CLA-2 CO:R:C:S 557534 MLR
Mr. Patrick Mc Glinchey
International Logistics Specialist
Zeneca Inc.
P.O. Box 751
Wilmington, Delaware 19897
RE: Applicability of duty allowance under HTSUS subheading
9802.00.50 to Acetochlor; herbicide; microencapsulating
Dear Mr. Mc Glinchey:
This is in reference to your letter of June 29, 1993,
requesting a ruling concerning the eligibility of Acetochlor for
a partial duty exemption under subheading 9802.00.50, Harmonized
Tariff Schedule of the United States (HTSUS).
FACTS:
Zeneca Inc. intends to ship domestically produced Acetochlor
to Belgium where it will be microencapsulated. Acetochlor is a
pre-emergence herbicide for the control of annual grass and
broad-leaf weeds in corn. The microencapsulation process
basically involves the containment of the Acetochlor within
polymer capsules which are suspended in water. After this
process, the product is referred to as Acetochlor 3.2CS. The
purpose of microencapsulating the Acetochlor is to control its
release rate when it is applied on a field, and to reduce dermal
toxicity.
It is stated that the Acetochlor is not chemically altered
by the microencapsulation process, and that its identity and
herbicidal properties remain intact. Only the form of the
product is altered, but this allegedly is not a necessary step in
the preparation or manufacture of Acetochlor itself.
ISSUE:
Whether the microencapsulation process performed on the
U.S.-origin Acetochlor in Belgium constitutes an alteration,
thereby entitling it 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'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.
In Headquarters Ruling Letter (HRL) 556616 dated June 16,
1992, we considered a herbicide in a water dispersible granule
that was exported to France for incorporation into water-soluble
film which is a highly specialized plastic, designed for
compatibility with agricultural chemical and applications
technology. It was held that the incorporation of the U.S.-
origin herbicide in water-soluble film in France, constituted an
acceptable alteration within the meaning of subheading 9802.0050,
HTSUS, 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.
We find HRL 556616 to be similar to the case at hand. As in
HRL 556616, the microencapsulation process only changes the form
of the herbicide. The Office of Laboratories & Scientific
Services has verified that although the entire encapsulation
process in Belgium is not free of chemical reactions, the
Acetochlor compound does not undergo any chemical changes.
Based on this information, we are of the opinion that the
microencapsulation process constitutes an acceptable alteration
within the meaning of subheading 9802.00.50, HTSUS.
HOLDING:
On the basis of the information submitted, we find that the
microencapsulation process constitutes an alteration within the
meaning of subheading 9802.00.50, HTSUS. Therefore, the
Acetochlor 3.2CS is entitled to classification under this tariff
provision with duty to be assessed only on the cost or value of
the operations performed in Belgium, upon compliance with the
documentary requirements of 19 CFR 10.8.
Sincerely,
John Durant, Director
Commercial Rulings Division