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HQ 966294

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August 8, 2003

CLA-2 RR:CR:GC 966294AM

CATEGORY: CLASSIFICATION

TARIFF NO.: 3907.60.00

Port Director
U.S. Customs and Border Protection
4341 International Parkway, Suite 600
Atlanta, GA 30354

RE: Protest 1704-02-100301; PET flake containing less than .5% non-PET plastic and metal contaminant

Dear Port Director:

This is in regard to Protest 1704-02-100301, concerning your classification of plastic flake material under the Harmonized Tariff Schedule of the United States (HTSUS). The protest covers 27 entries of the merchandise from May 2, 2001 to October 20, 2001. We have also considered views expressed in a supplemental submission from counsel, dated July 22, 2003, and those expressed in a telephone conference, on August 4, 2003.

FACTS:

The merchandise consists of polyethylene terephthalate ("PET") flakes manufactured from plastic bottles. Protestant entered the merchandise claiming classification in subheading 3915.90.00, HTSUS, as scrap plastic. The entries were liquidated under subheading 3907.60.00, HTSUS, as PET in primary forms.

Protestent describes the manufacturing process in the following manner: discarded plastic bottles are sorted by their plastic type; cleaned, ground into flakes and packed in bags. After entry, a sample of PET flake is tested to determine the amount of non-PET plastic contaminant in the bag. If the sample contains more than .5% non-PET plastic material, it is unusable for protestant's purposes because it will clog the extrusion machine. Once accepted for production, the metal contaminants are filtered out of the PET flakes. The flakes are then put into a machine that extrudes the PET into filament. The PET filament is manufactured into backing for roofing felt.

The American Plastics Council posts on its website, PlasticsResource.com//reading room//backgound info//information on Municipal recycling programs, June 1999 ©2003, American Plastics Council, in pertinent part, the following information:

Handling:

After plastics are collected, they are delivered to a handler for sorting (if necessary) and densification.

Sorting: Most collection programs today are multi-material, commingled programs. This means that plastics are collected with other recyclable packaging such as steel, glass and aluminum. In these programs, plastics will need to be separated - or sorted - from the other materials before they can be sent to market. Even if plastics are delivered in a separate stream, they still may need to be sorted by resin type (e.g., PET, HDPE) and to remove other forms of contamination. Today, sorting is performed either in a manual system, where plastic bottles and containers pass along a conveyor belt and are sorted by hand or in an automated system, which uses advanced technology (e.g., infrared identification or X-ray) to identify plastic containers by resin type and/or color.

Densification: Because it takes only a little bit of plastic to produce large volume bottles, e.g. a milk jug, empty plastic bottles have a high "volume to weight" ratio. High volume-to-weight ratios translate into high shipping costs. Therefore, once plastics are sorted, handlers will densify them prior to shipment. Baling (using a vertical or horizontal baler) is the most common means of densification, although some handlers granulate, or grind, plastics. The densification method selected usually depends on the specifications required by the handler's market.

A handler may be a publicly- or privately-owned materials recovery facility (MRF) or a private company that specializes in processing plastics. The type of handler selected usually depends on the collection method used: Plastics collected in a commingled municipal program will most likely go to a MRF that has the capacity to sort different materials by type, whereas plastics collected in a source-separated program may go directly to a plastics processor.

Reclamation:

Reclamation is the step where sorted and densified plastics are converted into flakes or pellets, which can then be used to manufacture new products. (Pellets and flakes are the two forms in which plastic feedstocks are commonly sold [emphasis added].) Flakes are made by feeding plastic articles (e.g., bottles) into a granulator where they are chopped into small uniform-sized chips of material.

The specific processes utilized by a reclaimer will depend in large part on the reclaimer's confidence in the quality of the plastics coming into the facility and the application into which the recycled plastic will be sold or used. For example, some reclaimers that are confident with the cleanliness and quality of the material coming into their facility may simply grind the plastic into flakes for sale to end-users, or use it themselves to make new products. The vast majority of reclaimers, however, will wash and dry incoming plastics in flake form and then convert them into pellets. Pellets are made by melting plastic and extruding it into thin strands (that look like spaghetti) that are then chopped into small, uniform pieces. The process selected by a reclaimer will depend on the products being manufactured since some products are made from pellets and others can be made from flakes.

