CLA-2 OT:RR:CTF:VS H055295 EE
Mark D. Pinchok
Bayer Corporation
100 Bayer Road
Pittsburgh, PA 15205
RE: Rovral® Brand 4 Flowable Fungicide; Subheading 9801.00.25, HTSUS; Temporary importation under bond; Subheading 9813.00.05, HTSUS
Dear Mr. Pinchok:
This is in reply to your letter, dated March 10, 2009, on behalf of Bayer CropScience LP (“BCS”), concerning the applicability of subheading 9801.00.25, Harmonized Tariff Schedule of the United States (“HTSUS”), to Rovral® Brand 4 Flowable Fungicide (“Rovral”) returned to the U.S. from Canada for reworking. You subsequently filed an additional submission dated June 19, 2009.
FACTS:
Rovral is a formulation of c. 42 percent Iprodione with application adjuvants. It is formulated for direct field end-use on a number of horticultural and row crops to stop fungi at several phases of development, including spore germination, mycelia growth, and spore production. This multi-faceted protection provides consistent, reliable disease prevention while reducing the risk of resistance development in future growing seasons.
You state that BCS formulates Rovral in the U.S. by combining French Iprodione active ingredient with inert ingredients (application adjuvants). There is no other active ingredient pesticide added to the formulation, and no chemical reaction occurs during the formulation process. The final product is then packaged in the U.S. for retail sale. Under certain circumstances, BCS exports Rovral to Canada. If quality or field performance issues ever arise, Rovral is imported back into the U.S. by BCS for reworking.
A typical reworking process would entail the following: the product is returned to the U.S. from Canada and consolidated at a warehouse location from the original packaging into bulk tanks. Next, the product is transported in the bulk tanks to a processing facility where it is reprocessed to the new specification. At the processing site the imported material (with quality problems) is mixed with new production material at 1/1 ratio by weight. The combined product is then passed through two horizontal media mills, containing media of a nominal 1.2mm diameter, and a media loading of 83% base on net shell volume. Each batch is passed 3 times using a discrete batch process, controlling the mill exit temperature at or below 50 degrees Centigrade. In-process sample are evaluated using laser diffraction techniques and wet screen methods to determine if the combined product is compliant with particle size specifications. Once the batch process is completed, a final batch sample is evaluated for all specifications/characteristics. Once the batch has passed all the new specifications, it is packaged for distribution.
Pursuant to 19 C.F.R. § 177, you seek a ruling on the applicability of subheading 9801.00.25, HTSUS, to Rovral returned to the U.S. from Canada.
ISSUES:
Whether Rovral is eligible for duty-free treatment under subheading 9801.00.25, HTSUS, when returned to the U.S. from Canada for reworking.
Whether Rovral is eligible for duty-free treatment under subheading 9813.00.05, HTSUS, when returned to the U.S. from Canada for reworking.
LAW AND ANALYSIS:
Section 141.2, CBP Regulations (19 C.F.R. § 141.2), provides that dutiable merchandise imported and afterwards exported, even though duty thereon may have been paid on the first importation, is liable to duty on every subsequent importation into the Customs territory of the United States, unless exempt by law.
One such exemption is set out in subheading 9801.00.25, HTSUS, which provides for the duty-free entry of:
Articles, previously imported, with respect to which the duty was paid upon such previous importation if (1) exported within three years after the date of such previous importation, (2) reimported without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, (3) reimported for the reason that such articles do not conform to sample or specifications, and (4) reimported by or for the account of the person who imported them into, and exported them from, the United States.
Articles satisfying each of the above requirements are entitled to duty-free treatment, assuming compliance with the documentary requirements of section 10.8a, CBP Regulations (19 C.F.R. § 10.8a). This regulation contains the same criteria found in subheading 9801.00.25, HTSUS. The documents required are declarations by the person abroad who received and is returning the merchandise to the U.S. and by the owner, importer, consignee, or agent. Each declaration must include a description of the articles, and the latter declaration must set forth information relative to the original importation of the merchandise, such as port and date of importation, entry number, and name and address of the importer at the time the duty was paid. 19 C.F.R. § 10.8a(b). However, the port director may waive the documentary requirements upon satisfaction that the requirements of that subheading are met. 19 C.F.R. § 10.8a(c).
