OT:RR:CTF:CPMMA H304576 AJK
TARIFF NO: 7607.20.50
Mr. Michael J. Lowell, Esq.
Reed Smith LLP
1301 K Street, N.W.
Suite 1000 – East Tower
Washington, DC 20005-3373
RE: Request for Reconsideration of NY N303268; Classification of Induction Seal Liners
Dear Mr. Lowell:
This letter is in response to your letter, dated June 3, 2019, in which you requested a reconsideration of New York Ruling Letter (NY) N303268, issued to you by U.S. Customs and Border Protection (CBP) on March 29, 2019, concerning the classification of induction seal liners under the Harmonized Tariff Schedule of the United States (HTSUS). In light of the COVID-19 crisis, we regret the extended delay in responding to your reconsideration request. We have reviewed NY N303268 and found it to be correct with respect to the classification of the induction seal liners. For the reasons set forth below, however, we modify the analysis.
FACTS:
The subject merchandise was described in NY N303268 as follows:
There are five different products under review. All five products are liners with a multi-layer laminate structure comprised of a board backing, a heat seal layer, aluminum foil, and a bonding layer. In all five products the board material predominates, constituting greater than fifty percent of the content by weight and thickness. The products are manufactured using lamination techniques including dry bond adhesive lamination, wax adhesive lamination, and extrusion coating/ lamination using plastic resins. All products provide a tamper-evident, weld seal and a secondary reseal feature for leak protection and product freshness. The five products vary, by weight and by thickness, in their composition of the board backing, heat seal layer, aluminum foil, and bonding layer.
ISSUE:
Whether the subject merchandise is classified in chapter 48, HTSUS, as paper; or heading 7607, HTSUS, as aluminum foil.
LAW AND ANALYSIS:
Classification of goods under the HTSUS is governed by the General Rules of Interpretation (GRI). GRI 1 provides that classification shall be determined according to the terms of the headings of the tariff schedule and any relative section or chapter notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRIs 2 through 6 may then be applied in order.
GRI 3(b) states, in pertinent part:
Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.
GRI 3(c) states, in pertinent part:
When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.
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The HTSUS provisions at issue are as follows:
4802 Uncoated paper and paperboard, of a kind used for writing, printing or other graphic purposes, and non perforated punch-cards and punch tape paper, in rolls or rectangular (including square) sheets, of any size, other than paper of heading 4801 or 4803; hand-made paper and paperboard
4804 Uncoated kraft paper and paperboard, in rolls or sheets, other than that of heading 4802 or 4803
4805 Other uncoated paper and paperboard, in rolls or sheets, not further worked or processed than as specified in note 3 to this chapter
7607 Aluminum foil (whether or not printed, or backed with paper, paperboard, plastics or similar backing materials) of a thickness (excluding any backing) not exceeding 0.2 mm:
7607.20 Backed:
7607.20.50 Other….
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Note 2 to Chapter 48, HTSUS, provides, in pertinent part:
This Chapter does not cover:
…
(n) Metal foil backed with paper or paperboard (generally Section XIV or XV);
....
Note 1(d) to Chapter 76, HTSUS, provides, in pertinent part:
Headings 76.06 and 76.07 apply, inter alia, to plates, sheets, strip and foil with patterns (for example, grooves, ribs, chequers, tears, buttons, lozenges) and to such products which have been perforated, corrugated, polished or coated, provided that they do not thereby assume the character of articles or products of other headings.
* * * * * *
The Harmonized Commodity Description and Coding System (HS) Explanatory Notes (ENs) constitute the official interpretation of the HS. While not legally binding or dispositive, the ENs provide a commentary on the scope of each heading of the HS at the international level, and are generally indicative of the proper interpretation of these headings. See T.D. 89-80, 54 Fed. Reg. 35127 (August 23, 1989).
The General EN to Chapter 76, HTSUS, provides, in pertinent part:
Products and articles of aluminium are frequently subjected to various treatments to improve the properties or appearance of the metal, to protect it from corrosion, etc. These treatments are generally those referred to at the end of the General Explanatory Note to Chapter 72, and do not affect the classification of the goods.
EN 74.10, HTSUS, provides, in pertinent part, as follows:
Other foil, such as that used for making fancy goods, is often backed with paper, paperboard, plastics or similar backing materials, either for convenience of handling or transport, or in order to facilitate subsequent treatment, etc.
