Moresco Corp. v. United States

• Decision Date: 31 October 1969
• Docket Number: C.D. 3911
• Citation: 63 Cust. Ct. 295
• Parties: MORESCO CORP. <I>v.</I> UNITED STATES.
• Court: U.S. Court of Customs and Patent Appeals (CCPA)

Page 295

63 Cust. Ct. 295

MORESCO CORP.v.

UNITED STATES.

C.D. 3911

United States Customs Court, First Division.

Decided October 31, 1969.

Siegel, Mandell & Davidson (Harvey A. Isaacs and Joseph Kaplan of counsel) for the plaintiff.

William D. Ruckelshaus, Assistant Attorney General (Brian Goldstein and Andrew P. Vance, trial attorneys), for the defendant.

Before WATSON, MALETZ, and RE, Judges

WATSON, Judge:

This protest involves the importation of certain trichloroethylene which the collector classified at the full statutory rate of duty of 30 per centum ad valorem under paragraph 18 of the Tariff Act of 1930, as modified by Presidential proclamation T.D. 52788. The assessment was apparently made by virtue of a determination by the collector that the merchandise in question was a product of East Germany within the meaning of Presidential proclamation, T.D. 52788.

Plaintiff, though conceding the merchandise is trichloroethylene properly classifiable under paragraph 18 of the Tariff Act of 1930, as modified, contends that the involved merchandise by virtue of the addition of certain chemicals in West Germany, had become a product of West Germany, and therefore dutiable at the rate of 7½ per centum ad valorem under said paragraph 18 of the tariff act, as modified by T.D. 52739.

The pertinent parts of the statutes and the Presidential proclamation are:

Paragraph 18 of the Tariff Act of 1930:

Carbon tetrachloride, * * * tetrachloroethan, and trichloroethylene, 30 per centum ad valorem.

Paragraph 18 of the Tariff Act of 1930, as modified by the Torquay Protocol to the General Agreement on Tariffs and Trade, T.D. 52739:

                      Trichloroethylene ------------------------------   7½% ad val
                

Presidential proclamation, T.D. 52788:

WHEREAS sections 5 and 11 of the Trade Agreements Extension Act of 1951 (Public Law 50, 82d Congress) provide as follows:

SEC. 5. As soon as practicable, the President shall take such action as is necessary to suspend, withdraw or prevent the application of any reduction in any rate of duty, or binding of any existing customs or excise treatment, or other concession contained in any trade agreement entered into under authority of section 350 of the Tariff Act of 1930, as amended and extended, to imports from the Union of Soviet Socialist Republics and to imports from any nation or area dominated or controlled by the foreign government or foreign organization controlling the world Communist movement.

SEC. 11. The President shall, as soon as practicable, take such measures as may be necessary to prevent the importation of ermine, fox, kolinsky, marten, mink, muskrat, and weasel furs and skins, dressed or undressed, which are the product of the Union of Soviet Socialist Republics or of Communist China.

* * * * * * *

Now, THEREFORE, I, HARRY S. TRUMAN, President of the United States of America, * * * do proclaim:

PART I

That the application of reduced rates of duty * * * established pursuant to trade agreements * * * shall be suspended with respect to imports from such nations and areas referred to in section 5 as may be specified in any notification pursuant to this part of this proclamation given by the President to the Secretary of the Treasury, * * *. For the purposes of this part the term "imports from such nations and areas" shall mean articles imported directly or indirectly into the United States from nations or areas specified in an effective notification, but shall not in any case include articles the growth, produce, or manufacture of any other nation or area. [Italics ours.]

The matter herein was submitted upon an agreed stipulation of fact and the testimony of two witnesses called by the plaintiff.

At the outset of the trial, counsel for the respective parties stipulated as follows:

First, that the merchandise, the subject of the protest, consists of stabilized Trichlorethylene [sic], imported under Entry 866342 of 12/4/59; secondly, that the Trichlorethylene [sic] was produced in East Germany and thereafter shipped to West Germany, where materials in the following per gallon percentages were added: (a) 0.13 per cent pyridine; (b) 0.02 per cent triethylamine; and, (c), 0.03 per cent pine oil (steamed distilled). [R. 3-4.]

