October 2019 — Question 76

ABC Smith & Co. manufactures small gardening hand-held shovels in its foreign trade zone (FTZ). For the shovels’ production, the company imports and formally enters screws that are subject to a 2% ad valorem rate of duty, which the company then subsequently admits to its FTZ. Additionally, ABC Smith & Co. extracts raw metal from its mine in Minnesota. The raw metal is classified under an HTS with a 10% ad valorem rate of duty. ABC Smith & Co. then admits the extracted metal into its FTZ. Furthermore, ABC Smith & Co. admits to its FTZ as non- privileged foreign status merchandise plastic shovel handles that are subject to an 8% ad valorem rate of duty. In the FTZ, ABC Smith & Co. then smelts the raw metal, shapes it into the heads of shovels, and assembles the heads with the plastic shovel handles and screws to form finished hand-held shovels that are subject to a 4% ad valorem rate of duty. What rate of duty applies to the hand-held shovels upon withdrawal from the FTZ and entry into the customs territory of the United States?

• A2% ad valorem
• B4% ad valorem✓ CBP's answer
• C8% ad valorem
• D10% ad valorem
• E20% ad valorem Category XV – Free Trade Agreements