CON-9-04
LIQ-1
OT:RR:CTF:ER H013653 DCC
Ms. Jane Wright
Fines, Penalties & Forfeitures
U.S. Customs and Border Protection
127 North Water Street
Ogdensburg, NY 13669
RE: NAFTA Duty Drawback
Dear Ms. Wright:
This is in response to your request for internal advice dated April 12, 2007, pursuant to 19 C.F.R. § 177.11. You ask whether certain shipments of Trichloroisocyanuric Acid (“TCCA”) meet the definition of “same condition” in 19 C.F.R. § 181.45(b)(1) and are therefore eligible for NAFTA duty deferral. We note that this request was prompted by the issuance of a penalty notice for failure to file North American Free Trade Agreement (“NAFTA”) duty deferral entries for the exportation of the subject merchandise. We also received a letter dated September 17, 2007, from counsel for the importer and drawback claimant, Cambrian Chemicals, Inc. (“Cambrian”).
FACTS:
TCCA is a chlorine-based chemical compound with the molecular formula C3Cl3N3O3. The substance is used as an industrial disinfectant, algaecide and bactericide mainly for swimming pools. Cambrian imports TCCA in bulk form into Canada, and then exports the material to the United States. In the United States, Cambrian has contracted with a U.S. business to blend the TCCA with boric acid, or boric acid and zinc oxide, and form the resulting mixtures into tablets. The TCCA / boric acid formulation is pressed into “Stick Tablets,” and the TCCA / Boric Acid formulation is pressed into “Foot Tablets.”
After the blending and forming operations, the tabletized TCCA is exported to Canada. According to counsel’s submission, the boric acid is added to the mixture in order to allow the granular TCCA to be pressed, formed, and released from the tabletizing machine. Counsel claims the zinc oxide is a colorant, and its only purpose is to add a speck of blue color to the finished tablet. According to a review of promotional information for pool cleaning products containing TCCA, zinc oxide assists in the reduction of algae and bacteria when used in combination with TCCA.
In a letter, dated December, 2006, the CBP Fines, Penalties & Forfeitures Office stated, “the merchandise does not meet the definition of ‘same condition’ and thus is not excluded from NAFTA duty deferral.” You now seek advice from this office on whether the imported TCCA in powder form and exported TCCA in tabletized form should be treated as merchandise in the “same condition” for purposes of NAFTA duty drawback under 19 U.S.C. § 3333(a)(2) and 19 C.F.R. § 181.45(b).
ISSUE:
Whether imported granular TCCA and the exported tabletized TCCA are the “same condition” for purposes of the NAFTA duty deferral provisions.
LAW AND ANALYSIS:
Section 203 of the NAFTA Implementation Act (Public law 103-182; 107 Stat. 2057, 2086; codified at 19 U.S.C. § 3333, the “Act”), provides for the treatment of goods subject to NAFTA drawback. Pursuant to 19 U.S.C. § 3333(a), a good subject to NAFTA drawback means any good other than:
(2) A good exported to a NAFTA country in the same condition as when imported into the United States. For purposes of this paragraph—
(A) processes such as testing, cleaning, repacking, or inspecting a good, or preserving it in its same condition, shall not be considered to change the condition of the good.
Furthermore, section 3333(a) provides that “[a] good exported to a NAFTA country in the same condition as when imported into the United States” is not a good subject to the NAFTA limitation that drawback may be granted only on the lesser of the total duties paid or owed on the importation into the United States or the total amount of duties paid on the exported good on its subsequent importation into Canada or Mexico. See 19 C.F.R. § 181.44. This section applies only to goods imported into the United States that are subsequently exported into Canada on or after January 1, 1996, or into Mexico on or after January 1, 2001. See Annex 303.7, section C, NAFTA; 19 C.F.R. § 181.41. Antidumping and countervailing duties, however, may not be waived, remitted, or refunded under the Act. See 19 U.S.C. § 3333(e); 19 C.F.R. § 181.42(a).
