us-cbp-cross-rulings-hq-555463•HQ 555463: 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
HQ 555463: 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
us-cbp-cross-rulings-hq-555463HQ 555463: 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; 554883Guidance
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 555463
September 11, 1990
CLA-2 CO:R:C:V 555463 LS
CATEGORY: Classification
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.
FACTS:
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.
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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
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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).
ISSUE:
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.
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LAW AND ANALYSIS:
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.
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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
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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.
HOLDING:
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.
Sincerely,
John Durant, Director
Commercial Rulings Division
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