HQ 554883

June 16, 1989

CLA-2 CO:R:C:V 554883 GRV

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.50

District Director of Customs

Detroit, Michigan 48226-2568

RE: Application for Further Review of Protest No. 3801-7-000703,

protesting denial of TSUS item 806.20 treatment to variously

coated polypropylene film imported from Canada

Dear Sir:

The above-referenced protest contests your denial of the

partial duty exemption under item 806.20, Tariff Schedules of the

United States (TSUS), to polypropylene film coated abroad with

either an acrylic or saran material. Protestant submitted

samples of the subject merchandise in its untreated and treated

form for examination.

FACTS:

Protestant manufactures polypropylene film in the U.S. In

its untreated form, the film is a useable article of commerce,

which is marketed and sold in the U.S. as packaging material for

such uses as brick-wrapping of bulk products, transparent windows

in other packaging, dry laminations, box overwrapping, garment

packaging and various shrink-wrapping applications.

Protestant exported rolls of uncoated polypropylene film to

Canada where the film was coated with clear plastic (acrylic or

saran) material of U.S. origin. While both the acrylic and saran

improve the heat-sealability of the film, the acrylic coating

improves the machinability and optical qualities of the film and

serves as an aroma barrier, whereas the saran coating enhances

the moisture and oxygen barrier properties of the film. Once

abroad, the rolls of film are unwound and passed through a

machine as a web in which the coatings are applied. The first

stage involves the ionization of the film\'s surface with an

electrostatic device to prepare it for a primer coat which is

then deposited on the film. Acrylic or saran material is then

deposited on the film in liquid form, after which the film is

dried, re-rolled and returned to the U.S.

Counsel for protestant states that the foreign processing

operation increases the value of the film by 54% and that both

the coated and uncoated film are classifiable under TSUS item

771.4316. Counsel further claims that the end use of the product

remains basically the same, but admits that the coatings do

impart some new capabilities and uses to the exported film. In

support of his position that the coating process constitutes an

alteration, counsel relies heavily upon the reasoning set forth

in Headquarters Ruling Letter 067376 (April 9, 1982) and contends

that this ruling represents a change in Customs interpretation of

the term \"alteration\" by expanding the degree to which an article

may be changed.

On return to the U.S., the polypropylene film was denied the

partial duty exemption under TSUS item 806.20 by your office

based on the determination that the coating of the film added new

uses and properties. Although you note that the uncoated film

has many uses in the U.S., you believe that the \"film would not

be useable as a wrapping for moisture and oxygen barrier, and

improved heat-sealability if it was not coated.\" Therefore, you

indicate that the coating process performed in Canada goes beyond

the contemplated scope of TSUS item 806.20.

ISSUE:

Whether the coating of the exported polypropylene film

constitutes an acceptable \"alteration\" within the meaning of TSUS

item 806.20, thereby qualifying the returned polypropylene film

for the partial duty exemption provided for under this tariff

provision.

LAW & ANALYSIS:

Articles returned to the U.S. after having been exported to

be advanced in value or improved in condition by repairs or

alterations may qualify for the partial duty exemption under TSUS

item 806.20 (now subheadings 9802.00.40 and 9802.00.50, Harmo-

nized Tariff Schedule of the United States (HTSUS)), provided the

operations do not destroy the identity of the exported articles

or create new or different articles. Articles entitled to this

partial duty exemption are dutiable only upon the cost or value

of the foreign repairs or alterations, provided the documentary

requirements of section 10.8, Customs Regulations (19 CFR 10.8),

are satisfied.

In Dolliff & Company, Inc., v. United States, 66 CCPA 77,

C.A.D. 1225, 599 F.2d 1015, 1019 (1979), the court considered the

scope of the term \"alterations,\" as used in TSUS item 806.20, and

stated that:

\...repairs and alterations are made to completed articles

and do not include intermediate processing operations which

are performed as a matter of course in the preparation or

the manufacture of finished articles. (Court\'s emphasis).

Moreover, in A.F. Burstrom v. United States, 44 CCPA 27,

C.A.D. 631 (1956) (a case decided under paragraph 1615(g), the

precursor tariff provision to TSUS item 806.20), the court

indicated that where the article imported differs in name, value,

appearance, size, shape, and use from the article exported, a

conversion of the exported article into a new article is

signaled.

In Amity Fabrics, Inc. v. United States, 43 Cust.Ct. 64,

C.D. 2104, 305 F.Supp. 4 (1959), unmarketable Pumpkin-colored

cotton twill-back velveteen was exported to be redyed a black

color. The court found that the merchandise was advanced in

value and improved in condition commercially by the dyeing

operation and that such change constituted an alteration. The

court further found that \"the identity of the goods was not lost

or destroyed by the dying process; no new article was created;

there was no change in the character, quality, texture, or use of

the merchandise; it was merely changed in color.\"

In Royal Bead Novelty Co. v. United States, 68 Cust.Ct. 154,

C.D. 4353, 342 F.Supp. 1394 (1972), uncoated glass beads were

exported so that they could be half-coated with an Aurora

Borealis finish which imparted a rainbow-like luster to the half-

coated beads. The court found that the identity of the beads was

not lost or destroyed in the coating process and no new article

was created. Moreover, there was no change in the beads\' size,

shape, or manner of use in making articles of jewelry (plaintiff

testified that both uncoated and half-coated beads were used

interchangeably). Accordingly, the court concluded that the

application of the Aurora Borealis finish constituted an altera-

tion within the meaning of item 806.20 and 19 CFR 10.8.

Common to these judicial decisions is a consideration of

whether the use(s) of the returned article is the same as that of

the exported article. We believe that this consideration is

important in this case, for if it is determined that the foreign

coating operation produced such changes in the performance char-

acteristics of the exported article as to alter its subsequent

handling and uses over that which earlier prevailed, this would

indicate that the exported article was incomplete for its

intended purpose, and that the foreign processing created a new

and different article.

Comparing the physical properties of the uncoated and coated

polypropylene film samples submitted, we are of the opin- ion

that the foreign coating operation significantly altered the

performance characteristics of the exported plastic film. Be-

cause of the relatively high melting point of the uncoated

polypropylene, the film tends to pucker and shrink before it

reaches its sealing temperature or melting point (Plastic Films

and Packaging (1975), Oswin, C.R. (John Wiley & Sons, pp. 42-

43)). This would tend to eliminate the film\'s usage in many food

applications. Coating the film with polymers having a lower

melting point, i.e., saran or acrylic, lowers the seal tempera-

ture of the product considerably, allowing the product to be used

in applications where food must be sealed tightly within its

packaging.

Reviewing the barrier properties of saran, acrylic and

polypropylene (Encyclopedia of Chemical Technology, Kirk and

Othmer, Volume 3, pp. 488-491), we note that polypropylene is

comparatively porous to water vapor and gaseous materials. For

example, saran\'s oxygen permeation resistance is more than 1,000

times greater than polypropylene, its carbon dioxide resistance

is 1,700 times greater, and water vapor resistance is 2.5 times

greater. Acrylic\'s oxygen permeation resistance is 10 times

greater than polypropylene\'s and its carbon dioxide resistance is

1,000 times greater. In effect, the resistance of the coated

polypropylene film to air (gas) and water vapor helps retard

spoilage, preserve \"freshness,\" prevent sogginess and prevent

drying out. All of these properties are essential to food

storage and are essentially absent in the uncoated polypropylene

films.

It is clear from an analysis of the samples submitted and

the information you have provided that the uncoated polypropylene

film is essentially used for non-food wrapping purposes, e.g.,

shrink-wrapping applications, while the coated film is primarily

intended for use as food wrapping. As the performance charac-

teristics and uses of the imported article differ substantially

from those of the exported article, it is our opinion that the

foreign coating operation resulted in the creation of a new and

different commercial article. Moreover, it is apparent that the

polypropylene film, in its condition as exported, was unsuitable

for its intended use as food wrapping.

Regarding counsel\'s argument that the exported and imported

product are classifiable under the same tariff provision, the

appellate court in both the Burstrom and Dolliff cases stated

that such common classification is irrelevant in determining

whether certain foreign processing operations comprise altera-

tions under TSUS item 806.20.

Headquarters Ruling Letter 067376, dated April 9, 1982,

which counsel contends is controlling in regard to the facts of

the instant case, held that the application in Canada of a

protective plastic coating to domestically-produced steel pipe

qualified as an alteration under TSUS item 806.20. Counsel

maintains that the coating process described in that ruling is

analogous to the coating process in this case. However, the

determination in ruling 067376 that the coating of the pipe

constituted an alteration was predicated on the finding that the

coated and uncoated pipes were used in identical applications.

As has been shown, such identical uses are not present here.

HOLDING:

On the basis of the record presented in this matter, it is

our opinion that the coating of the polypropylene film with

acrylic or saran material in Canada exceeds the meaning of the

term \"alteration\" under TSUS item 806.20. Accordingly, the

returned polypropylene film is not entitled to the partial duty

exemption under that tariff provision. You are directed to deny

the protest in full. Please provide a copy of this ruling to the

protestant.

Sincerely,

John Durant, Director

Commercial Rulings Division