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HQ 557836




April 11, 1994

CLA-2 CO:R:C:S 557836 WAS

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.50

Mr. Gary L. Croskey
EMS-American Grilon Inc.
2060 Corporate Way
P.O. Box 1717
Sumter, S.C. 29151-1717

RE: Applicability of the partial duty exemption under subheading 9802.00.50, HTSUS, to polyamide resins imported from Switzerland

Dear Mr. Croskey:

This is in reference to your letter dated January 31, 1994, requesting a ruling on the applicability of the partial duty exemption under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), to polyamide resins to be imported from Switzerland.

FACTS:

The products which you intend to export to Switzerland are described as copolyamides which you state are manufactured in the U.S. by condensation of epsilon-caprolactam with: omega-dodecalactam 11-aminoundecanoic acid, and/or mixtures of hexamethylene-diamine and di-acids such as adipic, azaleic, sebacic and dodecanedioic. These products are chemically known as nylon resins. These resins are exported in solid and in granular or chip form to Switzerland. You state that the tradename for these resins is "Griltex," and a different number will appear after the tradename, depending upon the specific chemical structure and viscosity or molecular weight of the resin. You have provided a list of the existing commercial Griltex resins that you export or plan to export to Switzerland.

According to your description of the production processes, when the Griltex "G" granules arrive in Switzerland, they are conveyed to storage silos, cooled with liquid nitrogen and then fed into a cryogenic grinding mill that is also cooled by liquid nitrogen. The grinding mill grinds the Griltex "G" granules into powders which are then separated based upon particle size by vibrating screens (separating sieves). Oversized particles are returned to the grinding mill for repeated grinding until the desired particle sizes are obtained.

Next, the chilled Griltex powders are heated to make them crystalline, and the powders may then be blended to obtain the final desired particle size distributions. Finally, the powders are bagged, assigned Griltex "P" names and identifying numbers and returned to the U.S. The powders are used in the formulation of adhesive pastes and can also be scatter-coated, in powder form, for thermal bonding of fabric to fabric, or to other substrates, such as foam, paperboard, etc.

You state that for every one pound of Griltex "G" products shipped to Switzerland, approximately 0.99 pound of Griltex "P" products are returned, with the difference due to the material losses (waste) incurred in the processing.

In a letter dated February 22, 1994, addressed to Mr. C.N. Reilly (NIS 238), U.S. Customs, New York Seaport, you stated that the Griltex resins the subject of this ruling request are:
complete for their intended adhesive applications and in fact are sold within the United States in its granular form. Our annual domestic sales of these granular Griltex products exceed 700 metric tons and are used mostly in the very same end use markets as the Griltex powders we import. Obviously, our customers have very different processing equipment for handling and using granules and powders.

In a letter dated April 7, 1994, you further stated:

[w]hen the Griltex granules are used, they are poured or conveyed into a hopper where they then fall into an extruder or melter. The granules are melted and applied in droplets or dots onto a fabric or are extruded into a film or web. In any case, the Griletex resolidifies and the fabric, films, or webs are adhered to other fabrics or substrates again by applying heat.

When Griltex powders are used, they can be used in several different ways. First, they can be sprinkled or scatter-coated onto fabric or foam and then again adhered to another fabric by the application of heat. Secondly, they can be fed into a melter, and also applied in a droplet fashion to fabric. Thirdly, they can be mixed into a paste and then the paste is applied to the fabric.

You also stated in your April 7th letter that regardless of whether granules or powders are used, the adhesive action is essentially the same, namely, the melting of Griltex. In addition, you stated that, except for the paste method, no other ingredients are used, and even with the paste method the other ingredients are used as carriers to evenly distribute the Griltex powder particles. You maintain that these other ingredients have no effect on the adhesion qualities of the Griltex.

In your April 7th letter, you further stated that you have several customers in the U.S. that buy the Griltex in both granular and powder form. The primary factors which you claim lead to a customer choosing between using the granular and powder are: (1) feel or "hand" of the finished fabrics; (2) processing equipment available; (3) technological skill of the customer; and (4) costs.

ISSUE:

Whether the grinding operation performed abroad on the U.S.-origin Griltex "G" resins constitutes an alteration, thereby entitling it to the partial duty exemption available under subheading 9802.00.50, HTSUS, when returned to the U.S.