* * * * * *
It is undisputed that the induction seal liners are composite goods, which contain layers of: paper, wax, aluminum foil, adhesives and plastic. The paper component predominates by thickness, weight, and value. In NY N303268, CBP classified the merchandise in heading 7607, HTSUS, as aluminum foil under GRI 3(c), because it found that neither the aluminum foil nor the paper component predominates or is more functional in the sealing of a bottle. In your reconsideration request, you assert that CBP’s classification is incorrect, and that the merchandise should be classified in heading 4811, HTSUS, as paper, due to the predominance of the paper in both physical measures and utility of the merchandise. Upon our reconsideration, we uphold CBP’s classification but modify the analysis.
As a preliminary matter, we clarify that the induction seal liners are composite goods, which are composed of two independent products: (1) paper, and (2) aluminum foil laminated with either plastic film, plastic film and plastic coating, or paper and plastic coating. The paper and aluminum foil components are temporarily bonded together by a layer of wax. After importation, the induction seal liners undergo an induction process, during which the wax melts and separates the foil from the paper. The paper is then pressed into the bottle cap while the aluminum foil seals the opening of a bottle. Accordingly, the heading of each independent good must be determined prior to classifying the composite good. Under GRI 3, the merchandise is classified according to the heading in which one of the independent goods is classified.
Classification of Paper
The paper component consists of a single layer of paper. As the paper is not coated and is imported in either rolls or rectangular sheets, it is classifiable in three competing headings: 4802, HTSUS, as uncoated paper; 4804, HTSUS, as uncoated kraft paper; or 4805, HTSUS, as other uncoated paper. Each heading includes uncoated paper in rolls or sheets; however, it is distinguished by the manufacturing process of paper. In the instant case, the exact heading cannot be determined because the information regarding the manufacturing process was not furnished to CBP. As explained below, however, CBP’s inability to classify the paper component in the instant case does not impact the classification of the induction seal liners.
Classification of Aluminum Foil Laminated with Plastic and/or Paper
The second component of the induction seal liners varies in each of the five products. Products 1 and 2 contain a layer of aluminum foil that is laminated with a plastic film and a coating of plastic heat seal. Products 3 and 4 contain an aluminum foil that is laminated with a layer of plastic heat seal film only. Lastly, Product 5 contains an aluminum foil laminated with a layer of paper and a coating of plastic heat seal. Each layer of the aluminum foil and either paper or plastic film are bonded by adhesives. Due to the disparate combinations of materials in Products 1 through 5, each product is separately analyzed as follows:
Aluminum Foil Laminated with Plastic Film
Neither HTSUS nor ENs define the terms: “backed” and “backing”. In Amcor, however, the Court of International Trade (CIT) held that “in the context of Heading 7607, ‘backed’ is most appropriately construed to mean ‘supporting.’” Amcor Flexibles Singen GMBH v. United States, 425 F. Supp. 3d 1287, 1298 (Ct. Int’l Trade 2020). Although the court acknowledged that “backed” could be interpreted as either support or a positional reference of a back side, the court held that the latter is inapplicable because an aluminum foil has no distinguishable back side. See id. at 1299. The CIT concluded that absent the congressional intent for “backed” foil to exclusively include aluminum foil with a backing on the “back” side, “[i]mposing a positional reference on ‘backed’ aluminum would render the entire concept of ‘backed’ aluminum a nullity because without a ‘back,’ aluminum could never be ‘backed.’” Id. Moreover, EN 74.10, which applies, mutatis mutandis, to heading 7607, HTSUS, further supports the proposition that “backing” means support. EN 74.10 states that metal foil is “often backed with paper … for the convenience of handling or transport, or in order to facilitate subsequent treatment, etc.” See also id. (“The Explanatory Notes [74.10] thus demonstrate the function that a backing material provides for backed foil and they clearly suggest a support role for the backing material.”).
