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HQ 555800

April 5, 1991

CLA-2 CO:R:C:S 555800 RA


TARIFF NO.: 3913.90.20: 9802.00.50

Mr. Bruce R Cowan
Traffic Manager
8 Corporate Drive
Orangeburg, New York 10962-2614

RE: Applicability of subheading 9802.00.50, HTSUS, to microcrystalline ce11ulose made from sulfite softwood of U.S. origin

Dear Mr. Cowan:

This is in response to your letter of July 27, 1990, to the Regional Commissioner of Customs, New York, regarding the applicability of the partial exemption from duty under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), to microcrystalline cellulose made in Taiwan by processing sheets of fiber of U.S. origin. Your letter was referred to this office for a reply. We regret the delay in responding.


You propose to ship solid sheets of softwood (Hoeg Fibre) to Taiwan where they will be subjected to an acid hydrolysis process which converts the wood pulp into cellulose which is further treated to form microcrystalline cellulose. You believe that the foreign processing constitutes an alteration within the meaning of subheading 9802.00.50, HTSUS. The principal use of the finished product is as a tableting excipient or binder in the pharmaceutical industry. It is a fine, white, odorless, tasteless crystalline powder that is relatively free of contaminants and is partially soluble in alkali.


Can the processing abroad be considered as an alteration under subheading 9802.00.50, HTSUS?


Suheading 9802.00.50, HTSUS, provides for the assessment of duty only on the cost or value of repairs or alterations
performed abroad on articles returned to the U.S. after having been exported for that purpose. However, the application of this tariff provision is precluded where the operations performed abroad destroy the identity of the article or create new or commercially different articles. See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1957),; Guardian Industries Corporation v. United States, 3 CIT 9 (1982). Treatment under subheading 9802.00.50, HTSUS, also is precluded where the foreign operations result in articles with new and different uses or where the processing constitutes a part of the manufacturing process begun in the U.S. Dolliff & Company v. United States 66 CCPA 77, C.A.D. 1225, 599 F.2d 1015 (1979). Alterations can be made only to completed articles and the term does not include intermediate operations performed in the manufacture of finished articles. Congress did not intend to permit uncompleted articles to be exported abroad and there made into finised products and when returned to be subject to duties only on the cost of the so- called alterations. United States v. J.D. Richardson Co., 36 CCPA 15, C.A.D. 390 (1948).

We are of the opinion that the processing of the fiber sheets into sterilized cellulose form amounts, to an operation which exceeds an alteration, as it creates a new and different article and serves to finish a manufacturing process begun in the U.S. Therefore, tariff treatment under subheading 9802.00.50, HTSUS, is precluded and the returned cellulose would be classified under the provision for natural polymers and modified natural polymers, not elsewhere specified or included, in primary forms: other: polysaccharides and their derivatives, in subheading 3913.90.20, HTSUS, dutiable at the rate of 5.8 percent ad valorem on the total value.


Microcrystalline cellulose produced from fibers sheets in Taiwan is classified as a natural polymer under subheading 3913.90.20, HTSUS, dutiable at 5.8 percent ad valorem. It is precluded from a partial duty exemption under subheading 9802.00.50, HTSUS.


John Durant, Director
Commercial Rulings Division

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