CLA-2 CO:R:C:S 558021 WAS
TARIFF NO: 9802.00.50; 9801.00.10
Mr. Keith Welch
Unger Fabrikker A.S
P.O. Box 254
N-1601 Fredrikstad
Norway
RE: Linear alkylbenzene sulfonic acid (LABSA); 9802.00.50;
9801.00.10; repair; alteration; advance in value; improve in
condition
Dear Mr. Welch:
This is in reference to your letter dated August 17, 1993,
concerning the applicability of subheadings 9801.00.10 and
9802.00.50, Harmonized Tariff Schedule of the United States
(HTSUS), to linear alkylbenzene sulfonic acid made in Norway from
U.S. alkylbenzene. Your question regarding the classification of
the product was previously addressed in Headquarters Ruling
Letter (HRL) 954920 dated July 19, 1994.
FACTS:
Linear alkylbenzene of U.S. origin is shipped to Norway,
where it is reacted with sulfur trioxide to produce linear
alkylbenzene sulfonic acid (LABSA), which is sold in the U.S.,
under the brand names of "UFACID K" and "UFACID KA."
ISSUE:
Whether the LABSA is eligible for duty-free treatment under
subheading 9801.00.10, HTSUS, or in the alternative, a partial
duty exemption under subheading 9802.00.50, HTSUS, upon return to
the U.S.
LAW AND ANALYSIS:
I. Subheading 9801.00.10, HTSUS
Subheading 9801.00.10, HTSUS, provides for the free entry of
products of the United States that have been exported and
returned without having been advanced in value or improved in
condition by any process of manufacture or other means while
abroad, provided the documentary requirements of section 10.1,
Customs Regulations (19 CFR 10.1), are met. Some change in the
condition of the product while it is abroad is permissible.
However, operations which either advance the value or improve the
condition of the exported product render it ineligible for duty-free treatment upon return to the U.S. In the instant case, it
is clear that the production of LABSA results in a new and
different article of commerce from the alkylbenzene which is
shipped to Norway, and therefore, results in an advancement in
value or improvement in condition of the exported product.
Accordingly, the LABSA is not entitled to duty-free treatment
under subheading 9801.00.10, HTSUS, when returned to the U.S.
II. Subheading 9802.00.50, HTSUS
Articles returned to the U.S. after having been exported to
be advanced in value or improved in condition by repairs or
alterations may qualify for the partial duty exemption under
subheading 9802.00.50, HTSUS, provided the foreign operation does
not destroy the identity of the exported articles or create new
or commercially different articles through a process of
manufacture. See A.F. Burstrom v. United States, 44 CCPA 27,
C.A.D. 631 (1956), aff'd C.D. 1752, 36 Cust. Ct. 46 (1956);
Guardian Industries Corp. v. United States, 3 CIT 9 (1982).
Accordingly, entitlement to this tariff treatment is precluded
where the exported articles are incomplete for their intended
purpose prior to the foreign processing and the foreign
processing operation is a necessary step in the preparation or
manufacture of finished articles. Dolliff & Company, Inc. v.
United States, 455 F. Supp. 618 (CIT 1978), aff'd, 599 F.2d 1015
(Fed. Cir. 1979). Articles entitled to this partial duty
exemption are dutiable only upon the cost or value of the foreign
repairs or alterations when returned to the U.S., provided the
documentary requirements of section 10.8, Customs Regulations (19
CFR 10.8), are satisfied.
In regard to the production of LABSA, the Customs Office of
Laboratories and Scientific Services informs us that linear
alkylbenzenes is in a class of compounds commonly referred to as
hydrocarbons and are usually classifiable in either heading 2902,
HTSUS, or 2707, HTSUS. Only two elements are found in its
chemical structure: hydrogen and carbon. We note that the term
"linear alkylbenzene" is a generic term for compounds containing
alkyl (straight chain hydrocarbon) groups attached to a benzene
ring. The compounds are frequently used in motor fuel
blendstocks to increase the octane rating of the motor fuel.
Individual alkylbenzenes are frequently used as intermediates in
the production of other compounds. We further note that the
linear alkylbenzenes used to produce LABSA is a mixture of
different types of alkylbenzenes.
LABSA is a mixture of linear alkylbenzene sulfonic acids in
which the chain length of the alkyl groups vary. Four different
elements are found in the chemical structure of linear
alkylbenzene sulfonic acids: carbon, hydrogen, sulfur and oxygen.
LABSA is a surface active agent classifiable in heading 3402,
HTSUS.
According to the Customs Office of Laboratories and
Scientific Services, due to their different chemical structures,
linear alkylbenzenes and LABSA have significantly different
chemical and physical properties. The presence of a strongly
charged functional group, the sulfonyl group in the LABSA
accounts for a good amount of the physical and chemical
differences. Linear alkylbenzenes have no strongly charged
groups and are not soluble in water. However, the strongly
charged sulfonyl group of the LABSA allows it to be soluble in
water. In addition, linear alkylbenzenes may be added to
gasoline in significant amounts and used as fuel as opposed to
LABSA, which strongly attracts water and, in addition to
gasoline, would neither mix with the gasoline in significant
amounts, nor support proper combustion. In other words, although
the LABSA is produced from linear alkylbenzenes, their chemical
structures are significantly different.
Based on the above analysis, we are of the opinion that the
sulfonylation of the linear alkylbenzene in Norway may be
considered a step in the production of the LABSA. We note that
LABSA and linear alkylbenzenes are each separate articles of
commerce. Moreover, linear alkylbenzene is not only a pure
intermediate which can be used solely in the production of LABSA
- it may be used for other purposes. The LABSA and linear
alkylbenzenes have different chemical structures and each
structure has very different electrical properties (charges on
the atoms). Because of these differences, the two compounds have
completely different chemical properties and are used in separate
applications in totally different industries. Therefore, we find
that the production of LABSA creates a new or commercially
different article of commerce when compared to the exported
linear alkylbenzenes which is the result of processing that
exceeds the scope of an alteration, thereby precluding tariff
treatment under subheading 9802.00.50, HTSUS.
HOLDING:
On the basis of the information presented, it is our opinion
that the production of LABSA in Norway results in a new and
different commercial article when compared to the exported linear
alkylbenzenes and is, therefore, beyond the scope of an
alteration. Therefore, the duty exemption under subheading 9801.00.10, HTSUS, and the partial duty exemption under
subheading 9802.00.50, HTSUS, are inapplicable.
Sincerely,
John Durant, Director
Commercial Rulings Division