CLA-2 RR:TC:SM 559936 BLS
Port Director
P.O. Box 2748
Mobile, Alabama 36652-2748
RE: Eligibility of diuron products for duty-free treatment under
the GSP; double substantial transformation; IA 11/96
Dear Madame:
This is in reference your letter dated March 14, 1996,
forwarding a request for internal advice (IA 11/96) submitted on
behalf of IDA, Inc. ("IDA") and Drexel Chemical Company
("Drexel"), concerning the eligibility of certain diuron products
from Malaysia for duty-free treatment under the Generalized
System of Preferences (GSP) upon importation into the U.S. We
have also received a supplemental submission from counsel, dated
December 20, 1996.
FACTS:
IDA and Drexel are importers of Industrial Grade Diuron,
Technical Grade Diuron and Diuron 80 WP (wettable grade),
products whose primary use has been as herbicides for
agricultural and industrial applications where selective control
of undesirable plant growth is desired. Certain chemicals of
non-Malaysian origin are shipped to Malaysia where the following
processing is performed.
Diuron Cake
The first stage of production involves the manufacture of
diuron cake by Polytensides Sdn Berhad ("Polytensides"). During
this process, solid 3,4 dichlorophenyl isocyanate ("DCPI") is
liquefied by the application of heat. It is then pumped into
reactors in specified amounts with a 60% solution of aqueous
anhydrous dimethylamine ("DMA") and toluene. Both DCPI and DMA
are of non-Malaysian origin. The constituents are blended for
approximately 15 minutes. After the blending, the manufacturer
allows an exothermic reaction to run unhindered for
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approximately another 15 minutes. Following that reaction, the
mixture is cooled for approximately 120 minutes, with the aid of
water circulating around the outside of the reactor and through a
heat exchange unit.
The remaining required quantities of DMA and DCPI are then
added to the reactor, followed by approximately 15 minutes of
mixing. The manufacturer again permits an exothermic reaction to
run unhindered for another 15 minutes. The end result of these
reactions is a mixture of water, toluene, DMA, amorphous diuron
and minor impurities.
The constituents of this mixture are then separated by a
process called azeotropic distillation, forming pure amorphous
diuron at the end of the process. The distillation process
removes DMA, then water, then toluene. The crude amorphous
diuron remaining at this point still has a trace of toluene that
is difficult to remove, but here is removed by using a vacuum and
a higher temperature.
After azeotropic removal of DMA and water and the
distillation of toluene, the temperature of the remaining
constituents is about 125 degrees centigrade and a vacuum is
applied to the crude amorphous diuron. The toluene and any other
remaining volatile hydrocarbons are removed at this step and the
amorphous diuron melts to a liquid diuron. The vacuum and
heating are continued for about 30 minutes to ensure all
aromatics have been removed. During the increase of temperature
the amorphous crude diuron is changed into a molten diuron
liquid.
The molten crude diuron is heated to about 155 degrees
centigrade at full vacuum for 30 minutes. The vacuum is slowly
released while holding the temperature at 150-155 degrees
centigrade. Stainless steel trays are placed below the reactor
where one set of trays will hold one reactor of crude molten
diuron. The molten material is run into stainless steel trays
that are arranged so that the liquid fills each tray. After
filling, the trays are allowed to cool by forced air circulation.
The diuron is crystallized into diuron cakes that are safe to
handle and have no irritating odor, unlike the DCPI. The cooling
process takes about 8 hours to complete. Once cooled, the
product is diuron cake, which has a solid crystalline structure.
The importer states that this product consists of diuron in its
purest form, and can be used to make pesticide, a growth
inhibitor for paint, or can be used as a stabilizer in the
industrial diuron production of plastic resins.
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When cooled to ambient temperature, the wheeled trays are
moved to the storage area and the larger diuron cakes are broken
into smaller pieces and stored in open-top drums until further
production is required. From start to finish, the diuron cake
production process takes approximately 8 hours.
Industrial Diuron
The diuron cake is then moved to the separate facility of
Ancom Berhad ("Ancom"), where it will be formulated into specific
products, including herbicides such as Diuron Technical and
Diuron 80 WP as well as paint additives or plastic stabilizers.
These products require different formulating techniques.
Counsel states that in order to formulate Diuron Technical
and Diuron 80 WP, the pure diuron cake must be changed into a
product which has smooth flowable characteristics, and which
disperses well and adheres to plant surfaces in an effective
manner. This is achieved by a process which combines and coats
the diuron with specially purified silicas and clays so that the
solid crystalline chunks will be changed to flowable particles in
the 10 to 20 micron size range.
