MAR-2 RR:CR:SM 562557 ALH
Mr. Barry E. Cohen
Counsel to E.I. du Pont de Nemours and Company
Crowell Moring
1001 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2595
RE: Administrative ruling request for prospective transactions on whether certain imported chemical samples should be classified as prototypes under the Harmonized Tariff Schedule of the United States (HTSUS) 9817.85.01 or whether the chemical samples are exempt from the provisions of the tariff schedule pursuant to HTSUS General Note 19(c)
Dear Mr. Cohen:
This is in response to your letter of October 1, 2002, on behalf of E.I. du Pont de Nemours and Company (“DuPont”) requesting a prospective ruling regarding the tariff treatment of certain chemical samples. First you ask whether the chemical samples should be classified as prototypes under the Harmonized Tariff Schedule of the United States (HTSUS) subheading 9817.85.01. Second you ask whether the chemical samples are exempt from the provisions of the tariff schedule pursuant to HTSUS General Note 19(c).
FACTS:
DuPont is headquartered in Wilmington, Delaware and is engaged in the development and manufacture of chemical products for a variety of uses. The product at issue in this case is quantities (typically less than 100 milligrams, or 0.004 ounce) of experimentally developed chemicals. The chemicals will be produced by foreign research laboratories under contract with DuPont and subsequently imported into the United States.
After importation, DuPont’s scientists evaluate the samples to determine whether they can be developed into commercial products for the company’s agricultural chemicals business. The samples will be consumed in testing, destroyed, or retained as an experimental record in a storage facility. The imported samples that DuPont determines have potential commercial value will undergo further research and development, which may include production of additional quantities of the compound at its own research laboratories, further testing, and evaluation of commercial prospects for the compound as a pesticide or other agricultural chemical.
ISSUES:
Whether experimental chemical samples imported from foreign laboratories should receive tariff treatment as a non-dutiable prototype under HTSUS subheading 9817.85.01.
Whether the chemical samples are exempt from the provisions of the tariff schedule pursuant to HTSUS General Note 19(c).
LAW AND ANALYSIS:
Subheading 9817.85.01
Pursuant to §1433 of the Product Development and Testing Act of 2000 (PDTA), enacted as part of the Tariff Suspension and Trade Act of 2000 (Pub.L. 106-476), articles classified as “prototypes” under the Act may be imported duty-free. To provide for duty-free entry of prototypes, §1433 of the PDTA inserted a new subheading 9817.85.01 in Subchapter XVII of Chapter 98, HTSUS, which states:
Prototypes to be used exclusively for development, testing, product evaluation, or quality of control purposes...
The PDTA also added a new U.S. Note 6 in Subchapter XVII of Chapter 98, HTSUS. This note defines “prototypes” for the purposes of HTSUS subheading 9817.85.01 and sets forth certain conditions and limitations governing classification in the subheading. Specifically, U.S. Note 6 provides:
For purposes of this subchapter, including heading 9817.85.01, the term “prototypes” means originals or models of articles that -
are either in the preproduction, production, or postproduction stage and are to be used exclusively for development, testing, product evaluation, or quality control purposes; and
in the case of originals or models of articles that are either in the production or postproduction stage, are associated with a design change from current production (including a refinement, advancement, improvement, development, or quality control in either the product itself or the means for producing the product).
For purposes of clause (i), automobile racing for purse, prize, or commercial competition shall not be considered to be “development, testing, product evaluation, or quality control. ”
(i) Prototypes may be imported only in limited noncommercial
quantities in accordance with industry practice.
(ii) Except as provided for by the Secretary of the Treasury, prototypes or parts of prototypes may not be sold after importation into the United States or be incorporated into other products that are sold.
Articles subject to quantitative restrictions, antidumping orders, or countervailing duty orders may not be classified as prototypes under this note. Articles subject to licensing requirements, or which must comply with laws, rules, or regulations administered by agencies other than the United States Customs Service before being imported, may be classified as prototypes if they comply with all applicable provisions of law and otherwise meet the definition of "prototypes" under paragraph (a).
