United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 1997 HQ Rulings > HQ 560129 - HQ 560322 > HQ 560274

Previous Ruling Next Ruling
HQ 560274




May 16, 1997

CLA-2 RR:TC:SM 560274 DEC

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.50

Mr. Gary L. Croskey
EMS-American Grilon Incorporated
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 copolyester granules, pellets, and powders imported from Switzerland; HRL 557836; HRL 556740

Dear Mr. Croskey:

This is in reference to your letter dated January 13, 1997, 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 copolyester granules, pellets, and powders to be imported from Switzerland.

FACTS:

The products which you intend to export to Switzerland are described as copolyester granules and pellets which you state are manufactured in the U.S. Your company, EMS-AMERICAN GRILON, intends to purchase the granules or pellets in the U.S., sell the articles at cost to your parent company, EMS-CHEMIE, AG in Switzerland, who will grind the articles into powders, and then import the powders into the U.S. Your parent company intends to sell the powders to you at a cost which will include the price paid to your company for granules or pellets plus the cost of grinding which will be separately identified on the invoices.

The product exported to Switzerland is a granular or pellet form of an unsaturated copolyester manufactured by combining terephthalic and isophthalic acids with butanediol. The product is referred to as Bostik Hot Melt Adhesive #4181 if in granular form or Bostik Hot Melt Adhesive #7181 if it is in a pellet form. The returning products are identified as Griltex 6 P (your trade name) with various numerical designations following the P. The P indicates that the article is a powder and the numbers following the P refer to the particular powder's particle size distribution.

According to your description of the production processes in Switzerland, the copolyester granules or pellets are put into a storage silo where they are cooled with liquid nitrogen and then fed into a cryogenic grinding mill that is also cooled by liquid nitrogen. The grinding mills then grind the copolyester 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 6P names and identifying numbers and returned to the U.S. You state that for every one pound of copolyester 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. You state that the Griltex copolyester products are available for sale in the U.S. in their granular, pellet, and powder forms and all perform the same thermoplastic adhesive function regardless of the form. You state that the copolyester products 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 rubber.

ISSUE:

Whether the grinding operation performed abroad on the U.S.-origin copolyester granules and pellets constitutes an alteration, thereby entitling the resulting powder 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) 557836, dated April 11, 1994, Customs issued your company a ruling holding that polyamide resins that were manufactured in the U.S. and exported to Switzerland for certain grinding operations which are virtually identical to the processing that are the subject of this ruling request were eligible for a partial duty exemption pursuant to subheading 9802.00.50, HTSUS. As we stated in HRL 557836,
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.

In 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. The copolyester products here are complete for their intended use as adhesive applications prior to being exported to Switzerland to undergo the above-described grinding operations. The operations performed in Switzerland do not have the effect of destroying the identity of the copolyester products or changing their 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 copolyester products. The evidence you submitted indicates that the exported granules and pellets are used in the same end use markets as the Griltex powders which are imported into the U.S. Regardless of whether granules, pellets, or powders are used, the adhesive action is the same for these products.

HOLDING:

On the basis of the information submitted, the process of grinding the granules and pellets 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 grinding operations performed in Switzerland, upon compliance with the documentary requirements of 19 CFR 10.8.

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 Customs officer handling the transaction.

Sincerely,

John Durant, Director
Tariff Classification Appeals

Previous Ruling Next Ruling

See also: