Steel Rods Should Be Subject to Section 232, Not Basket Exemption Tariffs, DOJ Says
Processes performed on steel bars do not constitute "further working" for the purposes of tariff classification, meaning the steel bars are still classifiable in a tariff subheading subject to Section 232 tariffs, DOJ said in a brief filed March 21 at the Court of International Trade. Arguing in favor of its cross-motion for judgment, DOJ said that imported grinding rods from China are still classifiable under Harmonized Tariff Schedule subheading 7228.40.00 as “Other bars and rods of other alloy steel … not further worked than forged." ME Global is seeking reclassification of the rods under the residual subheading 7326.11.00 as "other articles of iron or steel,” which are not subject to Section 232 tariffs (ME Global Inc. v. United States, CIT #19-00179).
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DOJ said that because 7326 is a basket heading, ME Global must show that the rods are not classifiable under heading 7228, which DOJ said it has failed to do. ME Global argued that due to the manufacturing process -- which involves the heating of steel blooms, hot-rolling, and then cooling to form steel bars before they are cut to length for the intended customer, heated in an inductoforge, and processed by a series of forging dies while passing through a water quenching system -- the rods have acquired the character of "products falling in another heading of the tariff." DOJ pointed to Chapter 72 notes that specify that hot-rolling, hot-drawing or extrusion, forging, and cold-forming or cold-finishing do not qualify as processes that transform items out of heading 7228.
DOJ said that ME Global's classification argument rests entirely on the application of the Explanatory Note to HTSUS heading 7215 but that the U.S. Court of Appeals for the Federal Circuit has ruled that the explanatory notes should not be given weight “when the language of the tariff provision is unambiguous and the Explanatory Notes contradictory," which DOJ claimed is the case here.