Based upon the information you provided, the chemical samples satisfy the conditions set forth for classification under HTSUS subheading 9817.85.10. During the preproduction stage, DuPont’s scientists will study the imported chemical samples exclusively for development and product evaluation as required under subparagraph (a)(i) of Note 6. The quantity of the imported samples will be typically less than 100 milligrams or 0.004 ounce, which indicates that the importation is to be made in noncommercial quantities as required under subparagraph (b)(i) of Note 6. It is evident from the submission that, consistent with subparagraph (b)(ii) of Note 6, the imported samples will not be sold after importation, but will be consumed in testing, destroyed, retained as an experimental record in a storage facility, or undergo further testing and development.
No information has been submitted on behalf of DuPont concerning the status of the imported samples under subparagraph (c) of U.S. Note 6. Pursuant to this subparagraph, articles subject to quantitative restrictions, antidumping orders, or countervailing duty orders may not be classified as prototypes. Articles subject to licensing requirements, or which must comply with laws, rules, or regulations administered by agencies other than the United States Customs Service before being imported, may be classified as prototypes if they comply with all applicable provisions of law and otherwise meet the definition of “prototypes” under paragraph (a). Accordingly, this ruling is issued on the assumption that the terms of subparagraph (c) of U.S. Note 6 will be satisfied.
The facts presented in this case are similar to those in U.S. Customs Service Headquarters’ Ruling Letter (HRL) 562174 dated June 19, 2002, which involved organic compounds being imported into the United States. U.S. Customs held that the imported organic compounds that undergo a high speed screening process to determine pharmaceutical potential are properly classified under 9817.85.01 HTSUS. In both cases, the imported product is screened in the United States for commercial value. If the sample has commercial value, then more material is ordered, researched, and developed.
General Note 19(c)
In addition, you inquire as to whether the samples are exempt from the provisions of the HTSUS based on General Note 19(c). General Note 19(c) provides that for purposes of General Note 1, “records, diagrams, and other data with regard to any business, engineering or exploration operation whether on paper, cards, photographs, blueprints, tapes or other media ... are not goods subject to the provisions of the tariff schedule.” You directed our attention to an earlier U.S. Customs Service decision in support of this claim. In HRL 557732 dated March 24, 1994, the materials involved were preproduction materials such as animation cels, background scenes, rejected film takes and retakes, and other materials created by the Animations Studios in the production of animation films. The materials returned to Warner Bros. Animation were being used directly in the production of animated cartoon films and were returned to the U.S. in order to protect their proprietary value. The U.S. Customs Service held that the returned materials consisted of business records and data necessary for the production of animated films within the meaning of General Note 13(c), HTSUS. [now General Note 19(c), HTSUS].
HRL 063240 dated October 24, 1979 is cited within HRL 557732. The materials involved in HRL 063240 included rough layouts, working drawings of layouts for reproduction purposes, ozachrome proofs, full color proofs, film copies of the working drawings for reproduction, photographs, photostats in the form of either negative or positive prints, handmade approximations of finished printed designs, tracing sheets indicating what colors go where, ink swatches, color standard tolerance samples, and printed production samples. The U.S. Customs Service held that these materials fell within the scope of item 870.10, Tariff Schedules of the United States (TSUS) [the precursor provision to General Note 19(c), HTSUS].
Upon review of these two decisions we find that they are not relevant to the present case. General Note 19(c) is concerned with records, diagrams, etc. on paper or other media. In the present case, we have chemicals that are goods, not data on media. Therefore, the chemical samples do not qualify for the exemption under General Note 19(c).
HOLDING:
The imported experimental chemical samples are eligible for classification in subheading 9817.85.01, HTSUS. The information submitted indicates that the samples satisfy the relevant provisions of subparagraph (a) and (b) to Note 6 to Subchapter XVII of Chapter 98, HTSUS. Such classification presumes compliance with the terms of subparagraph (c) of Note 6. Additionally, the experimental chemical samples are not exempt from the provisions of the HTSUS under General Note 19(c).
A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the U.S. Customs Service officer handling the transaction.
Sincerely,
Myles B. Harmon
Acting Director
Commercial Rulings Division