United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 1990 HQ Rulings > HQ 0544283 - HQ 0554945 > HQ 0554883

Previous Ruling Next Ruling

HQ 554883

June 16, 1989

CLA-2 CO:R:C:V 554883 GRV


TARIFF NO.: 9802.00.50

District Director of Customs
Detroit, Michigan 48226-2568

RE: Application for Further Review of Protest No. 3801-7-000703, protesting denial of TSUS item 806.20 treatment to variously coated polypropylene film imported from Canada

Dear Sir:

The above-referenced protest contests your denial of the partial duty exemption under item 806.20, Tariff Schedules of the United States (TSUS), to polypropylene film coated abroad with either an acrylic or saran material. Protestant submitted samples of the subject merchandise in its untreated and treated form for examination.


Protestant manufactures polypropylene film in the U.S. In its untreated form, the film is a useable article of commerce, which is marketed and sold in the U.S. as packaging material for such uses as brick-wrapping of bulk products, transparent windows in other packaging, dry laminations, box overwrapping, garment packaging and various shrink-wrapping applications.

Protestant exported rolls of uncoated polypropylene film to Canada where the film was coated with clear plastic (acrylic or saran) material of U.S. origin. While both the acrylic and saran improve the heat-sealability of the film, the acrylic coating improves the machinability and optical qualities of the film and serves as an aroma barrier, whereas the saran coating enhances the moisture and oxygen barrier properties of the film. Once abroad, the rolls of film are unwound and passed through a machine as a web in which the coatings are applied. The first stage involves the ionization of the film's surface with an electrostatic device to prepare it for a primer coat which is then deposited on the film. Acrylic or saran material is then deposited on the film in liquid form, after which the film is dried, re-rolled and returned to the U.S.

Counsel for protestant states that the foreign processing operation increases the value of the film by 54% and that both the coated and uncoated film are classifiable under TSUS item 771.4316. Counsel further claims that the end use of the product remains basically the same, but admits that the coatings do impart some new capabilities and uses to the exported film. In support of his position that the coating process constitutes an alteration, counsel relies heavily upon the reasoning set forth in Headquarters Ruling Letter 067376 (April 9, 1982) and contends that this ruling represents a change in Customs interpretation of the term "alteration" by expanding the degree to which an article may be changed.

On return to the U.S., the polypropylene film was denied the partial duty exemption under TSUS item 806.20 by your office based on the determination that the coating of the film added new uses and properties. Although you note that the uncoated film has many uses in the U.S., you believe that the "film would not be useable as a wrapping for moisture and oxygen barrier, and improved heat-sealability if it was not coated." Therefore, you indicate that the coating process performed in Canada goes beyond the contemplated scope of TSUS item 806.20.


Whether the coating of the exported polypropylene film constitutes an acceptable "alteration" within the meaning of TSUS item 806.20, thereby qualifying the returned polypropylene film for the partial duty exemption provided for under this tariff provision.


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 TSUS item 806.20 (now subheadings 9802.00.40 and 9802.00.50, Harmo- nized Tariff Schedule of the United States (HTSUS)), provided the operations do not destroy the identity of the exported articles or create new or different articles. Articles entitled to this partial duty exemption are dutiable only upon the cost or value of the foreign repairs or alterations, provided the documentary requirements of section 10.8, Customs Regulations (19 CFR 10.8), are satisfied.

In Dolliff & Company, Inc., v. United States, 66 CCPA 77, C.A.D. 1225, 599 F.2d 1015, 1019 (1979), the court considered the scope of the term "alterations," as used in TSUS item 806.20, and stated that:

...repairs and alterations are made to completed articles and do not include intermediate processing operations which are performed as a matter of course in the preparation or the manufacture of finished articles. (Court's emphasis).

Moreover, in A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956) (a case decided under paragraph 1615(g), the precursor tariff provision to TSUS item 806.20), the court indicated that where the article imported differs in name, value, appearance, size, shape, and use from the article exported, a conversion of the exported article into a new article is signaled.

In Amity Fabrics, Inc. v. United States, 43 Cust.Ct. 64, C.D. 2104, 305 F.Supp. 4 (1959), unmarketable Pumpkin-colored cotton twill-back velveteen was exported to be redyed a black color. The court found that the merchandise was advanced in value and improved in condition commercially by the dyeing operation and that such change constituted an alteration. The court further found that "the identity of the goods was not lost or destroyed by the dying process; no new article was created; there was no change in the character, quality, texture, or use of the merchandise; it was merely changed in color."

