OT:RR:CTF:VS H323601 AP
Rick Van Arnam, Partner
Barnes, Richardson & Colburn, LLP
100 William Street, Suite 305
New York, NY 10038
RE: Country of Origin; Spent Catalysts; Subheading 9903.88.03; Section 301 Remedy
Dear Mr. Van Arnam:
This is in response to your June 15, 2021 ruling request, on behalf of BASF Corporation (“BASF” or “importer”) regarding the country of origin, for purposes of Section 301 measures, of certain chemical catalysts manufactured in the United States, shipped to and used in reactors in China, and subsequently returned to the United States for refining.
The importer has asked that certain information submitted in connection with this ruling be treated as confidential. Inasmuch as this request conforms to the requirements of 19 C.F.R.
§ 177.2(b)(7), the request for confidentiality is approved. The information contained within brackets in italics in this ruling or in the attachments to the ruling request, forwarded to our office, will not be released to the public and will be withheld from published versions of this ruling.
FACTS:
Catalysts are substances that increase the rate of a chemical reaction without undergoing any permanent chemical change. BASF will manufacture the subject chemical catalysts in South Carolina. The catalysts will contain a platinum group metal in the form of a solution that will be sprayed onto an aluminum oxide substrate also known as an aluminum oxide sphere or substrate. Specifically, the composition of the catalysts will be [X] to [X] percent aluminum oxide and [X] to [X] percent palladium. The precious metal solution will be produced when palladium is dissolved in acidic solutions and oxidizing agents. The solution will be filtered to remove contaminants. The aluminum oxide spheres will be coated with the precious metal solution in a rotating coating pan. The coated spheres will be chemically reduced by either a gas/liquid phase or a liquid reduction process. The strong reducing agents will fix the precious metal to the surface of the spheres. The coated spheres will be washed and dried. Chemical analysis will be performed to determine the particulate matter concentration. The catalysts will then be packaged for sale and exported to China where they will be added to BASF’s customers’ reactors to produce fine chemicals, oleochemicals and petrochemicals.
Gradually the catalysts’ efficiency will decrease below designated tolerance levels for various reasons. Other elements such as iron, sodium or carbon monoxide can occupy the micropores of the substrate and inhibit its ability to react. Palladium crystallites can agglomerate and cause palladium to become less reactive. The surface area of the substrate can be reduced, and the pores of the surface can be enlarged due to heat over time, which can reduce the catalytic activity. Also, mechanical friction or vibration can wear off palladium from the substrate. While a catalyst’s overall effectiveness diminishes with use, the remaining palladium and substrate do not change in form.
Once the catalysts’ effectiveness falls below their tolerance level, the spent catalysts will be removed from the reactor in China, packaged, and returned to the United States for refining. When entered into the U.S., the spent catalysts will be classifiable under subheading 7112.92.01, Harmonized Tariff Schedule of the United States (“HTSUS”), which provides for: “Waste and scrap of precious metal or of metal clad with precious metal; other waste and scrap containing precious metal or precious metal compounds, of a kind used principally for the recovery of precious metal other than goods of heading 8549: Other: Of platinum, including metal clad with platinum but excluding sweepings containing other precious metals.” During the refining process in the United States, the active palladium will be removed from the substrate, put into a solution, and sprayed onto a new substrate for use as a new catalyst.
ISSUE:
What is the country of origin of the chemical catalysts manufactured in the U.S., shipped to and used in China, and subsequently returned to the United States as spent catalysts for refining for the purposes of applying Section 301 trade remedies?
LAW AND ANALYSIS:
The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty of 25 percent will be imposed on certain Chinese imports pursuant to USTR’s authority under Section 301(b) of the Trade Act of 1974 (“Section 301 measures”). The
Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20(e), HTSUS. Among the subheadings listed in U.S. Note 20(f) of Subchapter III, Chapter 99, HTSUS, is 7112.92.01.
When determining the country of origin for purposes of applying Section 301 trade remedies, the substantial transformation analysis is applicable. The test is whether an article emerges from a process with a new name, character, or use, different from that possessed by the article prior to processing. Texas Instruments, Inc. v. United States, 69 CCPA 151, 681 F.2d 778 (1982). U.S. Customs and Border Protection (“CBP”) considers the totality of the circumstances and makes substantial transformation determinations on a case-by-case basis. CBP has stated that a new and different article of commerce is an article that has undergone a change in commercial designation or identity, fundamental character, or commercial use. A determinative issue is the extent of the operations performed and whether the materials lose their identity and become an integral part of the new article. See Nat’l Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993). If the manufacturing or combining process is a minor one, which leaves the identity of the article intact, a substantial transformation has not occurred. See Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983) (imported shoe uppers added to an outer sole in the United States were the “very essence of the finished shoe” and the character of the product remained unchanged and did not undergo substantial transformation in the United States).
In the instant matter, U.S.-origin catalyst is used in a reactor in China to speed up chemical reactions without being further worked. It gradually loses its catalytic activity through structural changes, overheating, contamination, or the deposit of extraneous materials, but it remains a catalyst. As in Nat’l Hand Tool Corp., the identity of the catalyst remains intact and no substantial change in name, character or use occurs when the catalyst falls below the designated tolerance levels in China. The spent catalyst is still called a catalyst. The chemical composition and mechanical properties of the palladium and aluminum substrate remain unchanged by the catalyst’s use. The palladium and the aluminum substrate do not change in form. The palladium’s particle size, density, shape, appearance, and chemical properties remain the same. The shape and chemical composition of the substrate also remain unchanged. Accordingly, we find that the U.S. catalysts, as described, are not substantially transformed in China, and remain products of the United States.
HOLDING:
Based on the information presented, the country of origin of the subject spent catalysts, returned to the United States from China, is the United States, and Section 301 measures will not apply.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by [CBP] field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
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 CBP officer handling the transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch