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HQ 559542

April 24, 1996

CLA-2 RR:TC:SM 559542 MLR


Wesley K. Caine, Esq.
Stewart and Stewart
2100 M Street, N.W.
Washington, D.C. 20037

RE: Country of Origin Marking for Acrolein; Chemical; Germany; Substantial Transformation; Ultimate Purchaser

Dear Mr. Caine:

This is in reference to your letter of October 31, 1995, requesting a ruling on behalf of Baker Performance Chemicals Incorporated ("Baker") concerning the country of origin marking for acrolein from Germany.


It is stated that acrolein is a highly toxic substance which has numerous industrial applications, including use as a bactericide or as a scavenger in oil field operations, and as an aquatic herbicide in irrigation systems. Baker states that it is required to identify itself as the "producer," pursuant to section 156.10 of the Environmental Protection Agency ("EPA") regulations (40 CFR 156.10), when it supplies the substance as a pesticide for commercial use. The label approved by the EPA for application to retail containers reads "Manufactured by: Baker Performance Chemicals Incorporated 3920 Essex Lane, Houston Texas 77027."

Baker imports the acrolein in 5000-gallon containers marked as originating in Germany. After importation at the Port of Houston, the acrolein is transferred into 20,000-gallon railcars for shipment to California where it is again transferred into 350-gallon "skid tanks" and/or 55-gallon cylinders while maintaining the substance under a pressurized "nitrogen blanket." It is stated that in order to use acrolein as a pesticide, it is necessary to subject the substance to the pressure of a "nitrogen blanket," which pressure must be maintained as the substance is released from the container. The containers used are designed to withstand 100 lbs/psi of nitrogen pressure and to permit continuous injection of that gas into the container as the contents are ejected at the application site. These simultaneous flows are stated to be possible by two valves on the container, each of which interconnects with other application apparatus. One connects to the nitrogen supply and permits the gas to be introduced at an appropriately controlled and constant pressure; the other connects with discharge apparatus through which the pesticide is released and applied. It is stated that the substance may only be used on site as a commercial pesticide if it is prepared in accordance with EPA regulations by producers holding appropriate registrations and registered establishments.

Baker states that it provides a pesticide service, not strictly the pesticide substance, to its two large customer groups, oil field operators and irrigation districts. In the case of the oil field operators, Baker states that they never take possession of the product. Baker also states that it does not itemize and distinguish between the product and the application service, similar to a lawn care service. In regard to the second customer group, the irrigation districts, it is stated that while irrigation districts handle the product and physically apply the substance at the site, Baker retains some control because the customer may only use it in strict accordance with regular training and with Baker's application equipment. Baker states that it only charges a single price for the overall service, and it retains ownership of the empty containers since they must be handled and cleaned according to EPA regulations. Baker's other customers, constituting approximately one percent, use rodenticides, and like the irrigation customers, Baker trains these customers and provides and owns the application equipment, including the containers.

A meeting was held at the Office of Regulations & Rulings, and supplemental information was submitted on April 18, 1996. In its supplemental information, Baker claims that it remains legally responsible for handling the empty containers after the acrolein is consumed. Baker also analyzes the application site and performs numerous tests that include water and weed infestation analyses. On request, Baker monitors the product's dissipation to ensure that it does not reach sensitive areas where toxicity becomes a threat, and, additionally, Baker normally communicates with governmental authorities, on behalf of the irrigation customers, when application issues arise or when use variances must be requested. It is further stated that Baker maintains a 24-hour service to provide guidance, and Baker assumes responsibility for responding to emergencies resulting from accidental releases and equipment failures. Baker also conducts research projects in conjunction with government agencies on behalf of the irrigation customers to ensure the product's continued safe use.