End-Use:

Once the plastic is in flake or pellet form, it can then be sold to manufactures to be made into new products. These include bottles and containers, clothing, automotive accessories, bags, bins, carpet, plastic lumber, film and sheet, hospital supplies, housewares, packaging, shipping supplies, toys and more. More than 1,300 products, made from or packaged in recycled plastics, are listed in APC's online Recycled Plastic Products Directory [emphasis added].

It is important to keep in mind that these components - although common to all plastic recycling systems - may occur in a slightly different order. It also is important to recognize that one facility or company may perform multiple roles in the system. For example, a company may fulfill the role of both plastics handler and reclaimer, or the role of both reclaimer and end-user. In general, however, the four components described must occur at some point in the system in order to recover plastics for use in manufacturing recycled plastic products.

Two samples were sent separately by the importer to the Customs Laboratory in Savannah, GA. Customs Laboratory Report SV20011207, dated August 29, 2001, states, "the sample is colored flakes (blue, green and clear) of a single thermoplastic material, polyethyene (sic) terephthalate plastic." This sample did not contain any metal contaminant and no plastic flake other than PET was found in the sample.

Subsequently, the importer claimed that it sent the sample in error because it came from further along in the processing than the product as imported. The importer sent a second sample. With respect to this second sample, Customs Laboratory Report SV20011655, dated January 17, 2002, states, in pertinent part, the following:

The sample consists of multicolored flakes/chips. Thirty-three different colors of flakes/chips were identified. The flakes/chips are composed wholly of polyethylene terephthalate (PET), a single thermoplastic material.

A conversation with Savannah Customs Laboratory personnel confirms that there was no non-plastic debris in this sample.

The importer sent a third sample to the Office of Regulations and Ruling claiming that it had been drawn from a recent shipment. This sample visibly contained many metal fragments not mentioned in the previous laboratory reports or pictured in the accompanying document. This sample was analyzed and the findings were reported in Customs Laboratory Report SF20030824, dated June 12, 2003, which states the following:

The sample is a mixture of plastic chips of various sizes and colors and other non-plastic material.

Laboratory analyses indicate that the sample is approximately 89 percent plastic and 11 percent other material. The plastic appears to be polyethylene terephthalate with a trace (less than .02 percent) of other plastic. The non-plastic material is primarily metal.

Verification with the Office of Laboratory Services revealed that the 11 percent "other material" was a percentage by weight that computes to only 2.2% by volume. This comports with the fact that metal is much heavier than plastic. It is unknown whether the volume of non-plastic material found in the sample is representative of that found in the entire shipment because metal contaminant would theoretically settle to the bottom of a sack.

ISSUE:

Are PET flakes containing less than .5% non-PET plastic contaminant, derived from recycled soda bottles that have been sorted by plastic type and cleaned, classified as plastic waste or as PET in primary forms?

LAW AND ANALYSIS:

Twenty seven entries are the subject of this protest. The entries were made from May 2, 2001 through October 20, 2001, and were liquidated from May 17, 2002 through August 23, 2002. A protest was filed on August 13, 2002. Under 19 USC 1514(c)(3)(A) and 19 CFR 174.12, a protest must be filed within 90 days after liquidation of the entries upon which it is based. The protest is untimely in relation to the one entry liquidated on August 23, 2002, after the filing of the protest on August 13, 2002.

Merchandise imported into the United States is classified under the HTSUS. Tariff classification is governed by the principles set forth in the General Rules of Interpretation (GRIs) and, in the absence of special language or context, which requires otherwise, by the Additional U.S. Rules of Interpretation. The GRIs and the Additional U.S. Rules of Interpretation are part of the HTSUS and are to be considered statutory provisions of law for all purposes.

GRI 1 requires that classification be determined first according to the terms of the headings of the tariff schedule and any relative section or chapter notes and, unless otherwise required, according to the remaining GRIs taken in their appropriate order. GRI 6 requires that the classification of goods in the subheadings of headings shall be determined according to the terms of those subheadings, any related subheading notes and, mutatis mutandis, to the GRIs.

