us-cbp-cross-rulings-hq-555354•HQ 555354: Request for Reconsideration of Customs Ruling Letter 554914 dated August 11, 1988.
HQ 555354: Request for Reconsideration of Customs Ruling Letter 554914 dated August 11, 1988.
us-cbp-cross-rulings-hq-555354HQ 555354: Request for Reconsideration of Customs Ruling Letter 554914 dated August 11, 1988.Guidance
Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.
HQ 555354
May 15, 1989
CLA-2 CO:R:C:V 555354 BJO
CATEGORY: Classification
Mike Ainsa, Esq.
Grambling & Mounce
P.O. Drawer 1977
El Paso, Texas 79950-1977
RE: Request for Reconsideration of Customs Ruling Letter 554914
dated August 11, 1988.
Dear Mr. Ainsa:
This is in response to your letters of March 28, and April
25, 1989, on behalf of your client, Epson El Paso, Inc.
("importer"), requesting reconsideration of Headquarters Ruling
Letter 554914 (August 11, 1988). That ruling held that a polymer
used in the manufacture of ophthalmic plastic lenses in Mexico
was not a substantially transformed constituent material of the
lenses for purposes of the Generalized System of Preferences
(GSP)(19 U.S.C. 2461-2465).
FACTS:
In HQ 554914, we considered whether three chemicals imported
into Mexico -diallyl diglycol carbonate (a liquid monomer),
diisopropyl peroxydicarbonate (a solid initiator), and a solid
ultra violet absorber- were substantially transformed by their
combination into a new and different article of commerce, a
liquid polymer, which was then used in the manufacture of
ophthalmic plastic lenses imported into the U.S. We stated that
in the absence of evidence showing that the liquid polymer was a
distinct commercial entity separately bought and sold or ready to
be marketed, it was our opinion that the production of the molded
plastic lenses in Mexico from the three chemicals was a
continuous manufacturing process resulting in the creation of
only one separately identifiable article of commerce, the plastic
lenses imported into the U.S.
You now claim that polymers like those produced by the
importer are distinct articles with numerous commercial uses, and
are marketed and sold by companies unrelated to the importer.
You state that PPG Industries, Inc. ("PPG") manufactures and
sells to the importer the diallyl diglycol carbonate (sold under
the trade name "CR-39\ Monomer"), and diisopropyl
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peroxydicarbonate ("IPP") used in the production of the plastic
lenses. As documented by PPG's October 31, 1988 letter to the
importer, PPG itself sells under the trade name "CR-39\ LS" the
same combination of PPG's CR-39\ monomer and IPP used by the
importer. Further, a December 15, 1988 letter from a PPG
representative to the importer states:
"On my last visit to your manufacturing facility in Juarez,
Mexico, I found that you also manufacture a pre-polymerized
resin. The process by which you manufacture this resin may
differ from PPG's; however, the end result appears to be in
the same family of products as CR-39\ LS. By pre-
polymerizing CF-39\ with IPP and strict temperature control
methods, Seiko-Epson has developed their own unique product
for use in their casting operation of plastic, ophthalmic
lenses." (emphasis in original)
The PPG representative also notes that the price for CR-39\ LS is
$15.30 per pound, while the price to the importer of CR-39\
Monomer and IPP is $2.00 and $7.80 per pound, respectively.
PPG's sale brochure submitted with your reconsideration request
indicates that CR-39\ may be used in the production of a variety
of transparent plastic articles, including lenses, safety
shields, and test animal cages.
Also submitted are letters from AZKO Chemicals, Inc.
("AZKO") and Nippon Oil & Fats Co., Ltd. ("Nippon"). These
letters indicate that both companies manufacture or purchase
products chemically equivalent to PPG's CR-39\ and IPP, and
produce and market a polymer which is substantially similar or
identical to PPG's CR-39\ LS. Invoices issued by Nippon to Seiko
Epson Corporation, Japan, for the sale of such a polymer are
submitted in further support of the claim that the polymer is a
distinct article of commerce.
In further response to our conclusion that the production of
the plastic lenses appeared to be a continuous process not
resulting in any intermediate article, you state that the
importer manufactures and stores the polymer in sufficient
quantities to enable it to produce ophthalmic lenses from a
single manufactured quantity for a period of a week or more.
