MAR-2-05 RR:CR:SM 561978 CW
Port Director
New York/JFK Area
Building #77
Jamaica, N.Y. 11430
RE: Country of origin of Polytetrafulouroethylene (PTFE) from Italy
Dear Director:
This is in reference to a request for a ruling initiated by counsel for Heroflon USA Corp. (referred to this office by the Office of the Trade Ombudsman) concerning the country of origin of certain Polytetrafulouroethylene (PTFE) imported by Heroflon from Italy. There is an outstanding antidumping order on granular PTFE resin from Italy (A-475-703). The record includes letters from counsel for Heroflon USA to the Customs Service dated June 29, August 4, October 13, 17, and 19, and November 2, 2000.
FACTS:
PTFE, a fluoropolymer (type of plastic), is produced through the polymerization of tetryfluoroethylene (TFE). PTFE is considered the most slippery material known to exist. This and many other properties make PTFE valuable for a wide variety of uses, including as a non-stick coating for metals and other plastics and as insulation, electrical tape, optical lenses, wires, cables, films, fabrics, industrial and medical tubing.
Heroflon s.r.l., the affiliate of Heroflon USA in Italy, imports into Italy PTFE in powder form (referred to as “virgin” or “unfilled” PTFE) from PTFE producers in Russia, Poland or China. We are informed by counsel that certain of the virgin PTFE purchased by Heroflon s.r.l. is resold to Heroflon USA without having undergone any processing in Italy (other than possibly a repackaging operation). The remainder of the virgin PTFE purchased by Heroflon s.r.l. is further processed in Italy by one of two methods prior to being resold to Heroflon USA. The first method of processing in Italy involves heating the virgin PTFE in a pre-sintering oven to its gel point of approximately 370 degrees to create extrusion grade PTFE. This process hardens and agglomerates the PTFE, but no filler or other ingredient is added. The second method of processing in Italy involves
mixing and blending the virgin PTFE with filler materials of different types and quantities (also of non-Italian origin) to create “filled” PTFE.
The PTFE which is to be blended in Italy is first de-agglomerated; i.e., it is removed from the packing in which it was shipped and any clumping of the product which occurred in transit is eliminated through a jet milling process. The PTFE powder is then mixed and blended with imported filler materials, such as glass fibers, graphite, carbon, stainless steel, bronze or molybdenitc. The mixing and blending is performed at room temperature in a dry powder mechanical blending process. Counsel states that the use of the different fillers may result in changes or differences in the rigidity, hardness and/or color of the finished products.
ISSUE:
What is the country of origin of the imported filled and unfilled PTFE described above for country of origin marking purposes?
LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin imported into the United States shall be marked in a conspicuous location place as legibly, indelibly, and permanently as the nature of the article (or container) will permit, in such a manner as to indicate to the ultimate purchaser in the United States the English name of the country of origin of the article. Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.
Section 134.1(b), Customs Regulations (19 CFR 134.1(b)), states that the country of origin of an article is the country in which it was manufactured, produced, or grown, unless thereafter the article is subjected to processing in another country which results in a substantial transformation. A substantial transformation is said to occur when, within the principle of the case of United States v. Gibson Thomsen Co. Inc., 227 C.C.P.A. 267 (C.A.D.)(1940), an article is processed such that it acquires a new name, character, or use.
In this case, the issue presented is whether the virgin PTFE imported into Italy by Heroflon s.r.l. is substantially transformed in Italy in regard to the three scenarios presented. The first scenario involves virgin PTFE that is not subjected to any processing operations in Italy prior to its shipment to the U.S. other than possibly a repackaging operation. There is no question in regard to this scenario that no substantial transformation takes place in Italy. Therefore, the country of origin of this product is the country in which the virgin PTFE was produced (Russia, Poland or China).
The second scenario involves virgin PTFE that is heated in Italy to its gel point of approximately 370 degrees to harden and agglomerate the product (creating extrusion grade PTFE). In this regard, Customs has generally held that a heat treatment will result in a substantial transformation only if alters the article’s mechanical properties to a significant extent. See, for example, Headquarters Ruling Letters (HRLs) 083236 dated May 16, 1989, and 555247 dated January 11, 1990. The decision in Ferrostaal Metals Corp. v. United States, 664 F.Supp. 535, 11 CIT 470 (1987), is also pertinent. That case concerned whether certain operations performed on cold-rolled steel sheet, described as a continuous hot-dip galvanizing process, substantially transformed the sheet. The process involved two steps: annealing, undertaken to restore the steel’s ductility lost in a previous cold rolling, and galvanizing, or dipping the steel in a pot of molten zinc. The court held that the continuous hot-dip galvanizing process resulted in a substantial transformation, in part, because the process changed the character of the steel sheet by significantly altering its mechanical properties and chemical composition.
While the heat treatment to which the PTFE is subjected in the second scenario hardens and agglomerates the product, our Office of Laboratories and Scientific Services advises that this process causes no change in the mechanical properties or chemical composition of the product. Therefore, consistent with the above decisions, we find that no substantial transformation of the PTFE results from the described heat treatment. Therefore, the country of origin of the PTFE in the second scenario also is the country in which the virgin PTFE was produced (Russia, Poland or China).
