CON-9-04 RR:CR:DR 228056 CB

Brian F. Walsh, Esq.
Barnes Richardson & Colburn
200 E. Randolph Drive
Suite 7920
Chicago, IL 60601-7796

RE: Temporary Importation Under Bond; Subheading 9813.00.05, HTSUS; 19 C.F.R. §181.58(b)(5);

Dear Mr. Walsh:

This is in reply to your letter of June 9, 1998 on behalf of your client, Dow AgroSciences Canada Inc. (“DAS Canada”), requesting a ruling relative to the applicability of 19 C.F.R. §181.53(b) to the facts set forth in your letter.

We note that you have requested confidential treatment, pursuant to 19 C.F.R. §177.2(b)(7), of Exhibits B and C which contain product specifications. Please be advised that we have reviewed the submission and concluded that the submission contains proprietary business information. Your request for confidential treatment of Exhibits B and C is hereby GRANTED.


DAS Canada manufactures and markets agricultural and specialty products including weed management products, plant disease management products, and noncrop pest management products. DAS Canada purchases MCPA that originates in The Netherlands. You state that MCPA is a herbicide active ingredient identified by the specifications listed in an attachment you have provided. DAS Canada imports the MCPA from The Netherlands into Canada on a duty-free basis.

Your letter states that since approximately January 1, 1996, DAS Canada has exported MCPA from Canada into the United States under the temporary importation under bond (“TIB”) provisions using subheadings 2918.90.2015 and 9813.00.0540, Harmonized Tariff Schedule of the United States (“HTSUS”). The MCPA is delivered to a service contractor located in the United States where the material is formulated into MCPA-2EHE which is an ester from of MCPA produced by mixing measured amounts of MCPA and 2-ethylhexanol in the presence of a catalyst resulting in an esterification reaction. You state that the esterification process assists the herbicide to operate more effectively. Plants absorb MCPA in its ester form more quickly. Upon completion of that reaction, the MCPA-2EHE is cooled, filtered, loaded onto tank trucks or railcars and returned to Canada.


Is the processing of the MCPA an alteration within the meaning of 19 CFR §181.53(b)?


Articles to be repaired, altered or processed (including processes which result in articles manufactured or produced in the United States) may be entered under subheading 9813.00.05, HTSUS, temporarily free of duty, under bond for their exportation within one year from the date of importation unless an extension for one or more additional periods, which when added to the initial period does not exceed three years, is granted by the district director.

U.S. Note 1(c), Chapter 98, Subchapter XIII, HTSUS (as amended by Presidential Proclamation 6780 of March 23, 1995 (published in the Federal Register on March 27, 1995 (60 FR 15845, 15853))), provides:

For purposes of this subchapter, if an article imported into the United States under heading 9813.00.05 is withdrawn for exportation to the territory of Canada or of Mexico, the duty assessed shall be waived or reduced in an amount that does not exceed the lesser of the total amount of duty payable on the article that would have been payable on importation under chapters 1 through 97, inclusive of the Harmonized Tariff Schedule of the United States or the total amount of customs duties paid to Canada or Mexico on the exported article, unless such article is covered by section 203(a)(1) through 203(a)(8), inclusive, of the NAFTA Implementation Act. The amount of duties or refunds calculated on such articles pursuant to this note shall be adjusted to take into account any subsequent claim for preferential tariff treatment made to another NAFTA country. This note shall apply to shipment to Canada on or after January 1, 1996, and to Mexico on or after January 1, 2001.

Pursuant to 19 C.F.R. §181.53(b)(5), promulgated by Treasury Decision (T.D.) 96-14, except in the case of a good imported from Canada or Mexico for repair or alteration, where a good was imported under a TIB for repair, alteration or processing and is subsequently exported to Canada or Mexico, duty shall be assessed on the good on the basis of its condition at the time of its importation into the United States. The Customs Service has followed the definition of alteration, set forth in 19 C.F.R. §181.64(a), for purposes of applying §181.53(b)(5). See Headquarters Ruling (HQ) 226904, dated May 29, 1996, and HQ 226858, dated July 12, 1996. Specifically, section 181.64(a) states that “. . . ‘repairs or alterations’ means restoration, addition, renovation, redyeing, cleaning, resterilizing, or other treatment which does not destroy the essential characteristics of, or create a new or commercially different good from, the good exported from the United States.” 19 C.F.R. §181.64(a).

It is your position that the reaction of 2EHE with MCPA in the United States alters the MCPA, but does not create a product which was new or commercially different from the MCPA. Therefore, the process of “adding the 2EHE” in the United States should be confirmed as being within the except clause in 19 C.F.R. §181.53(b)(5).

