Eligibility of B100 Soy Methyl Ester for preferential tariff treatment pursuant to subheading 9802.00.50 of the Harmonized Tariff Schedule of the United States (“HTSUS”)

HQ H250944 May 14, 2014 OT:RR:CTF:VS H250944 KSG CATEGORY: CLASSIFICATION Carolyn Leski BCB International 1010 Niagara Street Buffalo NY 14213-1501 RE: Eligibility of B100 Soy Methyl Ester for preferential tariff treatment pursuant to subheading 9802.00.50 of the Harmonized Tariff Schedule of the United States (“HTSUS”) Dear Ms. Leski: This is in response to your December 30, 2013, request forwarded to us by our New York office, on behalf of your client, Great Lakes Biodiesel Inc., for a binding ruling on whether certain imported B100 soy methyl ester, a biodiesel product, is eligible for preferential tariff treatment pursuant to subheading 9802.00.50, HTSUS. FACTS: Biodiesel is an additive to fossil fuels. U.S.-origin soybean oil is shipped to Norway. In Norway, a process known as transesterification occurs, which chemically modifies the soybean oil from triglyceride oil into a methyl ester using methanol in the presence of potassium hydroxide (catalyst) at around 140 F. You stated that the soybean oil undergoes a chemical reaction. The finished product is imported into the U.S. as a fuel additive. ISSUE: Whether the imported B100 soy methyl ester is eligible for preferential tariff treatment pursuant to subheading 9802.00.50, HTSUS. LAW AND ANALYSIS: Subheading 9802.00.50, HTSUS, provides a partial or complete duty exemption for articles exported from and returned to the United States after having been advanced in value or improved in condition abroad by repairs or alterations, provided the documentary requirements of 19 CFR 10.8 are satisfied. In circumstances where the operations abroad destroy the identity of the exported article or create a new or commercially different article, entitlement to subheading 9802.00.50, HTSUS, is precluded. See A.F. Burstrom v. United States, 44 CCPA 27; Guardian Industries Corporation v. United States; 3 CIT 9 (1982). Additionally, entitlement to this tariff treatment is not available where the exported articles are incomplete for their intended purposes prior to their foreign processing and the foreign processing is a necessary step in the preparation or manufacture of the finished article. Dolliff & Company, Inc. v. United States, 455 F. Supp. 618 (CIT 1978). In Drexel Chemical Co. v. United States, 27 CIT 804 (2003), the Court of International Trade found that the herbicide Diuron was substantially transformed due to the physical changes that air miling of DCU cake induced—namely, reducing the size of the Diuron particles—and the chemical change as valance bonds were freed. While the Diuron molecule itself remained unchanged throughout the process, the physical and chemical changes to the DCU cake resulted in a usable herbicide. Without the additional processing, the Court found that plant leaves were unable to take in the DCU particles, rendering the Diuron unusable for its intended purpose. In this case, the U.S.-origin material undergoes a chemical reaction overseas as a result of processing. As discussed in Drexel, processing that creates a chemical reaction is generally considered a substantial transformation. The processing performed in Norway would create a new and different product with a new name, character and use. Therefore, the imported B100 soy methyl ester would not be eligible for preferential tariff treatment under subheading 9802.00.50, HTSUS. HOLDING: Imported B100 soy methyl ester, processed in Norway, as described above, would not be eligible for preferential tariff treatment under subheading 9802.00.50, HTSUS. A copy of this ruling should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy of this ruling, it should be brought to the attention of the CBP officer handling the transaction. Sincerely, Monika R. Brenner, Chief Valuation & Special Programs Branch