Upjohn Co. v. United States

• Decision Date: 27 November 1985
• Docket Number: Court No. 81-8-01015.
• Citation: 623 F. Supp. 1281
• Parties: The UPJOHN COMPANY, Plaintiff, v. The UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

623 F. Supp. 1281

The UPJOHN COMPANY, Plaintiff, v. The UNITED STATES, Defendant.

Court No. 81-8-01015.

United States Court of International Trade.

November 27, 1985.

Donohue & Donohue (Joseph F. Donohue, Jr., Margaret R. Polito and Charles E. Duross, New York City, of counsel) for plaintiff.

Richard K. Willard, Acting Asst. Atty. Gen., Washington D.C., Joseph I. Liebman, Atty. in Charge, Intern. Trade Field Office Kenneth N. Wolf, New York City, for defendant.

Memorandum Opinion and Order

DiCARLO, Judge:

Plaintiff brings this action pursuant to 28 U.S.C. § 1581(a) challenging defendant's classification of a single entry of chemicals under item 403.90 of the Tariff Schedules of the United States (TSUS), as "mixtures in whole or in part of any of the products provided for in Subpart B."¹ Plaintiff claims that the chemical is properly classified under item 800.00 TSUS, as American goods returned. The Court finds that the merchandise is a product of the Netherlands, and was properly classified under item 403.90, TSUS.

FACTS

The facts of this case as stipulated by the parties are as follows:

1. Plaintiff, the Upjohn Company (hereinafter "Upjohn"), manufactured at its plant in LaPorte, Texas, a chemical described by Upjohn for internal purposes as crude 390 HOP, which is also known generally in the trade as polymethylene polyphenyl isocyanate, and also as polymeric MDI. For purposes of convenience, this material will be referred to throughout this stipulation as crude 390 HOP.

2. The crude 390 HOP was exported from the United States to the Netherlands.

3. Upjohn produced the crude 390 HOP in the following manner: aniline was reacted with formaldehyde to form polymethyulene polydiphenyl polyamine. The polymethylene polydiphenyl polyamine was reacted with phosgene to produce the crude 390 HOP, which contains isocyanate functional groups.

4. Isocyanates are reactive chemical compounds, each composed of a nitrogen atom bonded to a carbon atom bonded to an oxygen atom, hereinafter referred to as an -NCO group. Crude 390 HOP is a mixture of compounds of different molecular weights containing isocyanate groups. These compounds are: diphenylmethane diisocyanate, also known as methylene diphenyl diisocyanate (hereinafter referred to as "pure MDI"), triisocyanate, and other isocyanates of higher molecular weight, commonly referred to as "higher molecular weight structures." The lightest of these isocyanates is the pure MDI. The pure MDI molecule consists of 2 benzene rings joined together. Each ring contains one NCO (isocyanate) group see Attachment A.² The triisocyanate molecule consists of 3 benzene rings joined together, with each ring containing one NCO group see Attachment B. The higher molecular weight structures consist of 4 or more benzene rings joined together, with each ring containing one NCO group see Attachment C.

5. The crude 390 HOP described in paragraph 1 was sold by plaintiff to an affiliate, Upjohn Polymer B.V. (hereinafter "Upjohn B.V."), in an intercompany sale for $.1962 per lb. and was exported to the Netherlands. The merchandise was described on the commercial invoice as "Crude 390 HOP (Polymethylene Polyphenylisocyanate)."

6. The exported crude 390 HOP was a mixture consisting of approximately 68.8 percent pure MDI, 13.1 percent triisocyanate and 18.1 percent higher molecular weight structures.

7. The exported crude 390 HOP was subjected to a treatment in the Netherlands by Upjohn B.V. by which heat was applied at low pressure causing a portion of the MDI contained in the crude 390 HOP to vaporize and separate from the remainder of the material. This process, known as evaporation, occurred in a vessel known as a thin film evaporator. The MDI which was thus separated exited through a duct at the top of the thin film evaporator. No changes in molecular structure resulted from this process.

8. The material that remained following separation exited through the bottom of the thin film evaporator, was cooled and sent to storage. It was a mixture of approximately 34.4 percent pure MDI, 26.1 percent triisocyanate, and 39.5 percent higher molecular weight structures.

9. The pure MDI which was separated and exited the top of the thin film evaporator was immediately subjected to a series of processes which further purified it.

10. The material described in paragraph 8 that remained is sometimes described by Upjohn for internal purposes as crude BLD. It is known generally in the trade as polymethylene polyphenyl isocyanate and as polymeric MDI. For purposes of convenience, this material will be referred to throughout this stipulation as crude BLD.