CBP Regulations issued to pursuant to the Act provide guidance for implementing the requirement that the imported and exported merchandise be in the “same condition.” Under 19 C.F.R. § 181.45(b), the term “same condition” is defined in 19 C.F.R. § 181.45(b)(1) as follows:
(1) Same condition defined. For purposes of this subpart, a reference to a good in the “same condition” includes a good that has been subjected to any of the following operations provided that no such operation materially alters the characteristics of the good:
(i) Mere dilution with water or another substance;
(ii) Cleaning, including removal of rust, grease, paint or other coatings;
(iii) Application of preservative, including lubricants, protective encapsulation, or preservation paint;
(iv) Trimming, filing, slitting or cutting;
(v) Putting up in measured doses, or packing, repacking, packaging or repackaging; or
(vi) Testing, marking, labeling, sorting or grading.
CBP has previously considered the question of whether certain operations materially alter the characteristics of a good for purposes of section 181.45(b)(1). In Headquarter Ruling Letter (“HRL”) 230166, dated January 29, 2004, CBP determined that repackaging dried fruits and dried vegetables from industrial-sized bulk packages to smaller packages did not constitute a material alteration. HRL 231066 also determined that the adding of a desiccant (i.e., silicon dioxide) to dried fruits and vegetables materially altered the imported merchandise because the additive absorbed moisture and prevented powdered food from clumping. The increase in pourability was a material alteration of the character of the imported powder resulting in a product that was not in the same condition as the imported product, and therefore not within the scope of section 181.45(b).
Similarly, in HRL 228961, dated January 23, 2002, CBP considered whether processing imported synthetic indigo dye in the United States resulted in a material alteration of the imported product for purposes of section 181.45(b)(1). In that case, indigo powder of approximately 96 percent concentrate was mixed with water, a dispersing agent, and an antimicrobial agent, which was subsequently milled in order to form a paste of approximately 42 percent concentrate. CBP determined that the 42 percent synthetic indigo paste was not in the same condition as the imported 96 percent synthetic indigo powder based on differences in the concentrations, particle size after milling, handling instructions and the product applications for the two forms of indigo.
Cambrian claims that the tabletizing operation leaves the imported TCCA in the “same condition” as the TCCA at the time of export from the United States. Cambrian asserts that the U.S. tabletizing operation constitutes a packaging operation that measures the compound into individual doses in accordance with 19 C.F.R. § 181.45(b)(1)(v), but the operation does not materially alter the characteristics of the merchandise.
We referred your request and the importer’s submission to CBP’s Office of Laboratories and Scientific Services (“LSS”) for review. According to that office, the addition of either boric acid or boric acid and zinc oxide to the imported material “does not materially alter or suppress the effect or purpose of the TCCA.” LSS further notes that “the compression of the [TCCA] product into the ‘stick’ or ‘foot’ forms in essence is preparing the TCCA into a timed dosage form and which may fall under the § 181.45(b)(1)(v) provision.”
Based on the above information, we determine that the imported TCCA in granular form is in the same condition as the exported TCCA in tablet form and therefore within the scope of 19 CFR § 181.44(a). Neither boric acid nor zinc oxide materially alter the characteristics of TCCA when blended with the subject merchandise. Boric acid is used to facilitate tabletizing the imported TCCA into desired shapes. Although zinc oxide performs as an algaecide and bactericide, we note that TCCA has the same functions, and consequently, the addition of zinc oxide does not result in a material alteration when combined with TCCA. Therefore, TCCA imported in granular form, further processed as described above, and then exported back to Canada is not subject to NAFTA drawback because it is exported in the same condition as imported.
HOLDING:
The imported TCCA in granular form and the exported TCCA in tablet form are in the same condition for purposes of 19 U.S.C. § 3333(a)(2) and 19 C.F.R. § 181.45(b). Therefore, the TCCA is not a “good subject to NAFTA drawback.”
You are to mail this decision to counsel for the importer no later than 60 days from the date of this letter. On that date, the Office of International Trade will make the decision available to CBP personnel, and to the public on the Customs Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division