CLA-2 RR:TC:SM 560274 DEC
Mr. Gary L. Croskey
EMS-American Grilon Incorporated
2060 Corporate Way
P.O. Box 1717
Sumter, S.C. 29151-1717
RE: Applicability of the partial duty exemption under subheading
9802.00.50, HTSUS, to copolyester granules, pellets, and
powders imported from Switzerland; HRL 557836; HRL 556740
Dear Mr. Croskey:
This is in reference to your letter dated January 13, 1997,
requesting a ruling on the applicability of the partial duty
exemption under subheading 9802.00.50, Harmonized Tariff Schedule
of the United States (HTSUS), to copolyester granules, pellets,
and powders to be imported from Switzerland.
FACTS:
The products which you intend to export to Switzerland are
described as copolyester granules and pellets which you state are
manufactured in the U.S. Your company, EMS-AMERICAN GRILON,
intends to purchase the granules or pellets in the U.S., sell the
articles at cost to your parent company, EMS-CHEMIE, AG in
Switzerland, who will grind the articles into powders, and then
import the powders into the U.S. Your parent company intends to
sell the powders to you at a cost which will include the price
paid to your company for granules or pellets plus the cost of
grinding which will be separately identified on the invoices.
The product exported to Switzerland is a granular or pellet
form of an unsaturated copolyester manufactured by combining
terephthalic and isophthalic acids with butanediol. The product
is referred to as Bostik Hot Melt Adhesive #4181 if in granular
form or Bostik Hot Melt Adhesive #7181 if it is in a pellet form.
The returning products are identified as Griltex 6 P (your trade
name) with various numerical designations following the P. The P
indicates that the article is a powder and the numbers following
the P refer to the particular powder's particle size
distribution.
According to your description of the production processes in
Switzerland, the copolyester granules or pellets are put into a
storage silo where they are cooled with liquid nitrogen and then
fed into a cryogenic grinding mill that is also cooled by liquid
nitrogen. The grinding mills then grind the copolyester into
powders which are then separated based upon particle size by
vibrating screens (separating sieves). Oversized particles are
returned to the grinding mill for repeated grinding until the
desired particle sizes are obtained.
Next, the chilled Griltex powders are heated to make them
crystalline, and the powders may then be blended to obtain the
final desired particle size distributions. Finally, the powders
are bagged, assigned Griltex 6P names and identifying numbers and
returned to the U.S. You state that for every one pound of
copolyester products shipped to Switzerland, approximately 0.99
pound of Griltex P products are returned, with the difference due
to the material losses (waste) incurred in the processing. You
state that the Griltex copolyester products are available for
sale in the U.S. in their granular, pellet, and powder forms and
all perform the same thermoplastic adhesive function regardless
of the form. You state that the copolyester products are used in
the formulation of adhesive pastes and can also be
scatter-coated, in powder form, for thermal bonding of fabric to
fabric, or to other substrates, such as foam rubber.
ISSUE:
Whether the grinding operation performed abroad on the
U.S.-origin copolyester granules and pellets constitutes an
alteration, thereby entitling the resulting powder to the partial
duty exemption available under subheading 9802.00.50, HTSUS, when
returned to the U.S.
LAW AND ANALYSIS:
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 Headquarters Ruling Letter (HRL) 557836, dated April 11,
1994, Customs issued your company a ruling holding that polyamide
resins that were manufactured in the U.S. and exported to
Switzerland for certain grinding operations which are virtually
identical to the processing that are the subject of this ruling
request were eligible for a partial duty exemption pursuant to
subheading 9802.00.50, HTSUS. As we stated in HRL 557836,
the resins here are complete for their
intended use as adhesive applications prior
to being exported to Switzerland to undergo a
grinding operation. The operations performed
in Switzerland do not have the effect of
destroying the identity of the resin or
changing its chemical composition, but only
serve to change the form of the Griltex
product. Moreover, the foreign operations do
not result in any significant change in the
character or use of the resins. The evidence
you submitted indicates that the exported
Griltex granules are used in the same end use
markets as the Griltex powders which are
imported into the U.S. Regardless of whether
granules or powders are used, the adhesive
action is the same for both products.
In HRL 555740 dated May 28, 1991, a U.S.-origin herbicide
was exported to France where it was subjected to processes of
formulation and granulation to eliminate the product's powdery
consistency, and to render it more marketable and "user
friendly." Customs found that the formulation and granulation
processes constituted acceptable alterations within the meaning
of subheading 9802.00.50, HTSUS, because the herbicide in its
exported condition was complete for its intended use as an
herbicide, and, in fact, could be marketed within the
agricultural industry in its exported condition. Furthermore,
Customs also found that, since the chemical composition was not
changed by the addition of the dilutents, dispersants, wetting
agents, buffers, etc., the identity of the exported herbicides
was not destroyed. In addition, the foreign operations did not
appear to result in any significant change in the quality or
character of the herbicide, inasmuch as the herbicide retained
its weed killing properties. Therefore, the formulation and
granulation operations were held to be an alteration under this
subheading.
In the instant case, with regard to the facts you have
presented and consistent with the rulings described above, we are
of the opinion that the processing of the U.S.-origin Griltex
constitutes an acceptable alteration within the meaning of
subheading 9802.00.50, HTSUS. The copolyester products here are
complete for their intended use as adhesive applications prior to
being exported to Switzerland to undergo the above-described
grinding operations. The operations performed in Switzerland do
not have the effect of destroying the identity of the copolyester
products or changing their chemical composition, but only serve
to change the form of the Griltex product. Moreover, the foreign
operations do not result in any significant change in the
character or use of the copolyester products. The evidence you
submitted indicates that the exported granules and pellets are
used in the same end use markets as the Griltex powders which are
imported into the U.S. Regardless of whether granules, pellets,
or powders are used, the adhesive action is the same for these
products.
HOLDING:
On the basis of the information submitted, the process of
grinding the granules and pellets in Switzerland constitutes an
acceptable alteration within the meaning of subheading
9802.00.50, HTSUS. Therefore, the Griltex powder will be
entitled to classification under this tariff provision with duty
to be assessed only upon the cost or value of the grinding
operations performed in Switzerland, upon compliance with the
documentary requirements of 19 CFR 10.8.
A copy of this ruling letter should be attached to the entry
documents filed at the time this merchandise is entered. If the
documents have been filed without a copy, this ruling should be
brought to the attention of the Customs officer handling the
transaction.
Sincerely,
John Durant, Director
Tariff Classification Appeals
Division