The Court of International Trade ruled recently that heat-treated forged steel rods are properly classified as other bars and rods, not further worked than forged, under HTSUS 7228.40.00, where they are subject to the Section 301 tariffs on imports from China. The plaintiff had argued that these goods are classifiable as grinding balls and similar articles for mills under HTSUS 7326.11.00, which is not subject to the China 301 tariffs.
The steel rods at issue are used to crush ore in mining and mineral extraction operations. They are made via a process in which steel blooms are heated, hot-rolled into bars, and cooled, after which they are cut to the customer’s desired length, heated again, and processed by a series of forging dies and passed through a water quenching system. This process gives the rods a hard outer surface of martensite, which makes the rods suitable for breaking down ore and mineral structures, and a softer inner core of pearlite, which provides ductility and prevents the bars from breaking while being used in the mill.
U.S. Customs and Border Protection maintained that under General Rule of Interpretation 1 the imported rods are classifiable under HTSUS 7228.40.00 because this subheading describes the rods by name and with greater specificity than HTSUS 7228.30.80, the provision in which it classified the rods at entry. The plaintiff, however, interpreted two explanatory notes as holding that goods otherwise classified under heading 7228 will not be classified thereunder if subjected to working that causes it to assume the character of articles or products falling in another heading. The plaintiff asserted that the heat treatments and other processing operations performed on the rods, while not considered “working,” caused the rods to be “processed out” of the scope of heading 7228 because they assumed the character of articles under HTSUS 7326.11.00.
However, the CIT finds two problems with the plaintiff’s argument. First, the subject rods’ use is not an essential or even a material consideration in their classification because neither heading 7228 nor heading 7326 is a use provision (principal or actual), nor does either heading inherently suggest that products classified within its scope are for a particular use. Second, the argument violates the principle that, under GRI 1, possible headings are to be evaluated without reference to their subheadings, which cannot be used to expand the scope of their respective headings.
The CIT then finds that the subject rods are classifiable under heading 7228. The court rejected the plaintiff’s argument that the subject rods do not have a solid cross-section along their entire length (as required by note 1(m) to Chapter 72) because they are notched at the ends, instead ruling that notches are a type of indentation allowable under note (l). The court also determined that the subject rods are of other alloy steel because, as required under note 1(f) to Chapter 72, they contain by weight 0.3 percent or more of chromium. Further, the court said that under GRI 1 the rods are not classifiable under heading 7326, a basket provision, because they are specifically covered by heading 7228.
Finally, the CIT said the subject rods are classifiable under HTSUS 7228.40.00, which covers bars and rods not further worked than forged, rather than HTSUS 7228.30.80, which covers bars and rods not further worked than hot-rolled, hot-drawn, or extruded. The court explained that because the subject rods are forged after being hot-rolled, the latter subheading describes them at an intermediate stage of their production whereas the former more specifically describes them as a finished product.
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