The third scenario involves mixing and blending the virgin PTFE in Italy with filler materials of different types and quantities (also of non-Italian origin) to create filled PTFE, also referred to as a PTFE compound. In regard to whether this process results in a substantial transformation, we note the decision in National Juice Products v. United States, 628 F. Supp. 978, 10 CIT 48 (1986), a country of origin marking case. The U.S. Court of International Trade determined in that case that imported frozen concentrated orange juice was not substantially transformed in the United States when it was domestically processed into retail orange juice products. The U.S. processing involved mixing the imported concentrate with other batches of concentrate, either foreign or domestic, water, orange essences, orange oil, and, in some cases, fresh juice. The court agreed with Customs that the domestic processing did not produce an article with a new name, character or use because the essential character of the final product was imparted by the imported orange juice concentrate. The court stated:
[T]he retail product in this case is essentially the juice concentrate
derived in substantial part from foreign grown, harvested and processed
oranges. The addition of water, orange essences and oils to the
concentrate, while making it suitable for retail sale does not change the
fundamental character of the product; it is still essentially the product
of the juice of oranges.
National Juice, 10 CIT at 61. The court further stated that “the imported product is the very essence of the retail product.”
HRL 559965 dated January 24, 1997, concerned whether Canadian-origin peanut slurry is substantially transformed in the U.S. when it is processed into finished peanut butter. The processing involved mixing the imported slurry with U.S.-made peanut slurry as well as additional ingredients, including salt, sweeteners (dextrose and sucrose), peanut oil, and stabilizers (a blend of rapseed, cottonseed and soybean oils) and, in certain instances, specialty flavorings. The resulting product was then subjected to milling, heating, degassing and cooling.
Customs held in HRL 559965 that the blending together of the U.S. and Canadian peanut slurry along with certain other ingredients does not effect a substantial transformation of the slurry as the essential character of the finished peanut butter is imparted by the peanut slurry. We further stated:
The further milling of the peanut slurry, heating, cooling, and the
addition of various ingredients (salts, sweeteners, peanut oil, and
stabilizers) which counsel has indicated affect the taste and consistency
of the peanut butter do not change the very essence of the product. The
imported slurry is essentially peanut butter, but in a less refined state
than the creamy and highly processed products available under well
known trade names.
Consistent with the decisions in National Juice and HRL 559965, we find in this case that the milling of the virgin PTFE in Italy and the subsequent mixing and blending of the product with filler materials in Italy does not result in a substantial transformation of the PTFE. With respect to a change in name, the product before the mechanical blending process is referred to as virgin or unfilled PTFE. After the blending process, the product is referred to as filled PTFE, BTFE blend or a PTFE compound. While a change in name is the least persuasive factor and is insufficient by itself to support a finding that there is a substantial transformation, the evidence of such a change in name is equivocal in this case. See Superior Wire v, United States, 867 F.2d 1409, 1414 (Fed Cir. 1989).
In regard to a change in character, the Office of Laboratories and Scientific Services advises that, while adding filler materials to the PTFE unquestionably changes some of the characteristics of the product (e.g., rigidity, hardness and/or color), there is no change in its essential character. The essence of the filled PTFE clearly is imparted by the constituent PTFE polymer itself whose chemical structure is not altered by the milling and blending operations. Fillers, by their very nature, clearly are not the primary ingredients of the product.
With respect to a change in use, the type and quantity of filler(s) added affect the specific use to which the finished product may be put. Some uses of PTFE require no fillers, while other uses require the addition of one or more fillers. However, the many potential uses of PTFE are primarily predetermined by the properties and chemical composition of the virgin PTFE.
While not dispositive of the issue before us, we note that both the unfilled and filled PTFE are classified in heading 3904, Harmonized Tariff Schedule of the U.S. (HTSUS). If the PTFE contributes 95 percent or more by weight to the total polymer content in the filled PTFE, both the virgin and filled product would be classified in subheading 3904.61.00, HTSUSA, which provides for “fluoropolymer: polytetrafluoroethylene (PTFE)”. See HRL 085931 dated February 6, 1990.
Based on the foregoing, it is our opinion that the country of origin of the filled PTFE in scenario three is the origin of the virgin PTFE (Russia, Poland or China).
With regard to the assessment of antidumping duties, it is important to note that the country of origin determinations made in this ruling are for Customs purposes only. The applicability of antidumping duties to imported merchandise is solely within the jurisdiction of the International Trade Administration of the Department of Commerce. Therefore, for a determination as to the scope of Antidumping Order A-475-703 and its applicability to the merchandise described herein, the importer should contact that agency.
HOLDING:
Based on the information provided, we find that the filled and unfilled PTFE imported by Heroflon USA from Italy is not a product of Italy for country of origin marking purposes. Rather, its country of origin is the country in which the virgin PTFE was produced (Russia, Poland or China). The imported PTFE must be marked accordingly.
Sincerely,
John Durant, Director
Commercial Rulings Division