In understanding the language of the HTSUS, the Explanatory Notes (ENs) of the Harmonized Commodity Description and Coding System may be utilized. The ENs, although not dispositive or legally binding, provide a commentary on the scope of each heading, and are generally indicative of the proper interpretation of the HTSUS. See T.D. 89-80, 54 Fed. Reg. 35127 (August 23, 1989).

The HTSUS provisions under consideration are as follows:

3907: Polyacetals, other polyethers and epoxide resins, in primary forms; polycarbonates, alkyd resins, polyallyl esters and other polyesters, in primary forms:

3907.60.00 Poly(ethylene terephthalate)

3915 Waste, parings and scrap, of plastics: . . . .

3915.90.00 Of other plastics

Chapter 39, Note 6 states, in pertinent part, the following: "In headings 3901 to 3914, the expression 'primary forms' applies only to the following forms: . . . (b) Blocks of irregular shape, lumps, powders (including molding powders), granules, flakes and similar bulk forms."

Chapter 39, Note 7 states the following: "Heading 3915 does not apply to waste, parings and scrap of a single thermoplastic material, transformed into primary forms (headings 3901 to 3914)."

Protestant states that the PET flakes it imports are combined with debris of metal and other plastics contained in the entries. This conflicts with Custom's Laboratory findings in the first two samples sent by protestant. It is Customs’ practice not to disregard the reports of Customs laboratories. See Customs Directive 099-3820-002, issued May 4, 1992, See also Consolidated Cork Corp. v. United States, 54 Cust. Ct. 83, C.D. 2512 (1965). However, a third sample, sent by the protestant and analyzed by Customs Laboratory, was closer to protestant's description of its product. Even assuming that the third sample is in fact representative of the product as imported, we believe Customs' classification is correct for the reasons stated below.

Protestant describes its product as PET flake. The website for the American Plastics Council states that "[P]ellets and flakes are the two forms in which plastic feedstocks are commonly sold," and lists 1300 applications for recycled plastic materials. supra, p. 2-3. Hence, PET flake from recycled plastic is a manufactured product that is a recognizable commodity in its own right ready for the end-user. In fact, in protestant's description of the processing of its product, after a final filtration process, the instant merchandise is ready for end use as the starting material for roofing felt backing. It is not bales of crushed plastic bottles easily recognizable as plastic scrap. Rather, the bottles have been sorted, cleaned, and most importantly, transformed into a primary form per Chapter Note 6, supra.

Customs has long recognized that the transformation into primary form is an important consideration in determining whether a product is classifiable as scrap of heading 3915, HTSUS. In HQ 952970 we explained:
the Rosetta Stone for heading 3915 is the phrase 'transformed into.' If a Plastic article has been transformed into a primary form, it is not 'waste' of heading 3915. Certainly, soft-drink bottles made of polyethylene are not plastic in primary form. Chopped-up into chips and flakes, the bottles of high-density polyethylene have been transformed into a plastic in primary form that is classifiable under heading 3901, not 3915.

Furthermore, the primary form distinction has been used in numerous rulings. For instance, in HQ 951875, dated September 12, 1992, we ruled that plastic manufacturing waste and broken articles were classified as scrap because they had not been transformed into primary form. Likewise, in HQ 950490, dated March 20, 1992, we ruled that crushed discarded battery cases of a single plastic had not been transformed into primary form. However, in NY A85992, dated July 30, 1996, NY 862375, dated May 14, 1991 and HQ 952970, dated April 8, 1993, we classified polyethylene (PE) flake derived from recycled bottles of a single thermoplastic material, as to their material in primary form.

Protestant contends that the primary form for PET is pellets, not flake, and that recycled bottles transformed into PET flake could not therefore be classified as a primary form. We disagree. Nothing in the legal description of primary forms in Note 6 leads us to this conclusion. Note 6 clearly states that flake is a primary form.

In its supplemental submission, protestant also argues that Chapter 39, Note 3 and the Explanatory Notes to Chapter 39 (p. 714) state that primary forms are obtained by chemical synthesis. Chapter 39, Note 3, states, in pertinent part, the following:

Headings 3901 to 3911 apply only to goods of a kind produced by chemical synthesis, falling in the following categories:

(a) Liquid synthetic polyolefins of which less than 60 percent by volume distills at 300°C, after conversion to 1,013 millibars when a reduced-pressure distillation method is used (headings 3901 and 3902);

(b) Resins, not highly polymerized, of the coumarone-indene type (heading 3911);

(c) Other synthetic polymers with an average of at least five monomer units;

(d) Silicones (heading 3910);

(e) Resols (heading 3909) and other prepolymers.

The ENs to Chapter 39 state, in pertinent part, the following:

General arrangement of the Chapter

The Chapter is divided into two sub-Chapters. Sub-Chapter I covers polymers in primary forms and sub-Chapter II covers waste, parings and scrap, and semi-manufactures and articles.

In sub-Chapter I, relating to primary forms, the products of headings 39.01 to 39.11 are obtained by chemical synthesis and those of headings 39.12 and 39.13 are either natural polymers or are obtained therefrom by chemical treatment. Heading 39.14 covers ion-exchangers based on polymers of headings 39.01 to 39.13.

In sub-Chapter II, heading 39.15 relates to waste, parings and scrap of plastics. Headings 39.16 to 39.25 cover semi-manufactures or specified articles of plastics. Heading 39.26 is a residual heading which covers articles, not elsewhere specified or included, of plastics or of other materials of headings 39.01 to 39.14.

We do not think that the text supports protestant's contention. Rather, the Notes and ENs explain that the plastics of headings 3901-3911, HTSUS, are obtained by chemical synthesis as opposed to the plastics of headings 3912-3914, HTSUS, which are obtained by chemical treatment or ion exchange. The PET plastic in the instant merchandise was obtained by chemical synthesis as described in Chapter 39, Note 3(c). Hence, we do not accept the claim that the instant PET flakes are not a primary form per Note 6, a commodity in their own right, ready for the end-user of hundreds of applications as described by the American Plastics Council, supra, p. 3.

Protestant further contends that the instant merchandise consists of more than one thermoplastic material and is therefore specifically included in heading 3915, HTSUS, per Chapter Note 7. We disagree. First, counsel admits that if there is any thermoplastic material in a particular entry, it is quite likely less than .5%. The importer has gone to great lengths to assure that it is shipping PET flake with less than .5% non-PET contaminant and actually strives for less than .25% contaminant. In fact, in many of the bags tested by the importer, there is no contaminant detected at all and in the only sample of the three samples tested by Customs personnel that contained any non-PET material, there was only .02% non-PET contaminant.

Furthermore, Note 7 states: "Heading 3915 does not apply to waste, parings and scrap of a single thermoplastic material, transformed into primary forms (headings 3901 to 3914)." The General ENs to the Chapter 39 state, in pertinent part: "Waste, parings and scrap of a single thermoplastic material transformed into primary forms are classified in headings 39.01 to 39.14 (according to the material) and not in heading 39.15 (see Note 7 to this Chapter)." EN 39.15 states, in pertinent part, the following:

The heading, however, does not apply to waste, parings and scrap of a single thermoplastic material, transformed into primary forms (headings 39.01 to 39.14).

Waste, parings and scrap of a single thermosetting material or of two or more thermoplastic materials mixed together, even if transformed into primary forms, are covered by the heading.

The PET soda bottles contain only one thermoplastic material, not two thermoplastic materials mixed together. The PET soda bottles were sorted away from non-PET recycled containers and thoroughly cleaned such that only PET material was fed into the machine that transformed the bottles into flakes. Note 7 to Chapter 39, as the ENs make clear, applies to exactly this situation: a single thermoplastic material transformed into primary form. The de minimus amount of non-PET contaminant in the PET flake here does not serve to undermine the correct application of Chapter Note 7.

