CLA-2-39:OT:RR:NC:N:5:137
Hyun woo Han
LG Chem
128, Yeoui-daero, Yeongdeungpo-gu,
Seoul 07336 South Korea
RE: The tariff classification and country of origin of polybutylene adipate terephthalate (PBAT) compound
Dear Mr. Han:
In your letter dated July 21, 2024, you requested a tariff classification and country of origin determination ruling.
The product under consideration is referred to as PBAT compound. The product is referred to as a copolymer composed of 70 percent PBAT, 10 percent polylactic acid (PLA), 15 percent calcium carbonate (CaCO3) and 5 percent talc. The primary target applications of the PBAT compound are plastic bags, mulch films and food packaging.
PBAT Neat is shipped from China to South Korea. In South Korea, the PBAT Neat is measured and added to the mixer. PLA sourced from Thailand, Talc sourced from India or Pakistan and other additives are measured and added to the mixer. The components are mixed together. CaCO3 sourced in South Korea is measured out and added to a separate side hopper. The PBAT, PLA, Talc blend is fed into the extruder's main feeder. The CaCO3 is fed into the extruder via the side feeder. In the extruder the materials are uniformly blended under a specified temperature and pressure. The resulting product is PBAT compound composed of 70 percent PBAT, 10 percent PLA, 15 percent CaCO3 and 5 percent Talc. The product is cooled and cut into pellets of uniform size. The product then undergoes dehumidification and drying to remove any moisture content, is inspected and packaged in units of specified weight.
The applicable subheading for the PBAT compound will be 3907.99.5050, Harmonized Tariff Schedule of the United States (HTSUS), which provides for other polyesters, in primary forms: other: other: other. The general rate of duty will be 6.5 percent ad valorem.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided at https://hts.usitc.gov/.
The "country of origin" is defined in 19 CFR 134.1(b) as "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.
When considering a product that may be subject to antidumping, countervailing, or other safeguard measures, the substantial transformation analysis is applied to determine the country of origin. See 19 C.F.R. 102.0; HQ 563205, dated June 28, 2006; see also HQ 563205, dated September 16, 1996 (finding that "the term 'product of' at the least includes manufactured articles of such country or area" and that substantial transformation "is essentially the test used... in determining whether an article is a manufacture of a given country").
The courts have held that a substantial transformation occurs when an article emerges from a process with a new name, character or 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); National Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff'd, 989 F. 2d 1201 (Fed. Cir. 1993); Anheuser Busch Brewing Association v. The United States, 207 U.S. 556 (1908) and Uniroyal Inc. v. United States, 542 F. Supp. 1026 (1982).
However, if the manufacturing or combining process is merely a minor one that leaves the identity of the article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982), aff'd, 702 F.2d 1022 (Fed. Cir. 1983). Substantial transformation determinations are based on the totality of the evidence. See Headquarters Ruling (HQ) W968434, dated January 17, 2007, citing Ferrostaal Metals Corp. v. United States, 11 CIT 470, 478, 664 F. Supp. 535, 541 (1987).
The classification of the PBAT Neat when shipped from China to South Korea is 3907.99, HTS. The classification of the PBAT compound when shipped from South Korea to the United States is 3907.99.5050, HTSUS. PBAT composes 70 percent of the PBAT compound, and it is noted that the CAS numbers do not change for the PBAT. While the documentation notes that the addition of PLA, Talc and CaCO3 enhances the function of the PBAT, it does not change the function of the PBAT. Further, the PBAT compound does not have a change in use with the addition of the PLA, Talc and CaCO3. It is the opinion of this office that the mixing operations performed in South Korea do not result in a substantial transformation. Therefore, the country of origin of the PBAT compound will remain China.
Pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, products of China classified under subheading 3907.99.5050, HTSUS, unless specifically excluded, are subject to an additional 25 percent ad valorem rate of duty. At the time of importation, you must report the Chapter 99 subheading, i.e., 9903.88.02, in addition to subheading 3907.99.5050, HTSUS, listed above.
The HTSUS is subject to periodic amendment, so you should exercise reasonable care in monitoring the status of goods covered by the Note cited above and the applicable Chapter 99 subheading. For background information regarding the trade remedy initiated pursuant to Section 301 of the Trade Act of 1974, including information on exclusions and their effective dates, you may refer to the relevant parts of the USTR and CBP websites, which are available at https://ustr.gov/issue-areas/enforcement/section-301-investigations/tariff-actions and https://www.cbp.gov/trade/remedies/301-certain-products-china, respectively.
The holding set forth above applies only to the specific factual situation and merchandise description as identified in the ruling request. This position is clearly set forth in Title 19, Code of Federal Regulations (CFR), Section 177.9(b)(1). This section states that a ruling letter is issued on the assumption that all of the information furnished in the ruling letter, whether directly, by reference, or by implication, is accurate and complete in every material respect. In the event that the facts are modified in any way, or if the goods do not conform to these facts at time of importation, you should bring this to the attention of U.S. Customs and Border Protection (CBP) and submit a request for a new ruling in accordance with 19 CFR 177.2. Additionally, we note that the material facts described in the foregoing ruling may be subject to periodic verification by CBP.
This ruling is being issued under the provisions of Part 177 of the Customs and Border Protection Regulations (19 C.F.R. 177).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, please contact National Import Specialist Christina Allen at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division