OT:RR:CTF:VS H219208 KSG
Port Director
Customs and Border Protection
101 E. Main Street
Norfolk, Virginia 23510
Re: Protest No. 1401-12-100267; subheading 9801.00.10; shredded polypropylene
Dear Director:
This is in response to your referral of an Application for Further Review of Protest No. 1401-12-100267 filed by counsel on behalf of Printpack Inc. regarding imported shredded polypropylene. At the request of counsel, a telephone conference was held on August 16, 2012.
FACTS:
This case involves U.S.-origin plastic sheet composed of polypropylene (poly) and ethyl vinyl alcohol copolymer (EVOH) sent to China in rolls. In China, the plastic sheet was formed into food packaging (plastic cups). The leftover plastic sheet was fed into a grinder and shredded in China into smaller irregular pieces measuring up to one-eighth of an inch square for ease of transport back to the U.S. The shredded poly was shipped back to the U.S. and entered between October 31, 2011 and January 10, 2012, for recycling and use in manufacturing operations. At the time of entry, the shredded poly was classified in subheading 3915.10.00 of the Harmonized Tariff Schedule of the United States (“HTSUS”). CBP issued a Request for Information noting that recent exams by a CBP laboratory on a similar entry indicated that the good was composed of a single thermoplastic. On March 1, 2012, CBP issued a Notice of Action reclassifying the imported poly in subheading 3902.10.00, HTSUS. The Protestant argues that the poly is “waste, pairings and scrap of plastic” and properly classified in either subheading 9801.00.10, HTSUS, or as entered in heading 3915, HTSUS. In an e-mail received on October 4, 2012, counsel confirmed that the shredding operation does not add any commercial value to the material. The ground plastic material generated from the shredding operation is scrap which is used by the company in its production in the U.S. to produce plastic sheet.
ISSUE:
Whether the imported shredded poly is eligible for duty-free treatment under subheading 9801.00.10, HTSUS.
LAW AND ANALYSIS:
Subheading 9801.00.10, HTSUS, provides that products of the United States when returned after having been exported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad may be entered duty free provided the documentary requirements of 19 CFR 10.1 are satisfied.
In Burgess Battery v. United States, 13 Cust. Ct. 37, C.D. 866 (1944), the United States Customs Court held that certain zinc scrap that was the result of foreign processing of U.S.-origin zinc strip was eligible for duty-free treatment under paragraph 1615(a) of the Customs Act of 1930 (predecessor to subheading 9801.00.10, HTSUS). Burgess Battery involved residue scrap from the foreign manufacture of battery cups. The court reasoned that zinc was exported and zinc returned; that although it was changed in condition from zinc sheets to zinc scrap, the value was decreased and the condition was “…so deteriorated that the article was rendered useless except for remanufacture .”
In Shell Oil Company of Canada, Limited v. U.S., 27 CCPA 94 (1939), the court of Customs and Patent Appeals ruled that U.S.-origin crude petroleum exported to Canada to undergo a cracking process was not eligible as U.S. goods returned under paragraph 1615 of the Tariff Act of 1930 as it was a new and different article resulting from a manufacturing process that occurred in Canada.
Further, Burgess Battery examined Treasury Decision (“T.D.”) 24012, October 14, 1902, where U.S.-origin photographic film was exposed in Canada. Customs stated that the phrase “improved in condition” in the context of American goods returned, must be taken in a commercial sense. The view of the amateur photographer that exposed film is of greater value is a “sentimental estimate of its value.” Customs held that the photographic film was not advanced in value or improved in condition and therefore, eligible for duty-free treatment. In T.D. 26865, November 21, 1905, Customs held that U.S.-origin hoop steel exported to Canada to be used as fence locks, kept separate from non-U.S. origin scrap and returned to the U.S. as scrap was not advanced in value or improved in condition, but rather depreciated by the process of manufacture.
In this case, what is returned to the U.S. is by-product, which is shredded and made smaller to facilitate transport to the U.S. Although the sheet undergoes an additional step abroad, we find it is the same plastic sheet that was exported from the U.S. although smaller in size. Counsel stated that the shredding operation does not add any commercial value to the material and is then used in production in the U.S. There has been no showing that the U.S.-origin good was improved in condition abroad in a commercial sense. In contrast, in Shell Oil, the U.S.-origin good was clearly improved in condition as a result of processing in a foreign country.
Accordingly, we conclude that shredding scrap poly does not result in a good advanced in value or improved in condition. Since the foreign processing of the U.S. good does not create a good advanced in value or improved in condition, the imported shredded poly is eligible for duty-free treatment under subheading 9801.00.10, HTSUS, assuming the documentary standards set forth in 19 CFR 10.1 are met.
The other issue raised by counsel is whether the shredded poly should be classified in heading 3915, HTSUS, which provides: “Waste, parings and scrap, of plastics.” The Explanatory Note for heading 3915 states that the heading does not apply to waste, parings and scrap of a single thermoplastic material, transformed into primary forms (headings 39.01 to 39.14). The Customs laboratory report states that the shredded plastic is composed of “polypropylene…a single thermoplastic in primary form.” Chapter 39, Note 6, HTSUS, provides defines “primary forms” as “(a) liquids and pastes, including dispersions (emulsions and suspensions) and solutions; (b) blocks of irregular shape, lumps, powders (including molding powders), granules, flakes and similar bulk forms.” The imported shredded scrap is shredded into small irregular pieces measuring up to 1/8 inch square, which would be considered a primary form. Therefore, the imported shredded poly would not be classified in heading 3915, HTSUS.
The protest should be granted.
HOLDING:
The shredded poly is eligible for duty-free treatment under subheading 9801.00.10, HTSUS, upon the satisfaction of the documentary requirements set forth in 19 CFR 10.1. The good was properly classified in subheading 3902.10.00, HTSUS. The protest should be granted.
In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), 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 in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the
decision Regulations and Rulings of the Office of International Trade will make the decision available to CBP personnel, and to the public on the CBP 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
Commercial & Trade Facilitation Division