal Revenue Service. See generally, 19 U.S.C §§ 81c-e; 81o(b). Accordingly, CBP’s primary interest and concern is the control of merchandise moving to and from the zone, and the FTZ user’s compliance with zone procedures and all regulations pertaining to zone use. CBP, however, will generally defer to the FTZ Board for policy-based decisions.Additionally, CBP administers rules, orders, and guidance issued by other agencies, including both the United States Department of Commerce’s (“Commerce”) Bureau of Industry and Security (“BIS”) and International Trade Administration (“ITA”). In general, a tr