Applicability of partial duty exemption under HTSUS subheading 9802.00.50 to chemical plant growth regulator indole butyric acid;

HQ 558833 February 10, 1995 CLA-2 CO:R:C:S 558833 MLR CATEGORY: Classification TARIFF NO.: 9802.00.50 Mr. Joel Kroin Hortus USA Corp. P.O. Box 1956 Old Chelsea Sta. New York, NY 10113-1956 RE: Applicability of partial duty exemption under HTSUS subheading 9802.00.50 to chemical plant growth regulator indole butyric acid; Dear Mr. Kroin: This is in reference to your letter of October 4, 1994, requesting a ruling concerning the eligibility of the chemical plant growth regulator, indole butyric acid (IBA), for a partial duty exemption under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS). FACTS: You state that IBA is used in agriculture and horticulture by plant growers to propagate new plants from cuttings taken from mother plants. Many users use IBA in the technical grade form, as it is produced and before exportation to Holland. In Holland, the IBA will be finely ground, blended with talc, and tested to assure uniform blending. You state that this makes the product easier for the user to apply to the plant cuttings. ISSUE: Whether the grinding and blending processes performed on the IBA in Holland, 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'g 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. See 59 Fed. Reg. 25563 (May 17, 1994) for recent amendments to 19 CFR 10.8. We have held in Headquarters Ruling Letter (HRL) 555740 dated May 28, 1991, that formulation and granulation operations performed on a herbicide in France to eliminate the product's powdery consistency which made the chemical difficult to use, constituted an acceptable alteration within the meaning of subheading 9802.00.50, HTSUS. We found that the product in its condition upon exportation was complete for its intended use as a herbicide, and, in fact, could have been marketed within the agricultural industry in that condition. Furthermore, the formulation process abroad did not alter the chemical composition or identity of the herbicide, nor did it significantly change the quality or character of the product inasmuch as the herbicide retained its weed killing properties. See also HRL 556320 dated February 3, 1992, (holding that formulation and granulation operations performed on U.S.-origin herbicide in France constituted an acceptable alteration within the meaning of subheading 9802.00.50, HTSUS), and HRL 085216 dated October 27, 1989, (where the sifting, magnetic removal of tramp iron, and repackaging of U.S. raw and refined sugar in Canada, constituted an alteration under this subheading). In HRL 556616 dated June 16, 1992, a herbicide in a water dispersible granule 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 9802.0050, 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. With regard to the facts presented and consistent with the cases above, we are of the opinion that the grinding and blending processes which make the IBA easier to use constitute an acceptable alteration within the meaning of subheading 9802.00.50, HTSUS. As in HRL 555740, before and after the grinding and blending operations, the IBA is used interchangeably. HOLDING: On the basis of the information submitted, we find that the grinding and blending processes which make the IBA easier to use constitute an alteration within the meaning of subheading 9802.00.50, HTSUS. Therefore, the IBA is entitled to classification under this tariff provision with duty to be assessed only on the cost or value of the operations performed in Holland, 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 the goods are 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 Commercial Rulings Division