CLA-2 CO:R:C:S 557835 MLR
Mr. Gary L. Croskey
EMS-American Grilon Inc.
2060 Corporate Way
P.O. Box 1717
Sumter, S.C. 29151-1717
RE: Applicability of duty allowance under HTSUS subheading
9802.00.50 to copolyamide products imported from Switzerland;
nylon resins; caprolactam; FDA requirements
Dear Mr. Croskey:
This is in reference to your letter of January 31, 1994,
requesting a ruling concerning the eligibility of copolyamide
products from Switzerland for a duty allowance under subheading
9802.00.50, Harmonized Tariff Schedule of the United States
(HTSUS).
FACTS:
EMS-American Grilon Inc. ("EMS") manufactures copolyamide
products by condensation of epsilon-caprolactam with: omega-
dodecalactam 11-aminoundecanoic acid, and/or mixtures of
hexamethylene-diamine and di-acids such as adipic, azaleic, sebacic
and dodecanedioic. These products are identified as nylon resins
and are referenced in section 177.1500, Food and Drug Regulations
(21 CFR 177.1500). These resins are exported in solid, granular,
or chip form to EMS's parent company, EMS Chemie AG, in
Switzerland. The tradename of these resins is "Grilon E", and each
resin has a different identifying number depending upon the
specific chemical structure and viscosity or molecular weight. You
have provided a list of the existing commercial Grilon resins that
you export or plan to export to Switzerland. The letter "E" at the
end of the identifying number denotes that the product contains
small amounts of caprolactam.
In Switzerland, the Grilon "E" granules are conveyed to an
extraction column where they are washed with hot water (circa 100
degree Celsius). Because caprolactam is soluble in hot water, this
process removes or extracts the caprolactam from the Grilon "E"
granules. (You also state that the copolyamide Grilon is insoluble
in water.) The wet extracted Grilon granules are then dried with
nitrogen (nitrogen is required to prevent the Grilon from turning
yellow) and bagged for return to EMS. For every pound of Grilon
"E" products shipped to Switzerland, only about 0.92 to 0.95 pound
of Grilon is returned because of the caprolactam extracted and
other losses (waste) incurred during the processing.
EMS indicates that the Grilon returned to the U.S. is not
chemically altered, and is in the same form and appearance as the
Grilon E exported to Switzerland. The reason for extracting the
free caprolactam is to meet the Food and Drug Administration's
(FDA) requirements for film packaging applications, or to permit
EMS's customers to extrude the Grilon granule into acceptable
quality monofilaments (i.e., fishing line, weaving applications,
brushes, etc.).
In a letter dated March 10, 1994, EMS indicates that
chemically speaking, all polyamides produced from caprolactam will
contain some amounts of caprolactam and for most markets or
applications, these caprolactam-containing polyamides can be sold
on an "as is" basis. These applications include extrusion into
tubes, rods, and monofilaments and the injection molding of a wide
variety of plastic parts. One of the key markets for EMS's
products, however, is the blown film packaging market and mainly
because of FDA requirements, these products cannot be used unless
most of the caprolactam is removed.
ISSUE:
Whether the extraction of caprolactam from the copolyamide
products in Switzerland constitutes an alteration, thereby
entitling the returned product to be eligible for the duty
allowance available under subheading 9802.00.50, HTSUS.
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.
EMS states that the caprolactam is extracted to meet FDA
requirements for film packaging applications, or to permit its
customers to extrude the Grilon granule into acceptable quality
monofilaments. Section 177, Food and Drug Regulations (21 CFR
177.1500) discusses how nylon resins may be safely used to produce
articles intended for use in processing, handling, and packaging
food. In particular, specifications for the nylon resins are
provided, such as their melting point and solubility. EMS
indicates that caprolactam is soluble in hot water and that the
Grilon is not. We note that the softening and solubility behaviors
of polyamides is controlled by the magnitude of the intermolecular
forces between their individual chains. See Encyclopedia Britannia
(1975). The closer the amide groups are in the chain, the stronger
is the cohesion between chains, and the stronger the cohesion, the
higher the melting point, and the greater the insolubility. Id.
Based on this, it is our opinion that the processing performed in
Switzerland enables the nylon resins to be used for food packaging
applications.
In Headquarters Ruling Letter (HRL) 554883 dated June 16,
1989, Customs considered the coating of polypropylene film in
Canada with either acrylic or saran, which imparted some new
capabilities and uses to the uncoated film. Customs found the end
use of the film basically to be the same; however, the uncoated
film tended to pucker and shrink before it reached its sealing
temperature or melting point, thus eliminating the film's usage in
many food applications, whereas the coated film was primarily
intended for use as food wrapping. Consequently, it was determined
that the foreign coating of the polypropylene film exceeded the
meaning of the term "alteration" under item 806.20, Tariff
Schedules of the United States (TSUS) (now subheading 9802.00.50,
HTSUS).
In HRL 556955 dated May 12, 1993, Customs considered
pentostatin exported to Europe in a frozen concentrate form. In
Europe, a crystallization operation removed impurities and
fermentation by-products, which did not alter the chemical
composition of the product, but changed the product into a powdered
state. Because the pentostatin could not be used in patients
without the processing abroad, it was held that the processing
abroad was considered an intermediate operation and beyond the
scope of subheading 9802.00.50, HTSUS.
In this case, as in HRL 554883 and HRL 556955, we find that
the nylon resins, in their condition as exported from the U.S. are
not considered complete for their intended use as food packaging,
unless they undergo further processing to extract the free
caprolactam. Therefore, it is our opinion that the processing
performed in Switzerland is an intermediate operation and
constitutes part of an ongoing manufacturing process beyond the
scope of subheading 9802.00.50, HTSUS.
HOLDING:
On the basis of the information submitted, we find that the
extraction of the caprolactam from the copolyamide products
completes the nylon resins for their intended purpose. Therefore,
the processing abroad exceeds an alteration within the meaning of
subheading 9802.00.50, HTSUS.
Sincerely,
John Durant, Director