I. Whether the acrolein is substantially transformed in the U.S.

II. Whether Baker is the ultimate purchaser of the imported acrolein.


The marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. Congressional intent in enacting 19 U.S.C. 1304 was "that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will." United States v. Friedlaender & Co. Inc., 27 CCPA 297, 302, C.A.D. 104 (1940). Part 134, Customs Regulations (19 CFR Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.

I. Substantial Transformation

Section 134.1(b), Customs Regulations {19 CFR 134.1(b)}, defines "country of origin" as the country of manufacture, production or growth of any article of foreign origin entering the U.S. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the "country of origin" within the meaning of the marking laws and regulations. For country of origin marking purposes, a substantial transformation of an imported article occurs when it is used in the U.S. in manufacture, which results in an article having a name, character, or use differing from that of the imported article. See 19 CFR 134.35.

Baker claims that it substantially transforms the imported acrolein. A change in name is suggested since "acrolein" is imported, and either "pesticide" products, i.e., "herbicides," "fungicides," and rodenticides," or a "scavenger" are produced for oil field applications. Furthermore, it is suggested that such a name change is evident because the produced pesticide is subject to EPA's "pesticide programs" regulations set forth at 40 CFR Chap. 1, subchap. E.

A change in character is claimed because acrolein is toxic and dangerous to handle, and cannot be used as a pesticide, on site, without appropriate containerization and dedicated application apparatus. Therefore, it is stated that the substance must be safely encased within a container that facilitates application, akin to a cigarette lighter consisting of a plastic container filled with highly flammable butane. Accordingly, it is suggested that in addition to containing toxic contents, the container facilitates two separate flows, integrates with other apparatus, and becomes part of a much greater whole. Furthermore, it is noted that 40 CFR 152.3(r) distinguishes between mere containers for transportation and "packaging" used to contain pesticides for distribution, consumption, or use. Therefore, it is suggested that there is a major change in character when bulk acrolein is subsequently combined with Baker's specially designed container. Vandergrift & Co. v. United States, 59 Cust. Ct. 438, C.D. 3181 (1967), is cited as support where markers composed of plastic cartridges containing ink, wadding, and a tip were not regarded as ink per se, but the ink and container formed a new article, i.e., a "marker," with its own name and dedicated use.

A change in use is suggested because acrolein has numerous potential uses, primarily in organic synthesis, or to produce cattle feed, pharmaceuticals, perfumes, and Baker's pesticides. However, since the substance may only be used on site as a commercial pesticide if it is prepared in accordance with EPA regulations, and once the products are prepared and labeled they are dedicated exclusively to pesticide use pursuant to 7 U.S.C. 136j(a)(2)(G) which states that it is unlawful "to use any registered pesticide in a manner inconsistent with its labeling," Baker argues that the legal character of pesticides is different from that of bulk acrolein.

Another argument that the acrolein is substantially transformed in the U.S., is based on Ferrostaal Metals Corp. v. United States, 664 F. Supp. 535, 664 (CIT 1987), where the value added was a relevant factor in finding that certain steel was substantially transformed. The recognition of a value added test in Superior Wire v. United States., 669 F. Supp. 472, 478 (CIT 1987), aff'd, 867 F.2d 1409 (Fed. Cir. 1989), is also noted.

Customs has addressed the manipulation of herbicides in numerous rulings. In Headquarters Ruling Letter (HRL) 734558 dated July 22, 1992, Customs did not find a substantial transformation when herbicide intended for use on field corn was exported in bulk to France where it was encapsulated into a water-soluble film, since the operation did not change the chemical composition but only facilitated its use. See also HRL 556616 dated June 16, 1992. In HRL 555064 dated March 29, 1990, Customs also determined that the formulation of propanil-4, a herbicide for rice, from technical propanil did not constitute a substantial transformation for purposes of the Caribbean Basin Economic Recovery Act. This decision was based on T.D. 78-168, 12 Cust. Bull. 353 (1978), which held that the formulation of the herbicide diuron wettable powder by mixing technical diuron with various agents was not a substantial transformation for purposes of the Generalized System of Preferences. These findings are also consistent with National Juice Products Association v. United States, 628 F. Supp. 978 (CIT 1986), where the court found that imported manufacturing orange juice concentrate was the very essence of frozen concentrate orange juice and reconstituted orange juice. The court noted that the addition of water, orange essence and oils to the concentrate, while making it suitable for retail sale, did not change the fundamental character of the imported product, and therefore, was not a substantial transformation.

