CLA-2 RR:CR:SM 560983 MLR
Mr. Robert Zweerus
Akzo Nobel Chemicals bv
Barchman Wuytierslaan 10
P.O. Box 247
3800 AE Amersfoort
The Netherlands
RE: Applicability of partial duty exemption under HTSUS
subheading 9802.00.50 to monochloroacetic acid
Dear Mr. Zweerus:
This is in reference to your letter of March 26, 1998,
forwarded to us from Customs in New York, requesting a ruling
concerning the eligibility of monochloroacetic acid
(hereinafter "MCA"), for a partial duty exemption under
subheading 9802.00.50, Harmonized Tariff Schedule of the
United States (HTSUS).
FACTS:
It is stated that Akzo Nobel plans to export U.S.-origin
acetic acid to Europe where it is made into MCA. In Europe,
the acetic acid is combined with chloride, caustic soda, and
U.S.-origin acetic acid anhydride to make MCA. It is stated
that each ton of MCA will be composed of 625 tons of acetic
acid. It is stated that this process does not destroy the
chemical structure of acetic acid since it is still readily
ascertainable after the MCA is formed, and that acetic acid
and MCA are both classifiable under heading 2915, HTSUS.
ISSUE:
Whether the MCA is eligible for the partial duty
exemption under subheading 9802.00.50, HTSUS, when imported
into 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'g 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.
You cite Headquarters Ruling Letter (HRL) 555740 dated
May 28, 1991, as support that the processing at issue is an
acceptable alteration. In HRL 555740, formulation and
granulation operations performed on a herbicide in France to
eliminate the product's powdery consistency which made the
chemical difficult to use, constituted an acceptable
alteration within the meaning of subheading 9802.00.50,
HTSUS. We found that the product in its condition upon
exportation was complete for its intended use as a herbicide,
and, in fact, could have been marketed within the
agricultural industry in that condition. Furthermore, the
formulation process abroad did not alter the chemical
composition or identity of the herbicide, nor did it
significantly change the quality or character of the product
inasmuch as the herbicide retained its weed killing
properties.
You also cite HRL 556616 dated June 16, 1992 (herbicide
in a water dispersible granule exported abroad for
incorporation into water-soluble film constituted an
acceptable alteration because this process did not change the
chemical structure or use of the product, the identity and
properties of the herbicide remained intact, and the U.S.-manufactured herbicide was sold and could be used in its pre-processed form); HRL 557534 dated December 17, 1993
(microencapsulation of U.S.-origin Acetochlor constituted an
alteration); and HRL 558021 dated December 15, 1994 (linear
alkylbenzene reacted with sulfur trioxide to produce linear
alkylbenzene sulfonic acid was not entitled to subheading
9802.00.50, HTSUS, treatment, because the processes abroad
significantly changed the chemical and physical properties).
With regard to the facts presented, our Office of
Laboratory and Scientific Services indicates that in
producing monochloroacetic acid from acetic acid a
chlorination process is used to introduce a chlorine atom
into the chemical structure of the acetic acid. According to
the lab, all chlorination processes cause a chemical reaction
to occur to one or more of the starting materials (in this
case acetic acid). We consider, with few exceptions,
processing which effects a chemical reaction to have caused a
substantial transformation. According to the lab, this is
even more evident in chlorination reaction processes, as
chlorine is highly corrosive and poisonous.
Furthermore, the chemical structures of acetic and MCA
are significantly different, and the addition of a highly
electronegative chlorine atom on one end of the acetic acid
molecule totally alters the chemical characteristics of the
product. Additionally, acetic acid has a number of different
uses including as a food preservative and flavoring agent,
whereas MCA may not be used in food products, but may be used
in chemical production processes and as an herbicide and
bacteriostat. Therefore, as a result of the different
chemical properties, their uses not only differ, but when
used in chemical production processes, they produce different
end products. Based upon the different chemical properties
and end uses of the two products, we would consider acetic
acid and MCA to be two different articles of commerce, and
accordingly, it is our opinion that the processing in Europe
is not a mere alteration within the meaning of subheading
9802.00.50, HTSUS.
You also claim that acetic acid and MCA share the same
four digit classification under the HTSUS. While this is
cited as added support that an acceptable alteration has
occurred, the classification of chemicals within the same
heading under the HTSUS does not necessarily mean that no
chemical reaction occurs. Furthermore, even assuming that the
classification within the same heading is indicative that no
substantial transformation occured, this does not translate
into the fact that an acceptable alteration has occurred
within the meaning of subheading 9802.00.50, HTSUS.
HOLDING:
On the basis of the information submitted, we find that
MCA is not entitled to subheading 9802.00.50, HTSUS,
treatment, as the processes in Europe change the acetic acid
into a new and different article of commerce. A copy of this
ruling letter should be attached to the entry documents filed
at the time the goods are 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
Commercial Rulings Division