LAW AND ANALYSIS:

Articles returned to the U.S. after having been exported to be advanced in value or improved in condition by repairs or alterations may qualify for the partial duty exemption under subheading 9802.00.50, HTSUS, provided the foreign operation does not destroy the identity of the exported articles or create new or commercially different articles through a process of manufacture. See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956), aff'd C.D. 1752, 36 Cust. Ct. 46 (1956); Guardian Industries Corp. v. United States, 3 CIT 9 (1982). Accordingly, entitlement to this tariff treatment is precluded where the exported articles are incomplete for their intended purpose prior to the foreign processing and the foreign processing operation is a necessary step in the preparation or manufacture of finished articles. Dolliff & Company, Inc. v. United States, 455 F. Supp. 618 (CIT 1978), aff'd, 599 F.2d 1015 (Fed. Cir. 1979). Articles entitled to this partial duty exemption are dutiable only upon the cost or value of the foreign repairs or alterations when returned to the U.S., provided the documentary requirements of section 10.8, Customs Regulations (19 CFR 10.8), are satisfied.

In Headquarters Ruling Letter (HRL) 556616 dated June 16, 1992, we considered a herbicide in a water dispersible granule that was exported to France for incorporation into water-soluble film which is a highly specialized plastic, designed for compatibility with agricultural chemical and applications technology. It was held that the incorporation of the U.S.-origin herbicide in water-soluble film in France constituted an acceptable alteration within the meaning of subheading 9802.00.50, HTSUS, because this process did not change the chemical structure or use of the product; the identity and properties of the herbicide remained intact, and the U.S.-manufactured herbicide was sold and could be used in its pre-processed form.

In a recent ruling, HRL 557534 dated December 17, 1993, domestically-produced Acetochlor, a pre-emergence herbicide for the control of annual grass and broad-leaf weeds in corn, was sent to Belgium to be microencapsulated. This process involved the containment of the Acetochlor within polymer capsules which were suspended in water. We found the facts in HRL 557534 to be similar to HRL 556616 as the microencapsulation process only changed the form of the herbicide and the identity and herbicidal properties remained intact. Although the entire encapsulation process in Belgium was not free of chemical reactions, we found that the Acetochlor compound did not undergo any chemical changes. Thus, we held that the microencapsulation process constituted an acceptable alteration within the meaning of subheading 9802.00.50, HTSUS.

In another herbicide case, HRL 555740 dated May 28, 1991, a U.S.-origin herbicide was exported to France where it was subjected to processes of formulation and granulation to eliminate the product's powdery consistency, and to render it more marketable and "user friendly." Customs found that the formulation and granulation processes constituted acceptable alterations within the meaning of subheading 9802.00.50, HTSUS, because the herbicide in its exported condition was complete for its intended use as an herbicide, and, in fact, could be marketed within the agricultural industry in its exported condition. Furthermore, Customs also found that, since the chemical composition was not changed by the addition of the dilutents, dispersants, wetting agents, buffers, etc., the identity of the exported herbicides was not destroyed. In addition, the foreign operations did not appear to result in any significant change in the quality or character of the herbicide, inasmuch as the herbicide retained its weed killing properties. Therefore, the formulation and granulation operations were held to be an alteration under this subheading.

In the instant case, with regard to the facts you have presented and consistent with the rulings described above, we are of the opinion that the processing of the U.S.-origin Griltex constitutes an acceptable alteration within the meaning of subheading 9802.00.50, HTSUS. As in HRL 555740, the resins here are complete for their intended use as adhesive applications prior to being exported to Switzerland to undergo a grinding operation. The operations performed in Switzerland do not have the effect of destroying the identity of the resin or changing its chemical composition, but only serve to change the form of the Griltex product. Moreover, the foreign operations do not result in any significant change in the character or use of the resins. The evidence you submitted indicates that the exported Griltex granules are used in the same end use markets as the Griltex powders which are imported into the U.S. Regardless of whether granules or powders are used, the adhesive action is the same for both products.

HOLDING:

On the basis of the information submitted, the process of grinding the Griltex granules in Switzerland constitutes an acceptable alteration within the meaning of subheading 9802.00.50, HTSUS. Therefore, the Griltex powder will be entitled to classification under this tariff provision with duty to be assessed only upon the cost or value of the operations performed in Belgium, upon compliance with the documentary requirements of 19 CFR 10.8.

Sincerely,

John Durant, Director

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