We forwarded your submission to the Office of Laboratories and Scientific Services (the “Lab”) for a technical review of the production process and to provide this office with its comments. The Lab informs us that “. . . the production of MCPA-2EHE from MCPA involves an organic synthetic chemical reaction process performed under tightly controlled conditions in a fairly complex organic synthetic process environment.” The “. . . esterification process, although a ‘simple chemical reaction’ is a major organic synthetic manufacturing process. . .” which produces a new chemical compound. The new compound has a different chemical structure and name, different physical form (MCPA is found in flake form; MCPA-2EHE is an oily liquid), and different physical properties, i.e., boiling (melting) point, pH (acidity) and specific gravity.

Additionally, we have also reviewed the applicable case law. In E. Dillingham, Inc. v. United States, 29 Cust. Ct. 16 (1952), four metal discs were imported into the United States to be processed by having the edges bent to form flanges and to be pressed and spun to dish-like shapes. The plaintiff claimed that the processes were alterations or changes in condition which did not result in articles manufactured or produced in the United States within the meaning of the TIB law. The Customs Court held that the metal discs were not entitled to free entry, under bond, because the processing of the discs was not in the nature of repairs or alterations of finished products but an additional and vital step in their manufacture. In Guardian Industries Corporation v. United States, 3 C.I.T. 9 (1982), glass sheets were produced in annealed from in the United States and then sent to Canada for a heat treatment known as tempering, The glass was then re-imported into the U.S. as articles returned to the U.S. after having been exported for repairs or alterations. The plaintiff contended that the tempering operation was an alteration. The court concluded that the tempering process transformed the glass in name, use, performance characteristics and tariff classification and, thus, it was not an alteration. In reaching this decision, the court relied on A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1957), which held that a process which creates a new article of commerce is not an alteration. In Burstrom, steel ingots were exported to Canada and re-imported after having been converted into steel slabs. The court concluded that the imported slabs were not the same articles as the ingots, differing therefrom in name, value, appearance size, shape and use.

Based on these authorities and the Lab report, we conclude that the esterification process described in your ruling request is not an “alteration” within the meaning of 19 C.F.R. §181.53(b)(5). Like the factual situations in the case law discussed above, in the instant case the MCPA is subjected to an organic synthetic process which produces a new chemical compound having a different name and performance characteristics. The new compound, MCPA-2-EHE, has a different chemical structure and name, different physical form, different shipping and handling requirements and different physical specifications.

You also put forth the argument that, reasoning by analogy from other Customs decisions, it is clear that the addition of 2EHE does not change the essential character of MCPA. You cite applicable case law and Headquarters rulings discussing substantial transformation. It is your position that the MCPA imparts the essential character to the herbicide, even when MCPA must undergo the addition of 2EHE to produce MCPA-2EHE. Headquarters rulings have recognized that the status of a process or operation under one program is not determinative of its status under another program. See HQ 227937, dated August 11, 1998. The Court of International Trade has also recognized that results may differ according to the purpose of the statute. See National Juice Prods. Ass’n v. United States, 10 CIT 48, 58 n. 14, 628 F. Supp. 978 (CIT 1986)(“. . . although the language of the tests applied . . . is similar, the results may differ where differences in statutory language and purpose are pertinent.”). The legislative history to the NAFTA indicates that the parties intended to restrict drawback and duty deferral programs between the Parties. See H. Rept. 103-361, 103d Cong., 1st Sess. (1993). Section 203(a) of the NAFTA provides that all goods imported into the United States are subject to NAFTA drawback restrictions except if otherwise specifically exempted. TIB entries are in fact treated as a form of “drawback” under the NAFTA provisions. As stated above, we conclude that the esterification process does constitute a manufacture and, thus, brings the MCPA-2EHE under the NAFTA duty deferral rules. A manufacture has been defined by the Supreme Court as “a transformation from which a new article emerges having a distinctive name, character or use.” See Anheuser-Busch Brewing Association v. United States, 207 U.S. 556, 562 (1908) (emphasis added). Thus, if a process results in an article only having a different name or character, the definition of a manufacture has been met. In the instant case, the MCPA reaction process produces a compound with a different chemical structure, name, appearance, and physical properties.

We have also reviewed the Federal Register notice on country of origin of herbicides under NAFTA. The notice states that the “mixing of bulk herbicide with inert materials or with a wetting agent to place it in an end use form does not change the essential character of the herbicide. . . .” Rules for Determining the Country of Origin of a Good for Purposes of Annex 311 of the North American Free Trade Agreement; Final Rule, 61 Fed. Reg. 28,931 at 28,945 (June 6, 1996). The notice describes formulating processes which include blending and dilution for application and final use. Generally, Customs is of the view that a chemical reaction produces a new and different article, having different physical and chemical characteristics than the original chemical compound. These new characteristics are conferred by a change in the original chemical structure. Under the NAFTA rules of origin, goods of chapters 28,29, 32 and 38 (except for 38.23) which are the result of a chemical reaction are considered to be goods of the country where the chemical reaction occurred.


The processing of MCPA by the addition of 2EHE to form an esterified MCPA is not an alteration within the meaning of 19 C.F.R. §181.53(b)(5) and, thus, the except clause is not applicable.


John A. Durant
Commercial Rulings Division