Finally, you note that subsequent to our decision in the
instant case, we issued a ruling to a direct competitor of your
client in which we stated that the combination of CR-39\ and IPP\
was an article of commerce for GSP purposes. See HQ 555060,
dated March 20, 1989. In that ruling, we reversed our earlier
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position, and held that the resultant combination, characterized
by your client's competitor as a "polymerized mixture...[or]
'initiated concentrate'," was a substantially transformed
constituent material of ophthalmic lenses, and therefore could be
counted toward the GSP 35% value-content requirement. You state
that because the chemicals and processes described in HQ 555060
are almost identical to those employed by your client in the
creation of the intermediate product, the ruling issued to your
client should be likewise reversed.
ISSUE:
Whether a liquid polymer produced from the combination of
CR-39\, IPP, and an ultra violet absorber is a substantially
transformed constituent material of ophthalmic plastic lenses for
purposes of the GSP.
LAW AND ANALYSIS:
Under the GSP, eligible articles may receive duty-free
treatment if imported directly from a beneficiary developing
country (BDC), and if the sum of the cost or value of materials
produced in the BDC plus the direct costs of processing
operations performed in such BDC is not less than 35% of the
appraised value of the article at the time of its entry into the
customs territory of the U.S. See 19 U.S.C. 2463.
Pursuant to section 10.177, Customs Regulations (19 CFR
10.177), the words "materials produced in the BDC" are defined
for purposes of 19 U.S.C. 2463 as "constituent materials of which
the eligible article is composed which are either: (1) Wholly the
growth, product, or manufacture of the BDC; or, (2) Substantially
transformed in the BDC into a new and different article of
commerce."
In Azteca Milling Co. v. United States, ___CIT___, 703 F.
Supp. 949 (1988), the Court of International Trade defined
"article of commerce" for purposes of 19 CFR 10.177 as:
"the new and different product [must] be commercially
recognizable as a different article, i.e.,...the new and
different article [must] be readily susceptible of trade,
and be an item that persons might will wish to buy and
acquire for their own purposes of consumption or
production." 703 F. Supp. at 954.
The court also noted that evidence that no sales of the purported
intermediate articles were made was a factor to be considered in
determining whether they are articles of commerce. 703 F. Supp.
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at 955; see also The Torrington Company v. United States, 3 CAFC
158, 764 F. 2d 1563 (1985) (shipment on two occasions of the
intermediate article to a related company is adequate evidence
that the articles are articles of commerce for GSP purposes).
Based on the evidence presented, we are of the opinion that
the liquid polymer produced from the CR-39\, IPP, and ultra
violet absorber is a substantially transformed constituent
material of the ophthalmic plastic lenses. The evidence
establishes that the intermediate product is similar to that
marketed by PPG and Nippon. In Azteca, the purported
intermediate product, processed corn, was not readily susceptible
of trade because it was never gathered in the aggregate but was
immediately processed into the final article. 703 F. Supp. at
954. In contrast, the importer here manufactures the polymer in
a process whereby liquid polymer is manufactured and stored in
quantities sufficient to produce ophthalmic lenses for a period
of a week or more. Further, because the importer's liquid
polymer is substantially similar or identical to a product PPG
and Nippon have apparently successfully marketed and have offered
to the importer for sale in substitution of its own product, it
is clearly an item that is bought and acquired for purposes of
consumption or production. Finally, we accept your contention
that the chemicals and processes employed by your client in
producing the intermediate product are nearly identical to those
involved in HQ 555060. In that ruling, we reconsidered and
reversed our earlier opinion that the combination of CR-39\ and
IPP was not a substantially transformed constituent material of
ophthalmic plastic lenses. In accordance with that ruling, the
ruling issued to your client is likewise reversed.
CONCLUSION:
Liquid polymer produced from the combination of CR-39\, IPP
and ultra violet absorber is a substantially transformed
constituent material of ophthalmic lenses for purposes of the
GSP. Accordingly, its cost or value may be counted toward the
GSP 35% value-content requirement. That portion of HQ 554914
that is inconsistent with this conclusion is hereby revoked.
Sincerely,
John Durant
Commercial Rulings Division
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