CLA-2 CO:R:C:S 557836 WAS
Mr. Gary L. Croskey
EMS-American Grilon Inc.
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 polyamide resins imported from
Switzerland
Dear Mr. Croskey:
This is in reference to your letter dated January 31, 1994,
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 polyamide resins to be imported
from Switzerland.
FACTS:
The products which you intend to export to Switzerland are
described as copolyamides which you state are manufactured in the
U.S. by condensation of epsilon-caprolactam with: omega-dodecalactam 11-aminoundecanoic acid, and/or mixtures of
hexamethylene-diamine and di-acids such as adipic, azaleic,
sebacic and dodecanedioic. These products are chemically known
as nylon resins. These resins are exported in solid and in
granular or chip form to Switzerland. You state that the
tradename for these resins is "Griltex," and a different number
will appear after the tradename, depending upon the specific
chemical structure and viscosity or molecular weight of the
resin. You have provided a list of the existing commercial
Griltex resins that you export or plan to export to Switzerland.
According to your description of the production processes,
when the Griltex "G" granules arrive in Switzerland, they are
conveyed to storage silos, cooled with liquid nitrogen and then
fed into a cryogenic grinding mill that is also cooled by liquid
nitrogen. The grinding mill grinds the Griltex "G" granules 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 "P" names and identifying numbers
and returned to the U.S. The powders 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, paperboard, etc.
You state that for every one pound of Griltex "G" 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.
In a letter dated February 22, 1994, addressed to Mr. C.N.
Reilly (NIS 238), U.S. Customs, New York Seaport, you stated that
the Griltex resins the subject of this ruling request are:
complete for their intended adhesive applications and in
fact are sold within the United States in its granular form.
Our annual domestic sales of these granular Griltex products
exceed 700 metric tons and are used mostly in the very same
end use markets as the Griltex powders we import.
Obviously, our customers have very different processing
equipment for handling and using granules and powders.
In a letter dated April 7, 1994, you further stated:
[w]hen the Griltex granules are used, they are poured or
conveyed into a hopper where they then fall into an extruder
or melter. The granules are melted and applied in droplets
or dots onto a fabric or are extruded into a film or web.
In any case, the Griletex resolidifies and the fabric,
films, or webs are adhered to other fabrics or substrates
again by applying heat.
When Griltex powders are used, they can be used in several
different ways. First, they can be sprinkled or scatter-coated onto fabric or foam and then again adhered to another
fabric by the application of heat. Secondly, they can be
fed into a melter, and also applied in a droplet fashion to
fabric. Thirdly, they can be mixed into a paste and then
the paste is applied to the fabric.
You also stated in your April 7th letter that regardless of
whether granules or powders are used, the adhesive action is
essentially the same, namely, the melting of Griltex. In
addition, you stated that, except for the paste method, no other
ingredients are used, and even with the paste method the other
ingredients are used as carriers to evenly distribute the Griltex
powder particles. You maintain that these other ingredients have
no effect on the adhesion qualities of the Griltex.
In your April 7th letter, you further stated that you have
several customers in the U.S. that buy the Griltex in both
granular and powder form. The primary factors which you claim
lead to a customer choosing between using the granular and powder
are: (1) feel or "hand" of the finished fabrics; (2) processing
equipment available; (3) technological skill of the customer; and
(4) costs.
ISSUE:
Whether the grinding operation performed abroad on the U.S.-origin Griltex "G" resins 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'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) 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
9802.00.50, 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.
In a recent ruling, HRL 557534 dated December 17, 1993,
domestically-produced Acetochlor, a pre-emergence herbicide for
the control of annual grass and broad-leaf weeds in corn, was
sent to Belgium to be microencapsulated. This process involved
the containment of the Acetochlor within polymer capsules which
were suspended in water. We found the facts in HRL 557534 to be
similar to HRL 556616 as the microencapsulation process only
changed the form of the herbicide and the identity and herbicidal
properties remained intact. Although the entire encapsulation
process in Belgium was not free of chemical reactions, we found
that the Acetochlor compound did not undergo any chemical
changes. Thus, we held that the microencapsulation process
constituted an acceptable alteration within the meaning of
subheading 9802.00.50, HTSUS.
In another herbicide case, 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. As in HRL 555740, 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.
HOLDING:
On the basis of the information submitted, the process of
grinding the Griltex granules 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 operations
performed in Belgium, upon compliance with the documentary
requirements of 19 CFR 10.8.
Sincerely,
John Durant, Director
Commercial Rulings Division