Accordingly, based on these cases which involved the manipulation of the form of the herbicide, but still did not find a substantial transformation, it is our opinion that Baker does not substantially transform the imported acrolein. In regard to the name change, we note that the label approved by the EPA, while referring to the registered name of "Magnacide H Herbicide," also refers to "(Acrolein, Inhibited)." Furthermore, a change in the name of a product is the weakest evidence of a substantial transformation. Uniroyal, Inc. v. United States, 542 F. Supp. 1026 (CIT 1982), aff'd, 702 F.2d 1022 (Fed. Cir. 1983).

In regard to a change in character, we note that the label approved by the EPA warns that the product is still a "poison." Additionally, the label shows acrolein as the main ingredient of Magnacide, with the addition of inert ingredients, which indicates that there is no change in chemical composition, particularly relevant in the rulings cited above. In regard to Vandergrift, this case concerned the classification of the markers and not their country of origin. Furthermore, even if we were to rely on this case, the court only recognized a change in name from ink-impregnated wadding, a felt tip, and a plastic cartridge or case to a marker.

Regarding a change in use, while acrolein is stated to be used to produce cattle feed, pharmaceuticals, and perfumes, and, therefore, in these instances may be regarded as an ingredient, we do not find a change in use from the imported acrolein to the containerized acrolein used for pesticide purposes. The label refers to "Acrolein, Inhibited," and the word "inhibit" in a chemistry context means "to decrease the rate of action of or to stop a chemical reaction." The Random House Dictionary of the English Language, (Unabridged ed. 1973). This is the main reason why the imported acrolein is stated to be subjected to the pressure of a "nitrogen blanket." Furthermore, while the EPA regulations may suggest that Baker is the producer, these regulations do not use the criteria required for determining the country of origin of an article under 19 U.S.C. 1304.

Additionally, in regard to the value added in the U.S., while Superior Wire treated the cost added, amount of labor, and capital investment as a cross-check in substantial transformation cases, the Court of International Trade has also stated in numerous cases that the name, character and use test is entitled to continued adherence in view of its affirmance in recent opinions by the appellate court, and to avoid "ludicrous results," should generally be determinative of the country of origin of imported articles. See Ferrostaal 664 F. Supp. at 538; and National Hand Tool Corp. v. United States, 16 CIT 308, 312 (1992), aff'd, 989 F.2d 1201 (Fed. Cir. 1993). Accordingly, it is our opinion that the imported acrolein is not substantially transformed in the U.S.

II. Ultimate Purchaser

The "ultimate purchaser," under 19 U.S.C. 1304, is defined in 19 CFR 134.1(d) as generally the last person in the U.S. who will receive the article in the form in which it was imported. Section 134.35, Customs Regulations (19 CFR 134.35), provides that the manufacturer or processor in the U.S. who converts or combines the imported article into a different article having a name, character, or use, will be considered the "ultimate purchaser." As detailed above, we have found that Baker does not substantially transform the imported acrolein into a new and different article. Nevertheless, for the following reasons, Baker claims that it is the ultimate purchaser of the imported acrolein because it is providing a service, and, therefore, the acrolein does not have to be marked as a German product when the substance is provided to its customers.

Baker claims that if a product were sold, rather than a service, Baker's customers would have to comply with the handling requirements of the EPA regulations, rather than Baker assuming the legal responsibilities. As support for the claim that Baker is the ultimate purchaser of the acrolein, Baker cites C.S.D. 90-42, where Customs held that a restaurant operator was the "ultimate purchaser" of imported shrimp served to customers in restaurant operations, and, therefore, the customers were not required to know the country of origin of the shrimp even though they were the "ultimate user."