The process begins by breaking the diuron cake into pieces
of from 6 to 12 inches by 2 inches thick. The diuron cake pieces
are placed in a crusher blender that reduces the size from 6 to
12 inches to about 200 micron size. This process takes
approximately 60 minutes. The crude diuron is then placed in
open-top drums for storage before being processed into further
industrial grades of diuron for further manufacturing into usable
products.
Next, the 200 micron crystalline diuron is ground into an
industrial grade of about 120 micron size by using a mixture of
silica and clay with the diuron particles. The silica is a
specially purified silica of from 2 to 4 microns size, and the
clay of approximately 5 micron size.
Counsel states that the role of the silica and clay is
critical, since the diuron alone will not remain in the powder
state, but will agglomerate into larger pieces which are unusable
for the purposes desired by IDA/Drexel. The importer explains
that the adherence of the clay and silicon is accomplished
through the vehicle of Van der Waal forces, which are forces of
attraction occurring between atoms and molecules. While much
weaker than chemical bonds, the importer states that these are
the forces
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holding molecules together in molecular crystals. This
attraction is further enhanced by electrostatic charges built up
during the grinding and blending process. This is an ongoing
process during the various grinding and blending steps, with the
free silicon adhering to new uncoated diuron surfaces created in
the particle size reduction and processing. If silicon was not
added, the diuron crystals would stick together by
electrostatic forces and in the agglomerated form would be
unusable as a herbicide.
The crushed crystalline diuron is next placed in a ribbon
blender with 0.5% silica and 0.5% clay of the magnesium-aluminum-silicate type and blended for approximately 15 minutes to reduce
the diuron into smaller pieces and to coat those pieces with
silica until all the surface areas are treated.
The free-flowing industrial diuron is stored in open-top
drums for further manufacturing into usable pesticide
formulations. IDA/Drexel states that all diuron products to this
point cannot be used as agricultural products and are not sold as
such. However, the inquirer points out that industrial diuron
has been used in a number of non-agricultural applications
including use as a paint additive and as a plastic stabilizer.
Diuron Technical
Industrial Grade Diuron is then subject to further
processing with silica and clay to produce Diuron Technical. The
Industrial Diuron is placed in a ribbon blender and both silica
and clay are added. The importer states that about 1.0% silica
and 0.5% clay are added to adjust the finished concentration to
96-97% diuron. (It is noted in this regard that this statement
appears to conflict somewhat with the supporting material, which
describes Diuron Technical as containing a minimum of 97%
diuron.) The mixture is well blended in the ribbon blender and
then fed into the pin mill hopper. The Industrial Diuron is
taken to a pin mill that also has a classifer attached. The
blended diuron fed into the pin mill is ground to about 10 micron
size using an air classifer to separate and regrind the diuron.
The blending in the ribbon mill, then the pin mill is the most
lengthy in the entire manufacturing process, with the ribbon
blender taking approximately 6.5 hours.
The resulting product is Diuron Technical, a free flowing
diuron powder, ready to grind further for reformulation into a
Diuron 80 WP form or a liquid, flowable form. The Diuron
Technical product is now suitable for agricultural use if
combined with a surfactant and dispersant. This final step is
done either by Ancom, in the case where it sells IDA and Drexel
80 WP, or by Ida and Drexel, where Ancom exports Diuron
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Technical.
Diuron 80 WP
The manufacture of Diuron 80 WP mirrors the production of
Diuron Technical, except that, in addition to adding silica and
clay in the ribbon blender/pin mill phase of the operation, Ancom
also adds a surfactant and dispersant to arrive at the 80%
concentration of pure diuron. The importer advises that while a
number of surfactants would be suitable for use with diuron, the
one used in this case is monylphenolethoxylate. The dispersing
agent used by Ancom is usually either alkylnapthalenosulflonate
or ligninsulfonate. The production of Diuron 80 WP is
approximately 1.5 hours longer than the process for Diuron
Technical.
Counsel states that both the dispersant and the surfactant
are critical to the product's ultimate use as a pesticide. The
addition of the surfactant ensures that the diuron will adhere to
and remain on the surface of the weed or plant which is the
target of the pesticide. The dispersant ensures that when the
diuron is placed in suspension by the farmer or person using the
pesticide that it remains in suspension over a reasonable period
of time.