The General EN to Chapter 76 states that “various treatments to improve or appearance of [aluminum]” do not affect the classification of the goods. The permitted treatments are listed in the General EN to Chapter 72, which encompasses surface finishing treatments, including “coating with non-metallic substances, e.g., … coating with ceramics or plastics….” See also Amcor, 425 F. Supp. 3d at 1298 (“[T]he Explanatory Notes specifically identify ‘lamination’ as coming within the list of treatments that do not affect the heading in which flat-surfaced aluminum goods are classified.”). Moreover, note 1(d) to Chapter 76 is a priority rule that gives priority to another heading when an aluminum foil, which has been “perforated, corrugated, polished or coated”, “assume[s] the character of articles or products of other headings”. See also Alcan Food Packaging (Shelbyville) v. United States, 771 F.3d 1364, 1368 (Fed. Cir. 2014); Amcor, 425 F. Supp. 3d at 1300-1. Although HTSUS does not define “assume the character” in the context of Chapter 76, the CIT held that an aluminum foil assumes the character of another component when a merger with other materials significantly alters the foil—to the point where it can no longer be described as an aluminum foil. See 425 F. Supp. 3d at 1301. In Amcor, where the court analyzed Formpack that consisted multiple layers of plastic and aluminum foil, the court held that “the characteristics of Formpack after the foil is combined with plastics do not mark a transformation in the character of the foil such that it no longer may be considered foil” and thus, the aluminum foil did not assume the character of plastic. Id. Although the CIT recognized that the processing can change the character of a material by imparting additional properties, such addition does not automate in the assumption of character that activates the rule in note 1(d) to Chapter 76. See id. Accordingly, the classification under heading 7607, HTSUS, is warranted, unless the aluminum foil assumes the character of plastic.
Heading 7607, HTSUS, directly covers an aluminum foil laminated with a plastic film. Analogous to Formpack in Amcor, the instant aluminum foil laminated with a plastic film does not lose its properties after the lamination process. As outlined in Exhibit J of your ruling request, dated February 27, 2019, the plastic film strengthens the properties of the aluminum foil by creating an additional barrier layer that prevents oxygen and moisture from entering or exiting the container, thereby amplifying the function of the aluminum foil. You also stated that the plastic film protects the aluminum foil by providing a chemical barrier that prevents aggressive chemicals inside the container from corroding or altering the foil. As evidenced by the functions of the plastic film, the lamination process does not undermine the properties of the foil. Moreover, the predominance of the aluminum foil is further supported by the fact that absent the foil, the induction seal liners cannot perform the core function of sealing bottles. In so far as the plastic film provides support to the aluminum foil, the plastic film constitutes “backing”. Thus, the aluminum foil laminated with a plastic film is, prima facie, classified under subheading 7607.20.50, HTSUS, as backed aluminum foil, because the aluminum foil does not assume the character of plastic and is not excluded by note 1(d) of Chapter 76.
Aluminum Foil Laminated with Plastic Film and Plastic Heat Seal
The General EN to Chapter 76 states that Chapter 76 includes aluminum foil coated with non-metallic substances, such as plastics. In HQ 958356, dated October 26, 1995, CBP classified an aluminum foil coated with plastic—specifically, a pressure-sensitive adhesive—in subheading 7607.20.50, HTSUS, as backed aluminum foil. In determining whether the adhesive coating on the aluminum foil removed the merchandise from subheading 7607.20.50, HTSUS, CBP held that “[t]he coating of aluminum foil with an adhesive material to make it pressure sensitive and thereby adapt it for its intended uses certainly improves the properties of the metal.” HQ 958356. Hence, a coating of plastic does not remove an aluminum foil from subheading 7607.20.50, HTSUS.
In NY F84357, dated March 27, 2000, CBP reviewed an aluminum foil of which one side was bonded to a plastic film by an adhesive and coated with a heat sealant. Similar to the instant aluminum foil, the plastic film was utilized to strengthen the foil and to facilitate packaging of other products. Because the reinforcement of the aluminum foil and plastics strengthens the aluminum foil, CBP classified the products under subheading 7607.20.50, HTSUS, as backed aluminum foil. The instant aluminum foil in Products 1 and 2 are substantially similar to the product described in NY F84357. As explained above, the instant plastic components are merged with the aluminum foil to fortify and protect the properties of aluminum foil. See supra (2)(A) Aluminum Foil Laminated with Plastic Film. Although Products 1 and 2 contain higher compositions of plastic than Products 3 and 4, such physical measures do not alter the fact that the plastic promotes the functions of the aluminum foil and thus, serves as backing of the aluminum foil. Accordingly, the aluminum foil laminated with a plastic film and plastic coating is classified under subheading 7607.20.50, HTSUS, as backed aluminum foil.
