CLA-2 CO:R:C:S 555800 RA
Mr. Bruce R Cowan
Traffic Manager
8 Corporate Drive
Orangeburg, New York 10962-2614
Re: Applicability of subheading 9802.00.50, HTSUS, to
microcrystalline ce11ulose made from sulfite softwood
of U.S. origin
Dear Mr. Cowan:
This is in response to your letter of July 27, 1990, to the
Regional Commissioner of Customs, New York, regarding the
applicability of the partial exemption from duty under subheading
9802.00.50, Harmonized Tariff Schedule of the United States
(HTSUS), to microcrystalline cellulose made in Taiwan by
processing sheets of fiber of U.S. origin. Your letter was
referred to this office for a reply. We regret the delay in
responding.
FACTS:
You propose to ship solid sheets of softwood (Hoeg Fibre) to
Taiwan where they will be subjected to an acid hydrolysis process
which converts the wood pulp into cellulose which is further
treated to form microcrystalline cellulose. You believe that the
foreign processing constitutes an alteration within the meaning
of subheading 9802.00.50, HTSUS. The principal use of the
finished product is as a tableting excipient or binder in the
pharmaceutical industry. It is a fine, white, odorless,
tasteless crystalline powder that is relatively free of
contaminants and is partially soluble in alkali.
ISSUE:
Can the processing abroad be considered as an alteration
under subheading 9802.00.50, HTSUS?
LAW AND ANALYSIS:
Suheading 9802.00.50, HTSUS, provides for the assessment of
duty only on the cost or value of repairs or alterations
-2-
performed abroad on articles returned to the U.S. after having
been exported for that purpose. However, the application of this
tariff provision is precluded where the operations performed
abroad destroy the identity of the article or create new or
commercially different articles. See A.F. Burstrom v. United
States, 44 CCPA 27, C.A.D. 631 (1957),; Guardian Industries
Corporation v. United States, 3 CIT 9 (1982). Treatment
under subheading 9802.00.50, HTSUS, also is precluded where the
foreign operations result in articles with new and different uses
or where the processing constitutes a part of the manufacturing
process begun in the U.S. Dolliff & Company v. United States 66
CCPA 77, C.A.D. 1225, 599 F.2d 1015 (1979). Alterations can be
made only to completed articles and the term does not include
intermediate operations performed in the manufacture of finished
articles. Congress did not intend to permit uncompleted articles
to be exported abroad and there made into finised products and
when returned to be subject to duties only on the cost of the so-
called alterations. United States v. J.D. Richardson Co., 36
CCPA 15, C.A.D. 390 (1948).
We are of the opinion that the processing of the fiber
sheets into sterilized cellulose form amounts, to an operation
which exceeds an alteration, as it creates a new and different
article and serves to finish a manufacturing process begun in the
U.S. Therefore, tariff treatment under subheading 9802.00.50,
HTSUS, is precluded and the returned cellulose would be
classified under the provision for natural polymers and modified
natural polymers, not elsewhere specified or included, in primary
forms: other: polysaccharides and their derivatives, in
subheading 3913.90.20, HTSUS, dutiable at the rate of 5.8 percent
ad valorem on the total value.
HOLDING:
Microcrystalline cellulose produced from fibers sheets in
Taiwan is classified as a natural polymer under subheading
3913.90.20, HTSUS, dutiable at 5.8 percent ad valorem. It is
precluded from a partial duty exemption under subheading
9802.00.50, HTSUS.
Sincerely,
John Durant, Director
Commercial Rulings Division