DRA-4-OT:RR:CTF:ER H048148
Edmund Maciorowski, Esquire
Attorneys and Counselors at Law
33 Bloomfield Hills Parkway, Suite 250
Bloomfield Hills, Michigan 48304
RE: Drawback Eligibility of Non-NAFTA Originating Sodium Selenite
Dear Mr. Maciorowski: This is in response to your letter, dated December 24, 2008, on behalf of Pestell Mineral & Ingredients (“Pestell”) regarding the drawback eligibility of non – NAFTA originating sodium selenite under 19 USC § 1313.
In addition to your original letter, we have taken into consideration our teleconference discussion on March 25, 2009 as well as supplemental materials submitted on April 10, 2009 pursuant to our teleconference discussion. We have reviewed your ruling request and have made the following decision.
FACTS:
Pestell is a top industry supplier of quality trace mineral and feed ingredients for animal feed and fertilizer manufacturers. Pestell proposes to export “Sodium Selenite 45%,” originally a product of the Philippines, from Canada into the United States for dilution and subsequently return the product to Canada for sale in that market. Sodium selenite is derived by neutralizing selenious acid with sodium carbonate. It is imported into the United States by Pestell as “Other….salts…Other” under HTSUS subheading 2842.90 at a rate of 3.3% ad valorem. Pestell distributes this product in the concentrated form as feed supplement for livestock. Within the livestock feed industry sodium selenite is interchangeably referred to as “selenium.”
Although selenium is used as an ingredient in animal feeds in its concentrated form, certain customers prefer a diluted form of the product. In order to serve this market, Pestell contracts with a company in Omaha, Nebraska to dilute the concentrated selenium into selenium premix. The premix is sold in concentrations of 1%, 3%, 4% or 4.5% selenium, and you contend that it is commercially interchangeable with the high concentration form.
Selenium premix is the result of adding either “rice hull middlings” (“rice hulls”) and/or calcium carbonate (“calcium”) or limestone to the selenium. Rice hulls are the outermost covering of rice, and are a by-product of human food processing. Rice hulls and calcium carbonate are filler ingredients. These substances are combined in a 1-ton mixer, along with the necessary amount of selenium to achieve the desired dilution. You assert in the supplemental submission of April 10, 2009, that the substances that dilute the selenium concentration are inert and non-functional. The dilution is a weakened concentration of the selenium for those who may prefer using specific concentrations of the ingredient.
According to the submission, neither a chemical reaction nor any other change or alteration of the selenium occurs as a result of the dilution operation. Rather, the resulting premix merely controls the quantity of selenium present in its saleable form. After the dilution process the premix is packaged in bags for retail sale. The article is then placed on pallets, shrink wrapped and exported back to Canada.
The market demand for selenium premix is for customers who do not want to dilute the bulk product themselves. Accordingly, ready to use selenium better ensures the end user a uniform distribution of selenium in animal feeds, thereby providing a convenient method of safely ensuring the feed contains controlled levels of the selenium. In the alternative, should the consumer wish to mix or dilute the selenium on their own, selenium mixing formulas are widely available to sophisticated consumers in the distribution chain.
ISSUE:
Whether imported “Selenium Selenite 45%” and the exported “Selenium Premix” to which rice hullings or calcium carbonate are added is in 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 230166 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.
Most recently, in H013653, dated September 19, 2008, CBP considered whether a chlorine based chemical compound (TCCA) used as an industrial disinfectant, algaecide and bacteriacide for swimming pools was in the same condition after it had been blending with boric acid, or boric acid and zinc oxide which resulting in the formation of tablets. We found that 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.” We noted further 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.”
Accordingly, we determined 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 alters 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 noted 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.
Likewise in the instant case, the addition of limestone, rice hulls or calcium carbonate does not materially alter the concentrated “Sodium Selenite 45%.” The consumer can either purchase the concentrated 45% sodium selenite and mix it with the daily feed themselves or purchase the selenium already mixed with either limestone, calcium carbonate or rice middlings. The substances that dilute the concentrated “Sodium Selenite 45%” are inert and non-functional. Therefore, the concentrated 45% sodium selenite is not materially altered but rather merely diluted. Accordingly, the “Sodium Selenite 45%” imported into the U.S. and mixed with limestone, rice middlings or calcium carbonate 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 45% concentrated selenium form and the exported selenium premix sold in 1%, 2%, 3% and 4% or 4.5 % concentrations 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 45% concentrated selenium is not a “good subject to NAFTA drawback.”
Sincerely,
William G. Rosoff,
Chief
Entry Process and Duty Refunds Branch