Plaintiff's first witness was Mr. Melville Morris, formerly the president of Moresco Corporation, engaged in the importation and sale of chemicals in the United States (R. 10). Mr. Morris testified that he had personally negotiated the contract for the purchase of the involved merchandise with Rotexchemie Brunst in Hamburg, Germany (R. 11), and that he was familiar with the arrangements for the shipments of the goods from East Germany to the Deutsche Fanto plants in West Germany. The witness stated that, after importation, he was responsible for the sale of this merchandise to various industrial customers all over the United States, and that he was familiar, through personal observation, with the use to which the merchandise was put (R. 12-13).

As explained by plaintiff's witness, trichloroethylene is a liquid solvent used in the industrial process of cleaning metal parts during the process of manufacture. The solvent is placed into a tank or a vat and is then heated to a temperature of 184.6 degrees, at which time it vaporizes and rises up within the tanks and different equipment in which it is used. The metal parts are then introduced into the vapor, and the vapor condenses on the colder metal parts and takes away with it all the grease and soil and other contaminates and "washes it down to the bottom." This process is known as metal cleaning or degreasing (R. 14-15).

Plaintiff's second witness was Mr. Ephraim Werner, a chemical engineer and presently the president of Phillips Manufacturing Company, manufacturer of metal cleaning and vapor degreasing equipment, which company also distributes the chemicals that are used with this equipment. Mr. Werner testified that in the course of his experience he had personally observed the use of trichloroethylene. He testified that the materials stipulated as being added to the trichloroethylene 0.13 percent pyridine, 0.02 percent triethylamine, and 0.03 percent pine oil, were added in order to stabilize the product (R. 32); that trichloroethylene, in its pure state, is not very stable, and tends to become acid quickly, especially on contact with air, in which event it would tend to oxidize. The witness then testified that the introduction of stabilizers into the trichloroethylene tends to neutralize any acid that might form, and tends to prevent the formation of acid in trichloroethylene (R. 32). He stated that, to the best of his knowledge, "unstabilized" trichloroethylene, i.e., without the addition of stabilizers, is not marketed in the United States and that unstabilized trichloroethylene would tend to turn to acid within 48 hours if exposed to air (R. 33-35). The witness stated that, in the past, it has been necessary to further stabilize trichloroethylene where the material did not meet specifications in terms of acid acceptance (R. 37-38). He testified that his company does not buy any "pure" trichloroethylene (R. 38), and that even with stabilized material you have to do additional stabilizing (R. 39). Plaintiff's witness further stated that to the best of his knowledge the product, without the addition of a stabilizer, cannot be used as a metal degreasing solvent because of its tendency to "go acid" very quickly (R. 40).

On cross-examination, Mr. Werner testified that, based upon his knowledge and experience, a material such as thymol would normally be added as soon as the trichloroethylene is distilled in order to inhibit oxidation and to facilitate handling; that, in some instances, the addition of an inhibitor will slow down the oxidation process for a couple of months and the merchandise can be shipped in that condition (R. 48).

Mr. Werner further testified that when the pyridine, triethylamine and pine oil are added to the trichloroethylene, no new compound is formed, but rather these three substances go into solution with the trichloroethylene (R. 49-50). The addition of the stabilizers causes the solution to become alkaline and increases its acid absorption capacity (R. 56, 60). Plaintiff's witness, when asked if he was familiar with the term "phenolstabilization", stated that he was not familiar with this stabilization system, although he was "aware of it". In this connection, Mr. Werner stated:

All I can say is that there are a number of different stabilization systems in the United States. They are all kept relatively secret, and most of them are patented, to one degree or another, and I wouldn't want to venture my knowledge of anyone else's patents or use of a stabilization system. They all perform the same job, in that they are to act as a material for acid absorption and neutralization of acid. [Emphasis supplied.] [R. 60-61.]

Plaintiff's witness stated that while the process known as phenolstabilization was a different type of stabilization from that here discussed, he assumed it was "for the same ultimate purpose" (R. 62).

Defendant's exhibit A is a copy of the contract for the purchase of the trichloroethylene in issue. The parties to said contract are Moresco Corporation of New York and Rotexchemie Brunst and Company, Hamburg, Germany. The contract was signed by Mr. Morris of Moresco Corporation. This contract required the trichloroethylene, to be delivered from Soviet East Germany to West Germany, to have been already "phenolstabilized" (R. 68). Mr. Morris, upon being recalled to the stand, testified as follows:

Q. With respect to the term of this contract, sir, I point your attention to the designated article "Trichlorethylene [sic], quality as already delivered, phenolstabilized and according to the follow-average analysis * * *"

[Emphasis added.]

Are you familiar with these terms? — A. Yes, sir.

Plaintiff's witness, as heretofore noted, testified with respect...