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 > 1991 HQ Rulings > HQ 0555426 - HQ 0555590 > HQ 0555463

Previous Ruling Next Ruling

HQ 555463

September 11, 1990

CLA-2 CO:R:C:V 555463 LS


TARIFF NO.: 9802.00.50

District Director of Customs
909 First Avenue
Room 2039
Seattle, Washington 98174

RE: Application for Further Review of Protest No. 3004-9- 000301, protesting denial of subheading 9802.00.50, HTSUS, treatment to wooden spindles pressure-treated with a preservative containing chromium copper arsenate; alteration; commercially different article with specialized use; Burstrom; C.J. Tower; 083731; 554818; 554883

Dear Sir:

This is our decision on the above-referenced protest which was forwarded to our office by your memorandum dated April 20, 1989. The protest, which was filed by C.F. Liebert, Inc. on behalf of Exterior Wood, Inc. on January 6, 1989, contests your denial of the partial duty exemption under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), to wooden spindles pressure-treated with a preservative in Canada. The importer has informed us that samples of the treated spindles are unavailable.


The following facts are elicited from a letter dated October 6, 1988, from Exterior Wood, Inc. to C.F. Liebert, Inc., which is incorporated as part of this protest. Nelson Wood Products, Inc. manufactured wooden spindles and then machined and stained them. The spindles were then shipped to Exterior Wood, Inc. (U.S.A.) in Washougal, Washington, which exported them to its plant in Canada for purposes of pressure-treatment. Exterior Wood, Inc. states in this letter that, although the pre-stained spindles were ready for use in their condition as exported, Nelson Wood Products, Inc. ordered the optional preservative treatment because it would "be advantageous from a marketing standpoint." The invoices indicate that the wood preservative used was "Wolman CCA for ground contact." "CCA" is a chemical known as chromium copper arsenate.

C.F. Liebert, Inc. has provided us with the following information during telephone conversations with a member of my staff and in a fax dated August 2, 1990. The types of spindles referred to in the protest are used as porch or deck railing supports. At the time these spindles were entered into the U.S. between February and May, 1988, Nelson Wood Products, Inc. only sold treated spindles. The preservative treatment protects the wood against the elements, such as heat and water. Preservative designed for ground contact is applied even though the spindles may not be in contact with the ground. Although untreated spindles are capable of being used indoors or outdoors, they ordinarily are not used outdoors because, due to exposure from rain and sun, they would soon crack and splinter. Conversely, one would not ordinarily use treated spindles indoors because, generally, their appearance is not appropriate for indoor use, and such use does not dictate the need for a preservative. The protestant states that the preservative extends the life of the wood indefinitely. Further, the pressure-treatment adds approximately 5.5 cents to 6.6 cents to the value of each spindle.

Due to the limited information provided by the protestant, and the absence of samples of the pressure-treated spindles, we compiled the following additional facts about Wolman CCA pressure-treated wood from the manufacturer of the preservative. Wood which is pressure-treated with Wolman CCA provides protection against rotting and decay caused by fungus, termites, and other wood-destroying agents. Wolman CCA is a pesticide registered with the Environmental Protection Agency (EPA). In the treatment process, this formulation of chromated copper arsenate is pressure-impregnated and chemically fixed in the wood cells. In a reaction known as "fixation", the CCA is reduced by wood sugars to form insoluble precipitates, thus rendering the wood useless as a food substance to various wood-destroying agents. Fixation accounts for the permanent penetration of the preservative into the wood, and thus explains the leach resistance and non-volatility of the product.

By providing resistance against rot and decay, the preservative enhances the durability and longevity of the wood. Thus, the pressure-treated spindles are ideal for outdoor use, such as on patios and decks, where there is a need for protection against weather conditions and wood-destroying agents. Wood which is pressure-treated with Wolman CCA may also be used inside residences, but should be used for such applications only where protection against termites and fungal decay is needed, and provided that all sawdust and construction debris are cleaned up and disposed of after construction. Treated wood can be disposed of by ordinary trash collection or burial, but should not be burned in open fires, stoves, fireplaces or residential boilers because toxic chemicals may be produced as part of the smoke and
ashes. Pressure treatment with CCA also affects the color of the wood, by giving it a greenish tint when it is just treated. The wood then weathers to a soft grey color.

The manufacturer of Wolman CCA distributes a Consumer Information Sheet to consumers of "Wolmanized pressure-treated wood" regarding the safe use and handling of the product. (The term "Wolmanized" is a registered trademark which applies to wood pressure-impregnated with Wolman wood preservative chemicals.) This consumer sheet states that certain precautions should be taken when handling the treated wood and in determining where to use or dispose of the wood because CCA, which penetrates deeply into the wood, may present certain hazards. This consumer information is provided as part of a consumer awareness program which was instituted as a voluntary program by the wood preservative industry in lieu of mandatory regulation by the EPA under the Toxic Substances Control Act, 15 U.S.C. 2601-2629. In addition, Wolmanized pressure-treated wood is in compliance with commodity standards set by the American Wood Preservers' Association (AWPA) for production of pressure-treated wood.

The protestant, on behalf of Exterior Wood, Inc., entered the pressure-treated spindles under item 806.20, Tariff Schedules of the United States (TSUS) (the precursor of subheading 9802.00.50, HTSUS) between February, 1988 and May, 1988. Your office liquidated the three entries on December 30, 1988, under item 202.66, TSUS, which provides for "wood moldings, and wood carvings and ornaments suitable for architectural or furniture decoration, whether or not drilled or treated: Other."

The protestant claims that the subject merchandise is entitled to the partial duty exemption under item 806.20, TSUS, and should have been liquidated as entered. It contends that the spindles, in their condition as exported to Canada, were finished or completed articles since they were capable of use in that condition. Thus, the protestant asserts that the pressure- treatment process whereby the spindles are coated with a wood preservative constitutes an alteration and not a step in the manufacturing process. In support of its position, protestant relies upon Royal Bead Novelty Co. v. United States, C.D. 4353, 68 Cust. Ct. 154, 342 F. Supp. 1394 (1972), and C.S. Emery & Co. v. United States, T.D. 49000, 71 Treas. Dec. 880 (Cust. Ct. 1937).


Whether the wooden spindles exported to Canada for pressure treatment with CCA preservative were entitled to the partial duty exemption under subheading 9802.00.50, HTSUS, when returned to the U.S.


Subheading 9802.00.50, HTSUS, provides a partial duty exemption for articles returned to the U.S. after having been exported to be advanced in value or improved in condition by means of repairs or alterations. Such articles are dutiable only upon the value of the foreign repairs or alterations, provided the documentary requirements of section 10.8, Customs Regulations (19 CFR 10.8), are satisfied. However, entitlement to this tariff treatment is precluded in circumstances where the operations performed abroad destroy the identity of the articles or create new or commercially different articles. See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956); Guardian Industries Corp. v. United States, 3 CIT 9 (1982). Tariff treatment under subheading 9802.00.50, HTSUS, is also precluded where the exported articles are incomplete for their intended use prior to the foreign processing. Guardian; Dolliff & Company, Inc. v. United States, 81 Cust. Ct. 1, C.D. 4755, 455 F. Supp. 618 (1978), aff'd, 66 CCPA 77, C.A.D. 1225, 82, 599 F.2d 1015, 1019 (1979).

The following court decisions discuss the criteria to be examined in determining whether an operation performed abroad creates a new or commercially different article for purposes of subheading 9802.00.50, HTSUS. In Burstrom, the court held that where steel ingots were exported to Canada and converted into steel slabs, the imported slabs were not the same articles as the ingots, in that they differed in name, value, appearance, size, shape, and use. Thus, the operations performed abroad were not considered to be alterations within the meaning of paragraph 1615(g), Tariff Act of 1930, as amended, the precursor provision to item 806.20, TSUS. In C.J. Tower & Sons of Niagara, Inc. v. United States, C.D. 2208, 45 Cust. Ct. 111 (1960), griege goods were processed abroad by stretching, dyeing, and sizing, and were returned to the U.S. as finished cloth backing ready to be coated. Among the factors the court considered in determining that the finished cloth backing was a new or different article was the fact that it had a specialized and more limited use than the griege goods, i.e., it was peculiarly adapted for use in the manufacture of coated abrasives. In Dolliff, 81 Cust. Ct. 1, C.D. 4755, 455 F. Supp. 618 (1978), a heat setting treatment performed abroad resulted in a permanent adherence of certain finishing chemicals to the treated fabric, which had been exported as griege goods and returned as finished fabric suitable for manufacture into curtains. The griege goods and finished fabric were offered for sale and sold in different markets to different classes of buyers. The court held that where "foreign processing produces such changes in the performance characteristics of the exported article as to alter its subsequent handling and uses over that which earlier prevailed, the resultant product is of necessity a new and different article." 81 Cust. Ct. at 5, 455 F. Supp. at 622.