11. The crude BLD was sold by Upjohn B.V. to Upjohn Company (Plaintiff) for $.1962 per lb., exported from the Netherlands and is the subject of this case. It was described on the commercial invoice as "Crude BLD (Polymethylene Polyphenylisocyanate)."

12. The properties of the crude 390 HOP, the pure MDI and the crude BLD are set forth on Schedule "A" attached hereto.³

13. The components of the crude 390 HOP and crude BLD are the same, namely: pure MDI, triisocyanate, and higher molecular weight structures. The relative proportion of triisocyanate and higher molecular weight structures in the crude BLD following separation of a portion of the pure MDI from the crude 390 HOP increased in direct proportion to the amount of pure MDI removed from the crude 390 HOP. The remaining pure MDI in the crude BLD decreased in direct proportion to the amount of pure MDI removed from the crude 390 HOP.

14. The crude BLD remaining after the process described in paragraph 7, following storage as described in paragraph 8, was returned to the United States and blended by Upjohn with other polymeric MDI. The resulting products were known by the Upjohn tradename PAPI. These products were combined with polyols a chemical group having a chain-like molecule containing an available group composed of one oxygen atom and one hydrogen atom and additives to make types of polyurethane which are used to manufacture a variety of products that include furniture, adhesives/sealants, automotive interior trim, foundry core binders, laminated panel cores, insulation, structural foam, refrigeration insulation, particleboard binder, carpet underlay/adhesives and packaging.

15. The pure MDI resulting from the process described in paragraph 7, after further processing as described in paragraph 9, was mixed with other ingredients by Upjohn B.V. to produce products bearing the tradename ISONATE. (These products were not exported to the United States.) ISONATE products are combined with polyols and additives to manufacture types of polyurethane (which are different than those referred to in paragraph 14) which are used to produce a vareity of products such as plastic automotive bumper/fascia, fenders, integral skin plastics, adhesives/sealants, solid tires, shoe soles, roller skate wheels, industrial wheel/rollers, elastic fibers, carpet underlay/adhesives ski boots, and mechanical goods.

16. The polyurethanes described in paragraphs 14 and 15 depend on the presence of the NCO group. The variations in the types of polyurethanes may depend on the chemical structure of the polyols, additives and catalysts which react with the NCO group as well as the isocyanates used.

17. 390 HOP can be, and sometimes is, used as a blending material to produce certain PAPI products of the type referred to in paragraph 14. Such use depends on Upjohn's production needs.

18. The BLD remaining after the separation/evaporation process described in paragraph 7, plus the pure MDI following separation and further processing described in paragraph 9, were more valuable than the exported 390 HOP at the time of exportation. The remaining BLD did not increase in value as a result of the removal of the pure MDI.

19. The crude 390 HOP exported from the United States underwent a change in condition in the Netherlands as a result of the separation of a portion of the pure MDI. This caused the crude BLD to have a more viscous condition, i.e. a thicker consistency, after removal of a portion of the pure MDI. This change in condition is reflected on Schedule "A" in the property described as "Viscosity, CPS @ 25 C°." This change was a physical, not a chemical, change.

20. The crude BLD differs from the crude 390 HOP in isocyanate equivalents, and percentages of pure MDI, triisocyanate and higher molecular weight structures, as listed on Schedule "A".

21. The change in condition which occurred in the Netherlands is also reflected in the property described as "Isocyanate Equivalent (IE)" on Schedule "A". The isocyanate equivalent refers to the average of the equivalent weights of the different molecules present in a given mixture or compound. Pure MDI has an IE of 125 and crude 390 HOP has an IE above 125, due to the presence of the higher molecular weight structures. The removal of a portion of pure MDI (having an IE of 125) results in a greater percentage of molecules of higher equivalent weight in the mass of remaining crude BLD. Since IE reflects an average of the equivalent weights in the compound, the mixture following removal of the MDI has a higher equivalent weight, and therefore a higher IE, than the crude 390 HOP prior to removal of the pure MDI. The different isocyanate equivalents are shown on Schedule "A": 133.7 for the crude 390 HOP prior to separation of the pure MDI and 141.5 for the crude BLD after separation of the pure MDI. The change in IE is directly attributable to the separation of the pure MDI.

22. In a drawback statement dated June 4, 1975 (included herein as Attachment D), Upjohn sought amendment of its drawback rate embodied in T.D. 71-201-J which covers PAPI's manufactured with the use of aniline oil. In the statement, Upjohn stated:

"PAPI (Polymethylene Polyphenylisocyanate) is the group name for several similar, but not exact products listed below:

PAPI Crude 390 HOP Crude BLD PAPI...