Aluminum Foil Laminated with Paper and Plastic Coating
Note 2 of Chapter 48 excludes “metal foil backed with paper”. Accordingly, paper goods that “back” metal foil, such as aluminum foil, are precluded from the classification in any provisions of Chapter 48. As explained above, the CIT has recently held that “backing” means “supporting”. Amcor, 425 F. Supp. 3d at 1298. The Amcor court’s finding was supported by EN 74.10, which states that metal foil is “often backed with paper … for the convenience of handling or transport, or in order to facilitate subsequent treatment, etc.” See id. at 1299. Accordingly, a reading of note 2 of Chapter 48 and EN 74.10 together clearly demonstrates that in a composite good of paper and aluminum foil, the paper is generally used to provide support to the aluminum foil. Such support for aluminum foil is necessary to preserve the shape and form of the foil due to the flimsy and delicate nature of the foil—especially, an aluminum foil, such as the instant product, that does not exceed 0.2 mm in thickness. See EN 74.10. Furthermore, the plastic coating does not remove the product from heading 7607, HTSUS. See supra (2)(B) Aluminum Foil Laminated with Plastic Film and Plastic Coating. Thus, the aluminum foil laminated with paper and plastic coating in Product 5 is classified in subheading 7607.20.50, HTSUS, as backed aluminum foil.
In your reconsideration request, you assert that Product 1 is identical to the items—M0100 and M0101—in the CF29 Notices of Action to Mold Rite Plastics, Inc., dated September 22, 2010, and October 26, 2010. We note that the two Notices of Action were issued over ten years ago by only one port of entry. CBP described M0100 and M0101 as “[b]ottlecap lining material” and proposed to classify them under subheading 4823.90.6700, HTSUS, as other coated paper and paperboard. The Notices of Action, however, did not provide an explanation for the classification and merely cited to NY H85995, dated December 7, 2001. Product 1, however, is distinguishable from the products described in NY H85995. In NY H85995, CBP classified the small, non-rectangular shapes of coated paperboard, laminated on one side with aluminum foil under heading 4823, HTSUS, which includes “[o]ther paper…cut to size or shape”, since they had been cut to shape. Conversely, Product 1 is imported in rectangular sheets—not pre-cut—and thus, the proposed classification under heading 4823, HTSUS, is incorrect. More importantly, unlike the subject merchandise, the foil and paper in NY H85995 were permanently bonded. Thus, the induction seal liners are not classifiable in heading 4823, HTSUS, as other coated paper and paperboard. Moreover, entries of similar merchandise finally liquidated over ten years ago have no bearing on this determination. See 19 U.S.C § 1514(a)(2).
You also cite the following rulings which classified an aluminum foil coated or laminated with plastic under subheading 7607.19.60, HTSUS, as not backed aluminum foil: HQ 966769, dated January 5, 2004; HQ 965210, dated March 20, 2002; and HQ 965976, dated December 19, 2002. To the extent that those rulings are inconsistent with the decision of the CIT’s recent holding in Amcor, supra, they are revoked by operation of law.
Classification of Induction Seal Liners as Composite Goods
Goods that are, prima facie, classifiable under two or more headings, are classified in accordance with GRI 3. GRI 3(a) states that the heading which provides the most specific description is preferred to headings that provide a more general description. If, however, two or more headings refer to part of the items only, those headings are equally considered under GRI 3(b) or 3(c). To classify under GRI 3(b), CBP must identify the component of the subject merchandise that imparts the merchandise with its essential character. “The ‘essential character’ of an article is ‘that which is indispensable to the structure, core or condition of the article, i.e., what it is.’” Structural Industries v. United States, 360 F. Supp. 2d 1330, 1336 (Ct. Int’l Trade 2005). Alternatively, if the “essential character” test does not conclusively indicate the constituent component that imparts the essential character of the merchandise, the composite article at issue cannot be classified in accordance with GRI 3(b). In such instance, GRI 3(c) applies and the merchandise is classified in the heading that occurs last in numerical order.
In the instant case, the induction seal liners are composite goods consisting of: (1) paper, under chapter 48, HTSUS; and (2) backed aluminum foil, under subheading 7607.20.50, HTSUS. The two components do not constitute a single product for the purpose of classification, because the merger of aluminum foil and paper is not permanent. Each part will separate during the induction process and perform independently of each other. Neither predominates in the role or essential character of the subject merchandise as each component has distinguishable characteristics and separate functionalities. The aluminum foil is essential to the induction seal liners due to its ability to hermetically seal bottles, which ensures product freshness and provides tamper-evident sealing. The paper, on the other hand, functions as a secondary, non-hermetic seal to prevent leakage and promote product freshness after opening of the sealed bottle. Due to the equal merits of the paper and aluminum foil in the role of induction seal liners, CBP cannot unequivocally determine whether a hermetic, preserving, tamper-evident aluminum foil seal imparts the product’s essential character any more than the paperboard cap insert that augments the sealing properties of the cap after the removal of the aluminum foil.
