CLA-2 CO:R:C:V 555499 KAC
David O. Elliott, Esq.
Barnes, Richardson & Colburn
475 Park Avenue South
New York, New York 10016
RE: Applicability of partial duty exemption under HTSUS
9802.00.80 to sausage casing formed by extruding xanthate
cellulose solution over U.S.-origin
paper;Assembly;Coating;C.J. Tower;Sigma;Carter.
Dear Mr. Elliott:
This is in response to your letters of October 3, 1989,
January 3, and May 2, 1990, on behalf of Vista International
Packaging Inc., requesting a ruling on the applicability of
subheading 9802.00.80, Harmonized Tariff Schedule of the United
States (HTSUS), to sausage casing to be imported from Finland.
Samples of the sausage casing, and photographs and slides of the
cellulose coating were submitted for our consideration.
FACTS:
Vista intends to ship U.S. manufactured special grade paper
to Finland where the paper will be coated by OY Visko AB (Visko)
with a xanthate cellulose solution which regenerates and hardens
into cellulose. The foreign operations to be performed in
Finland consist of the following:
(1) soaking cellulose material (wood in sheet form) in a
sodium hydroxide solution in order to form an alkali
cellulose compound;
(2) removing excess water which leaves a cake-like
material;
(3) shredding the alkali cellulose cake;
(4) allowing the shredded alkali cellulose cake to mature;
(5) treating the matured alkali cellulose with carbon
disulfide to form cellulose xanthate.
(6) dissolving the cellulose xanthate in an aqueous sodium
hydroxide solution to form the xanthate cellulose
solution.
(7) forming a paper tube by twisting the U.S.-origin strip
of paper, and continuously feeding the tube through the
center of the extruder and inside the annular orifice;
(8) spraying the xanthate cellulose solution onto the outer
surface of continuously moving paper tube;
(9) passing the xanthate cellulose penetrated paper tube
through a series of acidic baths wherein the xanthate
cellulose solution coagulates, and then regenerates
into cellulose which forms the casing;
(10) passing the casing through a series of purifying baths
to remove acid, sulphur and salts;
(11) passing the casing through a final bath of glycerin
(the casing absorbs glycerin which acts as a softener
and humectant);
(12) drying the casing by passing it through a dryer on
rollers to remove excess water; and
(13) collecting the casing on reels.
The operations described in step nine take place within a period
of seconds so that once the xanthate cellulose solution makes
contact with the paper the xanthate cellulose solution hardens
almost instantaneously. Visko estimates that the paper tube will
move about two feet before the hardening process is completed.
It is estimated by Visko that approximately 70% of the xanthate
cellulose solution hardens on the exterior side, 10% hardens on
the interior side, and 20% hardens within the interstices of the
individual strands of paper fiber in the paper tube. You state
that the xanthate cellulose solution does not penetrate the
fibers, as seen under a sufficiently magnified electron
microscope.
Upon completion of the above foreign operations the fibrous
sausage casings will be imported into the U.S.
ISSUE:
Whether the U.S. special grade paper to be exported to
Finland will qualify for the duty exemption available under HTSUS
subheading 9802.00.80 when returned to the U.S.
LAW AND ANALYSIS:
HTSUS subheading 9802.00.80 provides a partial duty
exemption for:
[a]rticles assembled abroad in whole or in part of
fabricated components, the product of the United States,
which (a) were exported in condition ready for assembly
without further fabrication, (b) have not lost their
physical identity in such articles by change in form, shape
or otherwise, and (c) have not been advanced in value or
improved in condition abroad except by being assembled and
except by operations incidental to the assembly process such
as cleaning, lubrication, and painting....
All three requirements of HTSUS subheading 9802.00.80 must be
satisfied before a component may receive a duty allowance. An
article entered under this tariff provision is subject to duty
upon the full value of the imported assembled article, less the
cost or value of such U.S. components, upon compliance with the
documentary requirements of 10.24, Customs Regulations (19 CFR
10.24).
Section 10.16(a), Customs Regulations (19 CFR 10.16(a)),
provides that the assembly operation performed abroad may consist
of any method used to join or fit together solid components, such
as welding, soldering, riveting, force fitting, gluing,
laminating, sewing, or the use of fasteners.
In C.J. Tower & Sons of Buffalo, Inc. v. United States, C.D.
3840, 62 Cust.Ct. 643, 304 F.Supp. 1187 (1969), imported plastic
film was composed of two plastic sheets--one Canadian
polyethylene, the other U.S. polyester mylar--produced in Canada
by an extrusion process which joined the foreign polyethylene,
first made from pellets in a liquid form of high viscosity, to
the U.S. mylar sheets, using an adhesive or adhesive promoter.
The court found that the involved process was nothing more or
less than a combination of manufacturing and assembling
processes, and that the process was a controlled operation which
anticipated the transformation of the foreign liquid into a solid
before completion of the process. Therefore, the operation
provided in advance for the adhesion of two solids together in
the final product and was an assembly of solids within the
meaning of item 807.00, Tariff Schedules of the United States
(TSUS) (the precursor to HTSUS subheading 9802.00.80).