It is argued that as a result of the described operations
the chemicals imported into Malaysia are substantially
transformed into diuron cake which is an intermediate article of
commerce and which is itself substantially transformed into new
and commercially distinct products by subsequent manufacturing
operations which change its name, character and use. Therefore,
counsel contends that the chemicals imported into Malaysia are
subjected to a double substantial transformation and the cost or
value of such materials may be counted in determining the 35
percent value-content requirement under the GSP.
ISSUE:
Whether the chemicals imported into Malaysia (DCPI and DMA)
undergo a double substantial transformation so as to permit the
cost or value of these chemicals to be used in calculating the 35
percent value-content requirement under the GSP.
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LAW AND ANALYSIS:
Under the GSP, eligible products of a designated beneficiary
developing country (BDC) which are imported directly into the
U.S. qualify for duty-free treatment if the sum of the cost or
value of the materials produced in the BDC plus the direct costs
involved in processing the eligible article in the BDC is at
least 35% of the article's appraised value at the time of its
entry into the U.S. See 19 U.S.C. 2463.
The cost or value of materials which are imported into the
BDC to be used in the production of the article, as here, may be
included in the 35% value-content computation only if the
imported materials undergo a double substantial transformation in
the BDC. That is, the non-Malaysian chemicals must be
substantially transformed in Malaysia into a new and different
intermediate article of commerce, which is then used in the
production of the final imported article. See 19 CFR
10.177(a).
The test for determining whether a substantial
transformation has occurred is whether an article emerges from a
process with a new name, character or use, different from that
possessed by the article prior to processing. See Texas
Instruments Inc. v. United States, 69 CCPA 152, 681 F.2d 778
(1982). This determination must be based on the totality of the
evidence. See National Hand Tool Corp. v. United States, Slip
Op. 92- 61 (April 27, 1992), aff'd, 989 F.2d 1201 (1993).
In determining whether a substantial transformation occurs
in the manufacture of products from chemicals, Customs has
consistently examined whether a chemical reaction occurs when two
chemicals are mixed in the production of the final article. See
Headquarters Ruling Letters (HRLs) 555248 dated April 9, 1990;
556064 dated March 29, 1990; 555403 dated June 6, 1990; and
055652 dated May 18, 1979. When chemical compounds are mixed
together to form a different substance and the individual
properties of each ingredient are no longer discernable, they
have undergone a substantial transformation. See HRL 555989 dated
June 24, 1991, in which we held that raw materials used to
produce three varieties of antioxidants undergo a double
substantial transformation in the Bahamas.
We are of the opinion that the production of the diuron cake
from the chemicals imported into Malaysia results in a
substantial transformation of the
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imported materials into a "product of" Malaysia. These chemicals
are transformed into a new product with unique chemical
properties and a commercial identity distinct from its
constituent chemical compounds. The question which we must now
address is whether the diuron cake is an intermediate article of
commerce which itself is substantially transformed into the final
products, Diuron Technical and Diuron 80 WP. In this regard,
and as noted above, the steps required to complete the production
of Diuron Technical and Diuron 80 WP from the diuron cake do not
involve any additional chemical reactions.
Counsel argues that the diuron cake is an intermediate
article of commerce, which can be bought and sold at any time,
and is sold to a related party, to be formulated into the final
product. In this regard, counsel states that at this stage the
diuron cake can also be formulated into a paint additive or a
plastic stabilizer, as well as a pesticide. In support of a
double substantial transformation, counsel
cites the case of Torrington Co. v. United States, 764 F.2d 1563,
1568 (Fed. Cir. 1985). Torrington held that a double substantial
transformation occurred abroad when wire was transformed into
swaged needle blanks, which were then transformed into sewing
needles. The court in Torrington found that the swaged needle
blanks were "producer's goods" different than the finished
consumer's goods, needles, and held that such goods were
intermediate articles of commerce.
Counsel urges that the ruling in Torrington is directly
applicable to the facts at issue, in that the diuron cake is a
"producer's good" which is an identifiable article which can be
bought and sold at any time. Thus, he points out that the diuron
cake is sold to a related party, who processes it into the
finished product, a consumer's good which, he states, is a new
and different article from the diuron cake from which the
finished good was made.
We have limited Torrington to the specific factual situation
found therein--the dual substantial transformation of sewing
needles. See T.D. 86-7, dated December
20, 1985, 20 Cust. Bull. 7 (1986). Therefore, we do not
recognize Torrington as precedent for this case. However, even
if we were to consider Torrington, it is factually
distinguishable from the present case, since we do not consider
the manufacture of pesticides in the instant case to be analogous
to the manufacture of sewing needles.