Generally, the physical measures of bulk, quantity, weight or value are considered to determine the constituent material that imparts the essential character of the merchandise. Such consideration, however, is not always warranted when each component serves a comparable role and significance to the composite good. See EN to GRI 3(b). In the instant product, the primary role of each material is apparent without the quantitative review. Although the paper predominates in thickness, weight, and value, it is not the sole component that contributes to the effectiveness and operation of the induction seal liners at the time of importation. Even if assuming, arguendo, that the essential characters of the induction seal liners are determined solely based on the quantitative measures, such measurement will not yield a proper analysis because the physical characteristics do not reflect the actual role of each material in relation to the use of the good. The role of the induction seal liners in relation to the use of the entire good—to seal containers—is equally imparted by both the backed aluminum foil and paper. Thus, the merchandise cannot be properly classified according to the physical measures under GRI 3(b). Pursuant to GRI 3(c), therefore, the induction seal liners are classified in heading 7607, HTSUS, because it is the heading that appears last amongst the competing headings.
In your reconsideration request, you assert that according to Alcan, the subject merchandise should be classified in heading 4811, HTSUS, because the paper predominates in thickness, weight, and value. In Alcan, the U.S. Court of Appeals for the Federal Circuit held that the essential character of Flexalcon—a composite good made of laminated layers of aluminum and plastic—was imparted by plastic because: (1) plastic predominated according to the traditional measures of bulk, quantity, weight, and value; (2) plastic and aluminum had equal use in food packaging; and (3) plastic gave strength and flexibility, which supported the qualities that defined the subject merchandise. See 771 F.3d at 1367. Thus, the Alcan court held that Flexalcon was excluded from Chapter 76 due to note 1(d) to Chapter 76, which “establishes that the composite product is outside heading 7607 when it assumes the character of an article covered by another heading—in this case, heading 3921.” Id. at 1368. In comparison with the instant merchandise, we agree that the paper similarly predominates in weight, thickness, and value, and that both paper and aluminum foil are equally critical to the use of the induction seal liners. Unlike Flexalcon, however, the paper alone does not provide the qualities that define the entire good. The aluminum foil does not assume the properties of the paper; instead, the paper and aluminum foil are independent products that are temporarily bonded together to form the composite good. Accordingly, the analysis in Alcan is inapplicable to the induction seal liners.
Therefore, the subject merchandise is classified in heading 7607, HTSUS, as aluminum foil at GRI 3(c).
HOLDING:
Pursuant to GRI 3(c), the induction seal liners are classified in heading 7607, HTSUS, specifically subheading 7607.20.50, HTSUS, which provides for “Aluminum foil (whether or not printed, or backed with paper, paperboard, plastics or similar backing materials) of a thickness (excluding any backing) not exceeding 0.2 mm: Backed: Other.” The 2020 column one, general rate of duty is free.
Duty rates are provided for your convenience and subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided at www.usitc.gov.
On March 8, 2018, Presidential proclamations 9704 and 9705 imposed additional tariffs and quotas on a number of steel and aluminum mill products.? Exemptions have been made on a temporary basis for some countries. Quantitative limitations or quotas may apply for certain exempted countries and can also be found in Chapter 99. Additional duties for steel of 25 percent and for aluminum of 10 percent are reflected in Chapter 99, subheading 9903.80.01 for steel and subheading 9903.85.01 for aluminum. Products classified under subheading 7607.20.50, HTSUS, may be subject to additional duties or quota. ?At the time of importation, you must report the Chapter 99 subheading applicable to your product classification in addition to the Chapter 72, 73 or 76 subheading listed above.?The Proclamations are subject to periodic amendment of the exclusions, so you should exercise reasonable care in monitoring the status of goods covered by the Proclamations and the applicable Chapter 99 subheadings.
EFFECT ON OTHER RULINGS:
NY N303268, dated March 29, 2019, is hereby affirmed.
Sincerely,
for
Craig T. Clark, Director Commercial and Trade Facilitation Division