In Royal Bead Novelty Co. v. United States, 68 Cust.Ct. 154, C.D. 4353, 342 F.Supp. 1394 (1972), uncoated glass beads were exported so that they could be half-coated with an Aurora Borealis finish which imparted a rainbow-like luster to the half- coated beads. The court found that the identity of the beads was not lost or destroyed in the coating process and no new article was created. Moreover, there was no change in the beads' size, shape, or manner of use in making articles of jewelry (plaintiff testified that both uncoated and half-coated beads were used interchangeably). Accordingly, the court concluded that the application of the Aurora Borealis finish constituted an altera- tion within the meaning of item 806.20 and 19 CFR 10.8.

Common to these judicial decisions is a consideration of whether the use(s) of the returned article is the same as that of the exported article. We believe that this consideration is important in this case, for if it is determined that the foreign coating operation produced such changes in the performance char- acteristics of the exported article as to alter its subsequent handling and uses over that which earlier prevailed, this would indicate that the exported article was incomplete for its intended purpose, and that the foreign processing created a new and different article.

Comparing the physical properties of the uncoated and coated polypropylene film samples submitted, we are of the opin- ion that the foreign coating operation significantly altered the performance characteristics of the exported plastic film. Be- cause of the relatively high melting point of the uncoated polypropylene, the film tends to pucker and shrink before it reaches its sealing temperature or melting point (Plastic Films and Packaging (1975), Oswin, C.R. (John Wiley & Sons, pp. 42- 43)). This would tend to eliminate the film's usage in many food applications. Coating the film with polymers having a lower melting point, i.e., saran or acrylic, lowers the seal tempera- ture of the product considerably, allowing the product to be used in applications where food must be sealed tightly within its packaging.

Reviewing the barrier properties of saran, acrylic and polypropylene (Encyclopedia of Chemical Technology, Kirk and Othmer, Volume 3, pp. 488-491), we note that polypropylene is comparatively porous to water vapor and gaseous materials. For example, saran's oxygen permeation resistance is more than 1,000 times greater than polypropylene, its carbon dioxide resistance is 1,700 times greater, and water vapor resistance is 2.5 times greater. Acrylic's oxygen permeation resistance is 10 times greater than polypropylene's and its carbon dioxide resistance is 1,000 times greater. In effect, the resistance of the coated polypropylene film to air (gas) and water vapor helps retard spoilage, preserve "freshness," prevent sogginess and prevent drying out. All of these properties are essential to food storage and are essentially absent in the uncoated polypropylene films.

It is clear from an analysis of the samples submitted and the information you have provided that the uncoated polypropylene film is essentially used for non-food wrapping purposes, e.g., shrink-wrapping applications, while the coated film is primarily intended for use as food wrapping. As the performance charac- teristics and uses of the imported article differ substantially from those of the exported article, it is our opinion that the foreign coating operation resulted in the creation of a new and different commercial article. Moreover, it is apparent that the polypropylene film, in its condition as exported, was unsuitable for its intended use as food wrapping.

Regarding counsel's argument that the exported and imported product are classifiable under the same tariff provision, the appellate court in both the Burstrom and Dolliff cases stated that such common classification is irrelevant in determining whether certain foreign processing operations comprise altera- tions under TSUS item 806.20.

Headquarters Ruling Letter 067376, dated April 9, 1982, which counsel contends is controlling in regard to the facts of the instant case, held that the application in Canada of a protective plastic coating to domestically-produced steel pipe qualified as an alteration under TSUS item 806.20. Counsel maintains that the coating process described in that ruling is analogous to the coating process in this case. However, the determination in ruling 067376 that the coating of the pipe constituted an alteration was predicated on the finding that the coated and uncoated pipes were used in identical applications. As has been shown, such identical uses are not present here. HOLDING:

On the basis of the record presented in this matter, it is our opinion that the coating of the polypropylene film with acrylic or saran material in Canada exceeds the meaning of the term "alteration" under TSUS item 806.20. Accordingly, the returned polypropylene film is not entitled to the partial duty exemption under that tariff provision. You are directed to deny the protest in full. Please provide a copy of this ruling to the protestant.


Previous Ruling Next Ruling

See also: