Applicability of partial duty exemption under HTSUS subheading 9802.00.50 to monochloroacetic acid

HQ 560983 May 22, 1998 CLA-2 RR:CR:SM 560983 MLR CATEGORY: Classification TARIFF NO.: 9802.00.50 Mr. Robert Zweerus Akzo Nobel Chemicals bv Barchman Wuytierslaan 10 P.O. Box 247 3800 AE Amersfoort The Netherlands RE: Applicability of partial duty exemption under HTSUS subheading 9802.00.50 to monochloroacetic acid Dear Mr. Zweerus: This is in reference to your letter of March 26, 1998, forwarded to us from Customs in New York, requesting a ruling concerning the eligibility of monochloroacetic acid (hereinafter "MCA"), for a partial duty exemption under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS). FACTS: It is stated that Akzo Nobel plans to export U.S.-origin acetic acid to Europe where it is made into MCA. In Europe, the acetic acid is combined with chloride, caustic soda, and U.S.-origin acetic acid anhydride to make MCA. It is stated that each ton of MCA will be composed of 625 tons of acetic acid. It is stated that this process does not destroy the chemical structure of acetic acid since it is still readily ascertainable after the MCA is formed, and that acetic acid and MCA are both classifiable under heading 2915, HTSUS. ISSUE: Whether the MCA is eligible for the partial duty exemption under subheading 9802.00.50, HTSUS, when imported into 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. You cite Headquarters Ruling Letter (HRL) 555740 dated May 28, 1991, as support that the processing at issue is an acceptable alteration. In HRL 555740, 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. You also cite HRL 556616 dated June 16, 1992 (herbicide in a water dispersible granule exported abroad for incorporation into water-soluble film constituted an acceptable alteration 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); HRL 557534 dated December 17, 1993 (microencapsulation of U.S.-origin Acetochlor constituted an alteration); and HRL 558021 dated December 15, 1994 (linear alkylbenzene reacted with sulfur trioxide to produce linear alkylbenzene sulfonic acid was not entitled to subheading 9802.00.50, HTSUS, treatment, because the processes abroad significantly changed the chemical and physical properties). With regard to the facts presented, our Office of Laboratory and Scientific Services indicates that in producing monochloroacetic acid from acetic acid a chlorination process is used to introduce a chlorine atom into the chemical structure of the acetic acid. According to the lab, all chlorination processes cause a chemical reaction to occur to one or more of the starting materials (in this case acetic acid). We consider, with few exceptions, processing which effects a chemical reaction to have caused a substantial transformation. According to the lab, this is even more evident in chlorination reaction processes, as chlorine is highly corrosive and poisonous. Furthermore, the chemical structures of acetic and MCA are significantly different, and the addition of a highly electronegative chlorine atom on one end of the acetic acid molecule totally alters the chemical characteristics of the product. Additionally, acetic acid has a number of different uses including as a food preservative and flavoring agent, whereas MCA may not be used in food products, but may be used in chemical production processes and as an herbicide and bacteriostat. Therefore, as a result of the different chemical properties, their uses not only differ, but when used in chemical production processes, they produce different end products. Based upon the different chemical properties and end uses of the two products, we would consider acetic acid and MCA to be two different articles of commerce, and accordingly, it is our opinion that the processing in Europe is not a mere alteration within the meaning of subheading 9802.00.50, HTSUS. You also claim that acetic acid and MCA share the same four digit classification under the HTSUS. While this is cited as added support that an acceptable alteration has occurred, the classification of chemicals within the same heading under the HTSUS does not necessarily mean that no chemical reaction occurs. Furthermore, even assuming that the classification within the same heading is indicative that no substantial transformation occured, this does not translate into the fact that an acceptable alteration has occurred within the meaning of subheading 9802.00.50, HTSUS. HOLDING: On the basis of the information submitted, we find that MCA is not entitled to subheading 9802.00.50, HTSUS, treatment, as the processes in Europe change the acetic acid into a new and different article of commerce. 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