We believe that the court's decision in National Juice
Products v. United States,
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628 F. Supp. 978, 10 CIT 48 (CIT 1986), a country of origin
marking case, provides guidance for determining whether a second
substantial transformation results from the additional processing
of the diuron cake. In National Juice, the court determined
that imported frozen concentrated orange juice was not
substantially transformed in the U.S. when it was domestically
processed into retail orange juice products. In that case,
manufacturing concentrate produced abroad was shipped to the
U.S., where it was blended with other ingredients (primarily
water) to create an end product of either frozen concentrated
orange juice or reconstituted orange juice. This process
involved mixing the manufacturing concentrate with purified and
de-chlorinated water, orange essences, orange oil, and, in some
instances, fresh juice.
In National Juice, the court addressed each of the factors
-- name, character and use -- in finding that no substantial
transformation occurred in the production of retail orange juice
products from manufacturing concentrate. The court found that
the change in name from "concentrated orange juice for
manufacturing" to "frozen concentrated orange juice" and "orange
juice from concentrate" was not significant to a finding of a
substantial transformation. Instead, the court stated that these
names "merely refer to the same product, orange juice, at
different stages of production." Id. at 989.
The court agreed with Customs that the imported
manufacturing concentrate "imparts the essential character to the
juice and makes it orange juice. . . [and thus], ..., the
imported product is the very essence of the retail product." The
court found that the retail product in this case was essentially
the juice concentrate derived in substantial part from foreign
grown, harvested, and processed oranges. Although the addition
of the water, orange essences, and oils to the orange juice
concentrate made it suitable for retail sale, according to the
court, this did not change the fundamental character or use of
the product, as it was still essentially the product of the juice
of oranges.
In Azteca Milling Co. v. United States, 703 F. Supp. 949
(CIT 1988), aff'd, 890 F.2d 1150 (Fed. Cir. 1989), corn grown in
the U.S. was sent to Mexico where it was removed from the cob,
cleaned, and then cooked with lime, to produce "nixtamal."
Nixtamal was then steeped and washed, resulting in a product
identified as "masa." The masa was then ground and flash dried,
and after cooling, was sifted into flour. In that case, the
court found the nixtamal, masa, and tamale flour remained clearly
recognizable as processed corn, and that a dual substantial
transformation had not
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occurred since none of the intermediate products lost the
essential identifying characteristics of corn. See also Zuniga
a/c Refractarios Monterrey, S.A. v. United States, Slip Op. 92-89
(CIT June 12, 1992), where the court held that the production of
kiln furniture in Mexico from several dry ingredients of U.S.
origin through a multiple step processing operation did not
constitute a double substantial transformation, since none of the
products resulting from those steps, i.e., castables, casting
slip, or greenware, was considered a new and different
intermediate article of commerce which lost the "identifying
characteristics" of its constituent components.
In HRL 734558 dated July 22, 1992, also involving the mixing
of various substances, Customs addressed the manipulation of a
herbicide and found that there was no substantial transformation
when the herbicide, exported in bulk to France, was encapsulated
into a water-soluble film. In that case, Customs pointed out
that the operation did not change the chemical composition of
the herbicide but only facilitated its use. See also HRL 555064
dated March 29, 1990, where Customs determined that the
formulation of propanil-4, a herbicide for rice, from technical
propanil did not constitute a substantial transformation for
purposes of the Caribbean Basin Economic Recovery Act (CBERA).
This decision was based on T.D. 78- 168, 12 Cust. Bull. 353
(1978), which held that the formulation of the herbicide diuron
wettable powder by mixing technical diuron with various agents
was not a substantial transformation for purposes of the GSP.
The findings in these cases are also consistent with the court's
reasoning in National Juice, supra, since in both cases the
processing did not change the fundamental character of the
imported product.
The principles reflected in the cited cases are also well
defined in a number of Customs decisions which hold that the mere
refining or purification of a crude substance does not result in
a substantial transformation of the substance into a new and
different article of commerce with a new name, character or use.
In HRL 556143 dated March 2, 1992, Customs held that for purposes
of the 35% value-content requirement under the CBERA,
purification of Crude Octamine (85-87 percent purity) into
Octamine R (97 percent purity) did not result in a substantial
transformation. In that case, the claimed intermediate product,
Crude Octamine, was sold as a low grade aviation lubricant, while
the imported product was sold as a high-grade aviation lubricant.