Furthermore, we are not persuaded that the instant merchandise is classified in heading 3915, HTSUS, on the basis of the other, largely metal, contaminants. In HQ 088475, dated May 10, 1991, we classified PVC powder with impurities as PVC in primary form because it would ultimately be used for the same purposes as virgin PVC. In HQ 952836, dated February 19, 1993 we classified polytetraflouroethylene (PTFE) powder as a primary form single thermoplastic material, even though it was contaminated with dirt and oil. In NY E87484 dated December 27, 1999, we classified shredded polypropylene with a small amount of rubber contaminant as a plastic in primary form. We stated "[T]he presence of the unvulcanized rubber, a contaminant, does not alter the classification of this merchandise as primary form, even though the contaminant may render the product unsuitable for all of the same uses as virgin material." We follow this same reasoning here with regard to the metal contaminant in the instant merchandise. Here, the metal is easily removed prior to the extrusion process and does not affect the end use at all.

Lastly, language cited by counsel in its supplementary submission to define "waste", from Harley Co. v. United St`ates, 14 Ct. Cust. Appls 112, 115 T.D. 41644 (1926), a case dealing with the classification of cotton, wool and silk rags under the Tariff Act of 1922, and from United States v. C.J. Tower & Sons, CCPA 185, 187, C.A.D. 271 (1944), a case dealing with the classification of discarded x-ray films under the Tariff Act of 1930, is irrelevant to the case at hand. The language pertained to completely different merchandise under tariff provisions and "chief value" concepts not found in the HTSUS, whereas the cases did not discuss the "transformed into primary form" language that is at issue here.

However, in Latimer v. United States, 223 U.S. 501 (1912), the court held that broken tobacco leaves used in making a cheaper grade of tobacco products were not waste because they were used for the main purpose of making tobacco products. Likewise, in Mawer-Gulden-Annis (Inc.) v. United States, 17 CCPA 270, T.D. 43689 (1929), the court held that imperfect or broken olives, not salable as perfect or whole or stuffed olives, were not waste. The court reached its decision by noting that while inferior to perfect or whole olives, it nevertheless possessed the same food qualities and some of the uses of whole, pitted green olives. In citing these cases, the court in the United States v. David Studner, et al., 57 C.C.P.A. 122, 427 F.2d 819, C.A.D. 990 (1970), approved the following definition of waste: "[T]hat which has no original value or no value for the ordinary or main purpose of manufacture" (emphasis in the original) (Id. at 821). As in Latimer and Mawer, where inferior products were nonetheless suitable for the main purpose of the product, the primary form PET in the instant case, though inferior in grade and color consistency, possesses enough of the same manufacturing qualities as PET pellets to be used as the starting material for a myriad of plastic products.

Finally, the totality of the evidence in this case, based on the 3 samples submitted by the importer containing from 0 to 2.2% by volume of metal contaminant and 0 to .02% by weight of non-PET plastic contaminant, supports the conclusion that the instant merchandise consists of a single thermoplastic material in primary form. As indicated in numerous rulings cited above, the presence of de minimus non-PET material and metal contaminant in only the third (not the first or second) sample submitted, does not detract from this finding.

Accordingly, based on the above analysis, the subject PET flake is classified in subheading 3907.60.00, HTSUS, the provision for "Polyacetals, other polyethers and epoxide resins, in primary forms; polycarbonates, alkyd resins, polyallyl esters and other polyesters, in primary forms: poly(ethylene terephthalate)."

HOLDING:

The subject PET flake is classified in subheading 3907.60.00, HTSUS, the provision for "Polyacetals, other polyethers and epoxide resins, in primary forms; polycarbonates, alkyd resins, polyallyl esters and other polyesters, in primary forms: poly(ethylene terephthalate)."

You are instructed to DENY the protest.

In accordance with Section 3A(11)(b) of Customs Directive 099 3550065, dated August 4, 1993, Subject: Revised Protest Directive, you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision.

Sixty days from the date of the decision, the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.

Sincerely,

Myles B. Harmon, Director

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See also:

• Tariff No.: 3907.60.00 - Polyethylene terephthalate in primary forms
• Tariff No.: 3915.90.00 - Waste, parings and scrap, of plastics, nesoi