The payment of duty on the merchandise when first imported is a prerequisite to obtaining the benefit of subheading 9801.00.25, HTSUS. In the instant case, the article that is originally imported into the U.S. is Iprodione. Upon importation, Iprodione is formulated into field-ready Rovral. In New York Ruling Letter (“NY”) N052798, dated March 2, 2009, CBP determined that Iprodione was classified under subheading 2933.21.00, HTSUS, and Rovral was classified under subheading 3808.92.15, HTSUS. Thus, the article that is originally imported into the U.S. from France is not the same article that is subsequently imported from Canada. O.A. Both Corporation v. United States, 63 Cust. Ct. 443 (1969) (stating that two tariff classifications indicate two different articles of commerce). Accordingly, we do not find that the prerequisite to obtaining the benefit of subheading 9801.00.25, HTSUS is met. However, this does not preclude duty-free entry of Rovral when returned to the U.S. from Canada for reworking.
Under subheading 9813.00.05, HTSUS, articles to be repaired, altered or processed (including processes which result in articles manufactured or produced in the United States) may be entered temporarily free of duty under a Temporary Importation Under Bond (TIB) for exportation within one year from the date of importation. This one-year period may be extended for one or more additional periods, which when added to the initial period does not exceed three years. In order to qualify under this provision, the imported merchandise may not be imported for the purpose of a sale or sale on approval. U.S. Note 1(a) to Subchapter XIII, Chapter 98, HTSUS.
You state that Rovral, formulated and packaged in the U.S., is sold in the U.S. and under certain circumstances exported to Canada. If quality or field performance issues ever arise, Rovral is imported back into the U.S. by BCS for reworking. We find that the reworking performed in the U.S. constitutes a repair or alteration of Rovral within the meaning of subheading 9813.00.05, HTSUS.
Article 307(2) of the North American Free Trade Agreement (NAFTA) provides that “[n]otwithstanding Article 303, no Party may apply a customs duty to a good, regardless of its origin, imported temporarily from the territory of another Party for repair or alteration.” Section 181.53(b)(5), CBP Regulations (19 C.F.R. § 181.53(b)(5)), implements the requirements of NAFTA Article 307(2). Specifically, section 181.53(b)(5) provides:
Except in the case of a good imported from Canada or Mexico for repair or alteration, where a good, regardless of its origin, was imported temporarily free of duty for repair, alteration or processing (subheading 9813.00.05, Harmonized Tariff Schedule of the United States) and is subsequently exported to Canada or Mexico, duty shall be assessed on the good on the basis of its condition at the time of its importation into the United States.
19 C.F.R. § 181.53(b)(5) (emphasis added).
In the instant case, since the reworking performed when Rovral is returned to the U.S. constitutes a repair or alteration, Rovral qualifies under the exemption provided for in 19 C.F.R. § 181.53(b)(5).
U.S. Note 2(b) to Subchapter XIII, Chapter 98, HTSUS, provides that merchandise may be admitted into the United States under heading 9813.00.05 only on condition that If any processing of such merchandise results in an article (other than an article described in (a) of this U.S. note) manufactured or produced in the United States:
A complete accounting will be made to the Customs Service for all articles, wastes and irrecoverable losses resulting from such processing; and
All articles and valuable wastes resulting from such processing will be exported or destroyed under customs supervision within the bonded period; except that in lieu of the exportation or destruction of valuable wastes, duties may be tendered on such wastes at rates of duties in effect for such wastes at the time of importation.
In the instant case, the reworking process to which Rovral is subjected does not appear to constitute a manufacture or production in the U.S., as it does not create a new and different article having a distinctive name, character and use. See Anheuser-Busch Brewing Ass'n v. United States, 207 U.S. 556, 562 (1908). Therefore, BCS does not have to comply with the accounting requirements in U.S. Note 2(b) to Subchapter XIII, Chapter 98, HTSUS.
HOLDING:
Based upon the information submitted, we find that Rovral, returned to the U.S. from Canada for reworking, is not eligible for duty-free treatment under subheading 9801.00.25, HTSUS.
Rovral, returned to the U.S. from Canada, is eligible for duty-free treatment under subheading 9813.00.05, HTSUS.
Sincerely,
William G. Rosoff,
Chief
Entry Process and Duty Refunds Branch