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January 16,

CLA-2 RR:TC:SM 560747 BLS


Ms. Donna Scholler
Ka-Sha' Customhouse Broker
7550 23rd Avenue S.
Minneapolis, MN 55450

RE: Eligibilty of Atrazine Technical for duty-free treatment under the GSP; double substantial transformation; 35% value-content requirement; T.D. 77-273; Torrington

Dear Ms. Scholler:

This is in reference to your letters dated November 13 and14, 1997, on behalf of Sanachem Ltd., requesting a ruling as to whether the product known as Atrazine Technical is eligible for duty-free treatment under the Generalized System of Preferences (GSP).


Certain raw materials are imported into South Africa from Germany to be processed. It appears that these raw materials comprise about 70 percent of the final product. The completed product, Atrazine Technical, is then imported into the U.S. Based on the description of the processing and flow sheet submitted with your request, water methyl isobutyl ketone, cyanuric chloride, isopropyl amine and caustic soda are reacted to form the "reaction mass." This "reaction mass" is cooled and transferred to a second reaction vessel where it is further reacted with monoethylamine and caustic soda to produce crude atrazine. The crude atrazine is washed, dried, milled and packed to form Atrazine, technical grade ("Atrazine Technical").


Whether the production of Atrazine Technical results in a double substantial transformation for purposes of including the cost or value of the materials imported into South Africa in the 35% value-content requirement under the GSP.


Under the GSP, eligible articles the growth, product or manufacture of a designated beneficiary developing country (BDC) which are imported directly into the customs territory of the U.S. from a BDC may receive duty-free treatment if the sum of 1) the cost or value of materials produced in the BDC, plus 2) the direct costs of the processing operation in the BDC, is equivalent to at least 35% of the appraised value of the article at the time of entry. See 19 U.S.C. 2463(b).

South Africa is a BDC. See General Note 4, Harmonized Tariff Schedule of the United States (HTSUS). Based on a prior Customs ruling submitted with your request, the imported article is classifiable under subheading 2933.69.6020, Harmonized Tariff Schedule of the United States (HTSUS), which provides for "Heterocyclic compounds with nitrogen hetero-atoms(s) only: Compounds containing an infused triazine ring (whether or not hydrogenated) in the structure: Other: Other: Pesticides," a GSP eligible provision. See NY Ruling B89352 dated October 2, 1997.

Where an article is produced from materials imported into a BDC from non-BDC's, the article is considered a "product of" the BDC only if those materials are substantially transformed into a new or different article of commerce. See section 10.195(a), Customs Regulations (19 CFR 10.195(a)). In addition, if an article is comprised of materials that are imported into the BDC, the cost or value of those materials may be included in calculating the 35% value-content requirement only if they undergo a "double substantial transformation" in the BDC. See 19 CFR 10.196(a). Azteca Milling Co. V. United States, 703 F. Supp. 949 (CIT 1988), aff'd 890 F.2d 1150 (Fed. Cir. 1989). That is, the German-origin materials must be substantially transformed in South Africa into a new and different intermediate article of commerce, which is then used in the production of the final article which is yet another new and different article. See Torrington Co. v. United States, 8 CIT 150, 596 F. Supp. 1083 (1984), aff'd,
764 F. 2d 1563 (Fed. Cir. 1985). Torrington has been limited to the specific factual situation found therein. See T.D. 86-7, 20 Cust. Bull. (1986).

The test for determining whether a substantial transformation has occurred is whether an article emerges from a process with a new name, character or use, different from that possessed by the article prior to processing. See Texas Instruments Inc. v. United States, 69 CCPA 152, 681 F.2d 778 (1982).

In Torrington, the appellate court cited with approval T.D. 77-273, 11 Cust. Bull. 557 (1977), where the Government held that the dual substantial transformation standard was not satisfied with the production of dichloro, an intermediate step in the production
of Technical Atrazine. Even though the dichloro differed chemically from the constituent articles from which it was made and the final article, it was not considered an article of commerce, since the process used to manufacture the atrazine was a continuous one, and thus, the dichloro was not generally bought and sold. In that situation, we noted that the dichloro resulting from the first step of the manufacturing process would have to be refined to make shipping practicable.

In the instant case, the processing in South Africa results in chemical reactions which change the involved materials, having a wide variety of uses, into an article (Atrazine Technical) suited for specific purposes. This product, used as a herbicide, is an article with a new name, character and use when compared to the materials used in its production. Therefore, we find that the materials imported from Germany and used in the processing of the Atrazine Technical undergo a substantial transformation into a "product of" South Africa. The question now to be resolved is whether, for purposes of the 35% value-content requirement, the same materials undergo a "double substantial transformation," i.e., they are substantially transformed into a separate and distinct intermediate article of commerce which is then used in the production of Atrazine Technical, the completed product.

As described in the attachments to the submission, the process occurring in South Africa is a simple organic synthesis consisting of two reaction steps and a "clean up " process. Once the original reactants, i.e., water, cyanuric chloride, ...., are blended and have begun to react, the reaction must, from an engineering point of view continue until the Atrazine Technical is formed. As in T.D. 77-273, supra, there is no logical stopping place during the synthesis, as the process used to produce the final article is continuous. Further, no information or evidence has been provided which indicates that an intermediate product emerges from the operations in South Africa that can be separately bought and sold or is ready to be marketed as such.

Therefore, it is our opinion that the production of the Atrazine Technical in South Africa constitutes a continuous manufacturing process resulting in the creation of only one separately identifiable article of commerce which is the article imported into the U.S. Accordingly, as the materials imported into South Africa undergo only one substantial transformation, the cost or value of those materials may not be included in calculating the 35% value-content requirement.


The production of Atrazine Technical in South Africa constitutes a single substantial transformation. As a result, the cost or value of the materials imported into South Africa
for purposes of producing Atrazine Technical cannot be included in determining the 35% value-content requirement under the GSP.

A copy of this letter should be attached to the entry documents filed at the time this merchandise is 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,

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