MAR-2 RR:CR:SM 561918 KSG
Richard J. Salamone
Customs Manager
BASF Corporation
3000 Continental Drive-North
Mount Olive, NJ 07828-1234
RE: Country of origin marking of aerosol acrylic coatings; subheading 9802.00.50; 19 CFR 134.32(m)
Dear Mr. Salamone:
This is in response to your letter of October 17, 2000, requesting a ruling regarding the country of origin marking, and the applicability of subheading 9802.00.50, of the Harmonized Tariff Schedule of the United States ("HTSUS"), to aerosol acrylic coatings.
FACTS:
BASF Corporation manufactures acrylic coatings (primers, black and clearcoats) in the U.S., which are used as automotive paint. BASF exports the acrylic coatings in bulk to Germany for processing and insertion into aerosol spray containers. The acrylic coatings in their exported form are stated to be usable as paint. The coatings as exported, are a thick liquid. Prior to exportation, the paint can be applied with a paint brush, but it takes longer to dry and does not does not have the desired gloss finish, or by a spray paint gun, which gives the same result as the paint sprayed with an aerosol can, but requires considerable preparatory work (i.e. mixing, filling the gun) prior to use.
In Germany, solvents are added to the coatings to reduce their viscosity in order to ensure proper aerosolization, and propellant is added, which acts to disperse the ambient air during application. The coatings are then inserted into aerosol containers.
You state that the exported and imported articles are classified in subheading 3208.20.0000, HTSUS.
ISSUES:
I. Whether the acrylic coatings are eligible for the partial duty exemption under subheading 9802.00.50, HTSUS.
II. What are the country of origin marking requirements for the imported acrylic coatings packaged abroad in aerosol containers?
LAW AND ANALYSIS:
I. Subheading 9802.00.50
Subheading 9802.00.50, HTSUS, provides a partial duty exemption for articles that are returned after having been exported to be advanced in value or improved in condition by means of repairs or alterations, provided that the documentary requirements of 19 CFR 10.8 are met. For qualifying articles, duty is assessed only on the cost or value of the foreign processing.
However, in circumstances where the operations abroad destroy the identity of the exported article or create a new or commercially different article, entitlement to subheading 9802.00.50, HTSUS, is precluded. 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 Corporation v. United States; 3 CIT 9 (1982). Additionally, entitlement to this tariff treatment is not available where the exported articles are incomplete for their intended purposes prior to their foreign processing and the foreign processing is a necessary step in the preparation or manufacture of the finished articles. Dolliff & Company, Inc. v. United States, 455 F. Supp. 618 (CIT 1978), aff’d, 599 F.2d 1015 (Fed. Cir. 1979).
In Headquarters Ruling Letter ("HRL") 560274, dated May 16, 1997, Customs considered the question of whether granular and pellet herbicides manufactured in the U.S. and then exported to Switzerland to be ground into powder, heated and bagged, were eligible for a partial duty exemption under subheading 9802.00.50, HTSUS, when returned to the U.S. Customs held that the process of grinding the granules and pellets in Switzerland constituted an acceptable alteration within the meaning of subheading 9802.00.50, HTSUS. This was based on the conclusion that the granules were complete for their intended use prior to being exported to Switzerland. The operations performed in Switzerland did not have the effect of destroying the identity of the products or changing their chemical compositions- it was only a change in form. Moreover, the foreign operations did not result in any significant change in the character or use of the products.
Similarly, in HRL 557836, dated April 11, 1994, Customs considered whether nylon resin manufactured in the U.S. in granular form and exported to Switzerland where it was cooled with liquid nitrogen and then ground into powder, heated, blended and bagged, was an alteration within the meaning of subheading 9802.00.50, HTSUS. The finished powders were used in the formulation of adhesive pastes. The exported nylon resin was complete for its intended adhesive application and a purchaser could either buy the powder or resin form. The adhesive action was essentially the same and the granules and powders were sold in the same end use markets. Customs held that the processing of the nylon resins in Switzerland constituted an alternation within the meaning of subheading 9802.00.50, HTSUS. See also HRL 555740, dated May 28, 1991; HRL 556616, dated June 16, 1992; and HRL 557534, dated December 17, 1993.
In the instant case, with regard to the facts you have presented and consistent with the rulings described above, we find that the processing of the U.S.-origin acrylic coatings constitutes an acceptable alteration within the meaning of subheading 9802.00.50, HTSUS. The acrylic coatings are complete for their intended use as paint prior to being exported to Germany to undergo the above-described operations. The operations performed in Germany do not have the effect of destroying the identity of the acrylic coatings or changing their chemical composition, but only serve to change the form into an aerosol. The foreign operations do not result in any significant change in the character or use of the products. Regardless of whether the acrylic coatings are in a liquid or aerosol form, they are used for the same purpose.
II. Country of Origin Marking
Section 304 of the Tariff Act of 1930, as amended, 19 U.S.C. 1304, provides that, unless excepted, every article of foreign origin (or its container) imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. Congressional intent in enacting 19 U.S.C. 1304 was “that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will.” United States v. Friedlaender & Co., 27 C.C.P.A. 297 at 302; C.A.D. 104 (1940). Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Pursuant to 19 CFR 134.32(m), products of the United States exported and returned are excepted from country of origin marking. The term "country of origin" is defined in 19 CFR 134.1(b) as follows:
Country of origin means the country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the "country of origin" within the meaning of this part…
A substantial transformation occurs when a new and different article of commerce emerges from a process with a new name, character and use different from that possessed by the article prior to processing. United States v. Gibson-Thomsen Co., Inc., 27 CCPA 267, C.A.D. 98 (1940).
In the instant case, there is no new and different article of commerce that emerges from the processing in Switzerland. As discussed above, the exported acrylic coatings have the same name, character and use as the aerosol product that is processed and imported from Germany. The acrylic coatings are ready for use as paint, both at the time of export and in their aerosol form. The only change that occurs is the form of the article. Accordingly, the U.S.-origin acrylic coatings are not substantially transformed in Germany and remain a product of the U.S. Pursuant to 19 CFR 134.32(m), the acrylic coatings are excepted from country of origin marking as a product of the United States exported and returned.
HOLDING:
On the basis of the information submitted, the process of adding solvent and propellant and packaging the acrylic coatings in Germany constitutes an acceptable alteration within the meaning of subheading 9802.00.50, HTSUS. Therefore, the acrylic coatings are entitled to classification under this tariff provision with duty to be assessed only upon the cost or value of the operations performed in Germany, provided the documentary requirements of 19 CFR 10.8 are satisfied.
The acrylic coatings are excepted from country of origin marking pursuant to 19 CFR 134.32(m) as a product of the U.S. exported and returned.
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is 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