In HRL 725743 dated July 11, 1984, Customs considered honey imported in bulk drums, which was repacked into individual serving size pouches and then packed into cases of 200 or more pouches for sale to institutions such as restaurants. It was held that the ultimate purchaser was the institutional buyer, rather than the patron who used the honey, and, therefore, the individual pouches did not have to be marked with the honey's country of origin. Similarly, in HRL 734232 dated November 20, 1991, Customs considered a pharmaceutical drug from Italy, which was packaged in ampoules for intravenous use and only dispensed by doctors and nurses. The ultimate purchaser was determined to be the hospital pharmacy and, therefore, it was appropriate if only the 5-pack packages of ampoules repacked for the pharmacy was marked. In HRL 734524 dated July 30, 1992, Customs found an airline to be the ultimate purchaser of frozen meals served to passengers.

A. Oil Field Operators

In this case, it is stated that the oil field operators never take possession of the product, and the analogy of a lawn service is suggested. Under this scenario, the oil field operators are not receiving the article in the form in which it was imported. In fact, the oil field operators do not have any physical contact with the imported article because Baker will be applying the product for the oil operator, unlike the airline passenger who sees and eats the food, or the hospital scenario where the drug will be injected into the patient. Therefore, the oil field operators will be even further removed from the imported product than the airline passenger or the hospital patient. Furthermore, in the airline and hospital rulings, the purchasing decision was for the airline transportation and not the food, or the hospital or doctor and not the drug. Accordingly, in those scenarios, the user was purchasing a service. Similarly, in this case, we find that it is clear that Baker is providing a service and, therefore, Baker is the "ultimate purchaser" of the imported acrolein.

B. Irrigation Districts and Others

In regard to the irrigation districts and other Baker customers, they physically receive the acrolein which has not been substantially transformed in the U.S., and then they apply the substance themselves after training is provided by Baker. The empty containers are then returned to Baker. Here, as well, Baker claims that it is the ultimate purchaser of the acrolein and that it is providing a service to the irrigation districts. As support that Baker is selling a service rather than a product, Baker states that it is responsible for meeting the EPA guidelines, and that the irrigation customers never assume these legal responsibilities. Furthermore, Baker states that it provides training on how to handle the product, and it analyzes the site and performs tests and assumes responsibility for responding to emergencies resulting from accidental release and equipment failure. Additionally, it is stated that the irrigation customers pay a single price, and the customer does not have the option of purchasing only the acrolein.

In this case, it is our opinion that sufficient evidence has been presented to indicate that Baker is providing more of a service than just a product. The container provided to the customer is a necessary aspect in the use of the substance, and Baker retains ownership of the containers and provides training to its customers. However, it is our opinion that the overriding factor in determining that Baker is providing a service is that Baker analyzes the site and performs tests and any follow-up studies concerning the effect of the acrolein on the environment. Similar to HRL 734232, where the patient is provided the drug based upon the doctor's assessment of the patient, Baker only makes a recommendation and agrees to supply the acrolein on site after it performs analyses and tests of the site. Additionally, the interaction between Baker and its customer gives the customer the opportunity to determine the country of origin of the acrolein. Therefore, similar to the situation where the airline is considered the ultimate purchaser of airline meals or the hospital pharmacy is the ultimate purchaser of the drugs, we find that Baker is the "ultimate purchaser" of the acrolein and that the containers used at the customer's site do not require marking.


Based upon the information provided, it is our opinion that the imported acrolein is not substantially transformed in the U.S. However, it is our opinion that Baker is supplying a service, and, therefore, is the "ultimate purchaser" of the acrolein. Accordingly, the containers used at the customer's site do not require marking.

A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.


John Durant, Director

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