While the crude product in that case was clearly an article of
commerce, Customs found that Octamine R had the same chemical
structure as Crude Octamine, and that the removal of impurities
and ultimate refinement was not sufficient to change the
essential character of the low-grade
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lubricant. See also Coastal States Marketing, Inc. v. United
States, 10 CIT 613, 646 F. Supp. 255 (1986), aff'd 818 F.2d 860
(Fed. Cir. 1987), where the court held that the process of
blending Russian No. 2 gas oil with Italian No. 5 fuel oil in
Italy did not substantially transform the Russian oil into a
product of Italy. The court stated that the blended product was
not a new and different article, but simply variant grades of the
same product identified as fuel oil, with the resulting blend
also identified as fuel oil.
In another case involving the refinement of a crude
substance, HRL 554644 dated October 29, 1987, we held that the
processing of crude linseed oil into a fully refined oil did not
result in a substantial transformation. The refining process in
this case involved the dry caustic neutralization of the fatty
acids which was achieved through heating and mixing the oil with
sodium hydroxide. The fatty acids were dispersed converting the
acids and oil into water and soapy matter. The oil was moved to
centrifugal washers and separators, removing the soaps. After
centrifuging, all of the remaining water was removed from the oil
by vacuum drying. We held in HRL 554644 that:
While it is clear that the processing of the crude
linseed
oil into a refined product results in a purified,
higher
grade oil with less contaminants and odor, the
essential
character is not altered and it does not become a new
and
different article of commerce. The removal of
impurities
and ultimate refinement is not sufficient to effect any
major change in the product."
See also HRL 554637 dated July 13, 1987 (processing of raw sugar
into a refined product results in purified sugar with less
contaminants, which is not a new and different article of
commerce; HRL 082033 dated September 5, 1989 (refining cane sugar
upgrades and purifies the sugar, but it does not change the
essential character of the product); C.S.D. 84-112 dated July 2,
1984 (HRL 724640) (imported honey which was purified by heating
and filtering did not undergo a substantial transformation), and
HRL 555982 dated August 2, 1991 (evaporation of water from orange
juice and subsequent freezing in a CBERA BC does not change the
fundamental character of the imported juice).
In HRL 557830 dated August 19, 1994 (affirmed upon
reconsideration in HRL 558852 dated December 21, 1994), we held
that the distillation of raw ethyl alcohols feedstocks into
hydrous ethyl alcohol and then removal of water by a molecular
sieve
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process to produce anhydrous ethyl alcohol did not result in a
substantial transformation for purposes of the U.S.-Israel Free
Trade Implementation Act ("FTA"), as the final product retained
the essential character of the raw ethyl alcohols feedstocks. In
that case, we noted that both the hydrous ethyl alcohol and
anhydrous ethyl alcohol were considered "ethanol" in the chemical
and commercial sense, and that anhydrous ethyl alcohol had the
same chemical and molecular structure as the material from which
it was made. We stated that the additional processing involving
the removal of the water from the hydrous ethyl alcohol was not
sufficient to effect a substantial change in the chemical
composition or "essence" of the product, as this product still
possessed the identifying characteristics of the material from
which it was derived - raw ethyl alcohols feedstocks. Therefore,
we held that the processing of the raw feedstocks, which included
removing the water from the hydrous ethyl alcohol to produce
anhydrous ethyl alcohol by means of the molecular sieve process,
did not result in a substantial transformation of the raw ethyl
alcohols feedstocks.
While the instant case does not involve the refining or
purification of a crude product, but rather the addition of
silica, clay and other inert ingredients to make the diuron cake
a usable good, in our opinion the underlying issue to be resolved
is essentially the same, i.e., whether the processing of a crude
product which does not involve any chemical reaction results in a
change in name, character and use. In this regard, we note that
the final products continue to be identified as Diuron (i.e.,
Diuron Technical and Diuron 80 WP), and consist of materials of
which diuron constitutes approximately 80 percent (Diuron 80 WP)
and 96-97 percent (Diuron Technical).
We also find that the processing of the diuron cake in this
case is analogous to the operations performed in National Juice,
supra, which involved the blending with other ingredients
(primarily water) of manufacturing concentrate to create an end
product of either frozen concentrated orange juice or
reconstituted orange juice.
In that case, as noted, the court found that the retail product
was essentially the juice concentrate, and that although the
addition of the water, orange essences, etc., made it suitable
for retail sale, the fundamental character of the product
remained unchanged.
