IA 58/89; Lead processed from U.S.- and foreign-origin scrap lead acid batteries; eligible article; obsolete scrap; manufacturing process; dismantling; shredding; crushing; 554750; x554750; 555557; 555096

HQ W555514 April 17, 1991 CLA-2 CO:R:C:S W555514 KCC CATEGORY: Classification TARIFF NO.: 9802.00.60 District Director of Customs 880 Front Street, Suite 5S9 San Diego, California 92188 RE: IA 58/89; Lead processed from U.S.- and foreign-origin scrap lead acid batteries; eligible article; obsolete scrap; manufacturing process; dismantling; shredding; crushing; 554750; x554750; 555557; 555096 Dear Sir: This is in response to your request for Internal Advice which was initiated by ALCO Pacific, Inc. ("importer"), concerning the eligibility of lead blocks derived from scrap lead acid batteries for the partial duty..exemption under subheading 9802.00.60, Harmonized Tariff Schedule of the United States (HTSUS). The issue was forwarded to this office by memorandum dated October 18, 1989, from the Chief, NIS, New York. We regret the delay in responding to your request. FACTS: The importer, through its U.S. contractor, purchases lead acid batteries from scrap dealers, battery distributors, government agencies, and industry sources in the U.S. The contractor then proceeds to decase the batteries, remove the acid, and smelt the battery plates and linings in order to convert the lead oxide or sulfate to lead metal. The lead metal is then poured into containers and shipped to battery manufacturing companies to be used in the production of new batteries. The smelting process also yields another product, lead furnace slag, which is shipped to the importer's facility in Mexico for processing into lead blocks. The blocks are then returned to the U.S. for remelting and further processing. Because of the batteries' used condition and multiple sources of origin, the importer acknowledges that the origin of the used batteries cannot always be determined. The importer has submitted statistics from the U.S. Department of Commerce, International Trade Administration, Office of Metals, Minerals, and Commodities, to establish that the vast majority of batteries used in the U.S. are of u.s.-origin. The statistics show that over 89% of batteries sold in the U.S. during the period 1982- 1989 were manufactured in the U.S. The statistics submitted for domestic and imported lead acid batteries are as follows: Date Domestic Batteries Imported Batteries % of Domestic Batteries  1982 54,214,456 750,522 99%  1983 56,104,752 1,565,394 97%  1984 59,332,509 1,997,355 97%  1985 58,683,589 3,115,112 95%  1986 60,306,004 3,599,071 94%  1987 59,877,656 4,982,421 92%  1988 63,487,361 5,646,050 92%  1-4 1989 17,802,588 1,895,382 89%  ISSUE:     Whether subheading 9802.00.60, HTSUS, is applicable to the returned lead blocks derived from used batteries of U.S.- and foreign-origin. LAW & 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 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 the process­ ing 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). The phrase "manufactured in the United States or subjected to a process of manufacture in the U.S." requires that metal articles be produced by U.S. manufacturers or foreign-origin metal articles be subjected to a manufacturing process in the U.S. in order to be eligible under this statute. We have consistently ruled that "obsolete scrap" metal is eligible under subheading 9802.00.60, HTSUS, if it is shown that all the metal under consideration is manufactured in the U.S. or subjected to a process of manufacture in the U.S. See, Head­ quarters Ruling Letter (HRL) 554750 dated March 14, 1988, x554750 dated September 23, 1988, and HRL 555557 dated April 15, 1991. "Obsolete scrap" is defined as worn-out or discarded metal articles. In this case, the used batteries purchased by the importer from various sources are properly defined as "obsolete scrap." The importer acknowledges that it is impossible to establish that all the acquired used batteries are manufactured in the U.S. Although the importer submits statistics gathered by the Department of Commerce stating that over the past eight years 89% or more of the replacement lead acid batteries found in the U.S. are of domestic manufacture, these statistics are insufficient to establish that the lead blocks under consideration here satisfy the statutory requirements of subheading 9802.00.60, HTSUS. 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 reclamation operations performed by the importer to convert used batteries to lead metal and lead furnace slag do not constitute manufacturing processes as contemplated by subheading 9802.00.60, HTSUS. Therefore, the lead furnace slag will be considered an article of metal eligible under subheading 9802.00.60, HTSUS, only if the discarded lead acid batteries from which the lead furnace slag was obtained were manufactured in the U.S. Since the importer is unable to establish that the lead acid batteries subjected to the U.S. smelting operations are manufactured in the U.S. or subjected to a process of manufacture in the U.S., the imported lead blocks fail to meet the requirements of subheading 9802.00.60, HTSUS. HOLDING: For the reasons set forth above, as the importer is unable to establish that all the lead furnace slag exported for processing aboard were derived from metal articles manufactured or subjected to a process of manufacture in the U.S., we find that the imported undressed lead blocks are not entitled to entry under subheading 9802.00.60, HTSUS. Sincerely, John Durant, Director Commercial Rulings Division