In Sigma Instruments, Inc. v. United States, 5 CIT 90, 565
F.Supp. 1036 (1983), affirmed, 2 CAFC 24, 724 F.2d 930 (1984),
U.S. terminal pins were incorporated into header assemblies by a
transfer molding operation, wherein the molding compound,
exported in rope form, was transformed into a viscous state by
heating before being joined to the terminal pins by solidifying
around the pins in the mold cavity. The court determined that an
allowance in duty should be made for the cost or value of the
terminal pins under item 807.00, TSUS.
In Carter Footwear, Inc. v. United States, 11 CIT 554, 669
F.Supp. 439 (1987), a cotton textile vamp portion of a footwear
upper, pre-cut to exact shape and size in the U.S., was
reinforced with a thermoplastic applied to the toe area in a
molten state to form a box toe. As the thermoplastic solidified
in a matter of seconds (the plastic does not remain in its
incipient form) and displayed the salient features of a solid,
i.e., elasticity, high viscosity, tensile strength, crystallinity
and differential adhesion, the court was persuaded that upon
completion of the process there was a permanent union of two
solids. Further evidence indicated that due to the higher
viscosity and elasticity of the thermoplastic, it did not
penetrate or intermix with individual fibers of yarn, but because
of the thermoplastics weight it sagged into the fabric and
adhered to a portion of the surface. Moreover, the court
distinguished the thermoplastic from a liquid which would
penetrate the interstices between fiber, thoroughly wetting the
entire fabric and create a wicking effect.
In the instant case, we find that the process by which
xanthate cellulose solution is applied to, and regenerates into a
cellulose coating on, the U.S. special grade paper does not
constitute an acceptable assembly operation for purposes of
HTSUS subheading 9802.00.80.
In support of your contention that a duty allowance should
be granted for the U.S. paper, you rely on the above three cases
decided by the Court of International Trade, or its predecessor,
which we believe are distinguishable from the facts in this
case. In C.J. Tower, Canadian polyethylene in pellet form was
heated and, in its molten state, applied to a solid U.S.
polyester sheet with an adhesive or adhesive promoter holding
the two plastic sheets together. The polyethylene cooled to
solid form like the polyester film to which it was joined,
although there was no intermixing of the sheets during the
process due to the adhesive layer. In Sigma, a molding compound
in rope form was heated and, in a transitory molten state,
forced into a mold where it solidified around the U.S. terminal
pins, holding them in place. In Carter, a U.S. textile vamp
component was reinforced with plastic applied to the toe area to
form a box toe. The plastic, which was initially in rod form,
was applied while in a transitory molten state after heating.
Relying on testimony that solids may, in some cases, flow and
still be distinquishable from liquids, the court indicated that
the molten plastic was considered a solid.
In regard to the instant case, we believe that the operation
performed on the U.S. paper is essentially a coating operation.
The xanthate cellulose solution is applied to the U.S. paper and,
after the paper quickly passes through a series of acidic baths,
the solution coagulates and rapidly regenerates and solidifies
into a cellulose casing. The xanthate cellulose solution will
not coagulate until it passes through the acidic baths. Upon
review by Headquarters Office of Laboratories and Scientific
Services, it was determined that the xanthate cellulose is an
aqueous solution and, therefore, readily distinguishable from the
transitory molten substances in C.J. Tower, Sigma, and Carter.
Moreover, it was determined that the aqueous xanthate
cellulose solution completely saturates the paper, thereby
thoroughly entering into the interstices between the paper
fibers. As noted in your May 2, 1990, letter, after the xanthate
solution is sprayed onto the outer surface of the paper tube, the
solution passes through the paper and, upon solidification, 70%
of the cellulose remains on the outer surface, 20% remains within
the paper's interstices, and 10% remains on the inner surface of
the tube. This is in contrast to the Carter case where the
molten plastic, by virtue of its own weight, sagged into the
fabric and minimally penetrated certain of the interstices of the
top layer of the fabric. According to the Carter decision, the
defendant's expert witness testified that, in contrast to the
molten plastic, "... a liquid would penetrate the interstices
between the fibers of the yarn, thoroughly wetting the entire
fabric...." It is clear that the cellulose solution in the
instant case thoroughly wets the entire paper.
We recognize that, as was the case with the cotton fibers in
Carter, the solution in the instant case does not actually seep
into the paper fibers themselves since, if this were to occur,
the fibers would dissolve or swell, essentially resulting in the
destruction of the paper. However, we understand that while
liquids, such as the solution here, will saturate or thoroughly
wet the interstices between paper fibers, they will not
necessarily penetrate the fibers themselves. Thus, we believe
that the fact that the xanthate cellulose solution does not seep
into the paper fibers is not controlling on the issue of whether
the subject processing results in an acceptable assembly of two
solids.
HOLDING:
From the information and samples presented, we conclude that
the process by which xanthate cellulose solution regenerates
into a cellulose coating on the special grade paper is not an
acceptable assembly operation. Therefore, no allowance in duty
may be made under HTSUS subheading 9802.00.80 for the cost or
value of the U.S. special grade paper.
Sincerely,
John Durant, Director
Commercial Rulings Division