Counsel also relies on other authorities, including Koru
North America v. United States, 12 CIT 1120, 701 F. Supp. 229
(1988), a country of origin marking case, in
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support of a second substantial transformation. Counsel argues
that Koru, and not
National Juice, is analogous to the facts in the instant case.
In Koru, fish were caught on the high seas near New Zealand
where they were beheaded, detailed, eviscerated and frozen, then
off loaded in New Zealand. The fish were subsequently shipped to
Korea for further processing which consisted of thawing, gutting,
beheading, skinning, boning, trimming, glazing, refreezing and
packaging for exportation to the United States. The court held
that this further processing in Korea effected a substantial
transformation of the fish so that the country of origin of the
fish was Korea. The court reached this holding in view of the
fact that the processing in Korea created a new and different
article - an individually quick frozen fish fillet - from one
having the appearance (largely) of a whole fish. The court found
the fillets to be a separate product which is sold in separate
areas and
markets, and found in this processing changes in the name,
character, and use of the article. Moreover, the court
distinguished National Juice by finding that the changes
resulting from the processing "go to the fundamental nature and
character of the fish..." Id. Such changes included a change in
the shape, marketing and tariff classification of the fish
resulting from the processing.
Counsel believes that a second substantial transformation is
also supported by HRL 733814 dated June 24, 1991, in which
Customs relied on Koru in finding that the processing of green
coffee beans into instant coffee resulted in a product with a new
character and use. Counsel also cites in support of a
substantial transformation HRL 554308 dated November 24, 1986,
clarified by HRL 543895 dated April 20, 1987, where Customs found
a single substantial transformation where naproxen and naproxen
sodium were each mixed with certain materials and water and
tableted to a prescription drug dosage of the products Naprosyn
and Anaprox; HRL 556235 dated December 24, 1991, where we found
that a substantial transformation occurred when sugar syrup was
combined and processed with corn syrup to produce hard candy;
C.S.D. 85-12, involving the vulcanization of inner tubes; and
United States v. International Paint Co., 35 CCPA 87, C.A.D. 376
(1948), where the court found a substantial transformation based
on the different uses of a paint to which the blending of an
additive (varnish) and removal of impurities made it suitable for
use in marine applications.
In our opinion, the cited cases do not support the finding
of a second substantial transformation in the instant case. In
Koru, the evisceration of a fully formed fish
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into a filleted fish resulted in a fundamental change to the
essential character of the
final product, a change in our opinion that is not present in the
instant case. A similar finding was made in HRL 556235, as the
hard candy is clearly a different
product from the ingredients from which it was made, and also in
HRL 733814, a country of origin marking case which involved the
transformation of green coffee beans to instant coffee. (It is
further noted that unlike the diuron cake which itself was the
result of extensive processing, the fish in Koru and the coffee
beans in HRL 733814 were raw products which had undergone no
processing until the operations occurred which resulted in their
conversion to the final product.) International Paint involved a
claim for drawback, and as a result, Customs is not bound by the
decision in that case. C.S.D. 85-12 concerned a product (rubber
tires) and operations totally distinct from the processing
involved in the instant case, and as a result, we do not find
this case to be in point. Finally, we do not find HRL 554308 to
be applicable since, as distinguished from the present situation,
we found that each of the completed products had a new name,
character and use distinct from the chemicals from which they
were made.
In summary, based on the principles set forth in National
Juice, and supported by HRL 557830 and other Customs decisions
involving the refinement and purification of various products, we
find that the fundamental character and use of the diuron cake is
unchanged by the subsequent processing performed in Malaysia,
which results in the imported products Diuron Technical and
Diuron 80 WP. Accordingly, we find that only one substantial
transformation takes place in Malaysia, and that the cost or
value of the materials imported into Malaysia cannot be included
in calculating the 35% value-content requirement under the GSP.
HOLDING:
The production of Diuron Technical and Diuron 80 WP in
Malaysia constitutes a single substantial transformation. As a
result, while the imported products are considered products of
Malaysia for purposes of the GSP, the cost or value of the
materials imported into Malaysia for purposes of producing Diuron
Technical and Diuron 80 WP cannot be included in determining the
35% value-content requirement under the GSP.
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This decision should be mailed by your office to the
internal advice requestor no later than 60 days from the date of
this letter. On that date the Office of Regulations and Rulings
will take steps to make the decision available to Customs
personnel via the Customs Ruling Module in ACS and the public via
the Diskette Subscription Service, Lexis, Freedom of Information
Act and other public access channels.
Sincerely,
John Durant,
Director
Tariff
Classification Appeals Division