Although it is not clear whether the spindles, as exported, are considered to be incomplete articles within the meaning of Dolliff and Guardian Industries, it is apparent that the pressure-treatment process performed in Canada results in a commercially different product with new performance characteristics and a specialized use. These changes, which are discussed below, preclude application of the partial duty exemption under subheading 9802.00.50, HTSUS.

The pressure-treated spindles have a specialized use which differentiates them from untreated spindles, i.e., they are for use in areas where protection against termites, fungal decay, and certain weather conditions is needed. Thus, they are ordinarily used outdoors, and should be used indoors only where environmental conditions necessitate their use. As is the case with other Wolmanized pressure-treated wood, certain precautions should be taken in handling and disposing of the spindles because of potential hazards associated with the presence of CCA in the wood. Because of the protection it affords, the preservative treatment has the effect of substantially enhancing the durability and longevity of the wooden spindles. The pressure- treatment process results in the permanent chemical fixation of the CCA into the wood cells. It also changes the color of the wood and increases the price of the spindles. We also note that the pressure-treated spindles are geared to a different commercial market as a result of their specialized use, i.e., they are primarily sold for outdoor use. The existence of industry standards and specifications for production of pressure- treated wood lends further support to our conclusion that the pressure-treatment performed in Canada resulted in a commercially different product. See Headquarters Ruling Letter (HRL) 555321 dated January 16, 1990 (the fact that different ASTM (American Society for Testing and Materials) product specifications applied to rebar mat products before and after exportation for processing abroad indicated that the product, when returned to the U.S., was a new or different commercial article for purposes of subheading 9802.00.50, HTSUS).

The holdings of several other rulings support our finding that the pressure-treated spindles are not entitled to the partial duty exemption under subheading 9802.00.50, HTSUS. In HRL 083731 dated May 12, 1989, we held, inter alia, that softwood lumber which is exported to Canada to be microincised and pressure-treated with chromated copper arsenate (CCA), and then returned to the U.S. for use in making flotation units and docks for marinas, were not entitled to the benefits of subheading 9802.00.50, HTSUS, because the foreign operations exceeded the scope of "alterations." It was determined that the lumber, as exported, was not a finished product ready for its intended use, and that the microincising and pressure-treatment constituted a
part of the total manufacturing process begun in the U.S. See also HRL 554818 dated August 25, 1989 (process of galvanizing steel tubing (i.e., treating with chemicals and dipping in a bath of molten zinc) to make tubing resistant to the elements when used in steel scaffolding exceeded an alteration because it made the steel article into a finished product with new and enhanced characteristics ready for its intended use). In HRL 554883 dated June 16, 1989, we held that the coating of exported polypropylene film with an acrylic or saran material exceeded an alteration for purposes of subheading 9802.00.50, HTSUS, because it substantially altered the performance characteristics of the exported article and created a new and different commercial article with a different subsequent use. The coated film was primarily intended for use as food wrapping while the uncoated film was essentially used for non-food wrapping purposes.

The facts in the instant case are distinguishable from those in Royal Bead, supra, a case relied upon by the protestant. In Royal Bead, the court held that the application abroad of a half-coating of an Aurora Borealis finish to glass beads constituted an alteration, within the meaning of item 806.20, TSUS, because the identity of the beads was not lost or destroyed and no new article was created. There was no change in the size, shape, or manner of use of the beads in making articles of jewelry (i.e., the uncoated and half-coated beads were used interchangeably in making such articles). The sole change was in the finish in that the half-coated beads possessed a rainbow-like luster. In the instant case, the wood preservative treatment does impart substantially new and different characteristics to the spindles, most notably of which is a specialized use. Thus, the treatment does more than simply impart a different look or appearance to the spindles.


We find that the pressure-treatment of the spindles in Canada with Wolman CCA wood preservative exceeds an "alteration" within the meaning of subheading 9802.00.50, HTSUS, because it results in a commercially different product with new performance characteristics and a specialized use. Therefore, the returned spindles were not entitled to the partial duty exemption under that tariff provision. Accordingly, the protest should be denied in full. A copy of this decision should be attached to the Form 19, Notice of Action, to be sent to the protestant.


John Durant, Director
Commercial Rulings Division

Previous Ruling Next Ruling

See also: