KARACHI: The PCT Committee of the Model Customs Collectorate of Appraisement-East has concluded that acrylic polymer in primary form-370 complies with the description given in heading 32.09 and as such it is appropriately classifiable under sub-heading 3209.1010 being water-based varnish by application of Rule 1 to the General Rules for Interpretation.
According to details, the Adjudication Collectorate vide Order-in-Original No 39 of 2013-14 dated June 12, 2014 had referred a case to the PCT Committee regarding determination of classification of the product declared as acrylic polymer in primary form-370.
The committee held meetings on September 27, 2014 during which the members examined the case record, heard the verbal contentions of the Importer and his advocate, scrutinised the written reply submitted by the importer and his authorised representative and heard the collectorate’s viewpoint. The representative and counsel of the importer argued that in terms of 39.06 to the explanatory notes to the harmonised commodity and coding system, the product is clearly classifiable there under.
They also argued that in terms of definition of the term “primary forms”, as elaborated in the preamble to Chapter-39, heading 39.01 to 39.14 cover goods in primary form only. The expression primary form is defined in Note-6 to Chapter-39. It applies only to liquids, pastes and these may be the basic polymer which requires curing by heat or otherwise to form the finished material, or may be dispersions (emulsions and suspensions) of solutions of the uncured or partly cured materials. Many more arguments were put forward.
The importer’s lawyer submitted a written reply dated October 4, 2014 on behalf of Packages Limited, Lahore which among other things said that acrylic polymer in primary form-370 is being imported from ACTEGA Terra GmbH, Germany and is used as a glazing material for paper and paperboard; the product in question is in the form of liquid/paste and, therefore, covered by Note 6 of Chapter 39; that liquid polymer in primary form-370 imported by the company is not clearly identifiable as being intended for use solely as varnish and therefore it is not excluded from classification under heading 39.06 and that Since the product is not excluded from heading 39.06, there is no question of classification under heading 32.09.
The lawyer also argued that heading 32.09 covers paints and varnishes, including enamels and lacquers based on synthetic polymers or chemically modified natural polymers or chemically modified natural polymers, dispersed or dissolved in an aqueous medium, blended with dispersions or insoluble colouring matter and fillers. The literature or the description of the product does not specify it to be a varnish, nor it is intended chiefly or principally to be used as varnish and, therefore, it cannot be considered for classification under heading 32.09.
He argued that since there is an assumption that it could be used as varnish as well, Note 3 of GIR is required to be adopted and that in terms of GIR 3© of the rules, the goods will qualify for classification under the heading which occurs last in numerical order which in this case is 39.06. It was also argued that the product is also internationally traded under heading 39.06 as is confirmed from the certificate of the supplier and lastly, that there is long standing practice of classifying the said product under heading 39.06 which cannot be arbitrary changed.
The members of the committee were of the view that goods were not of heading 39.06 as it covered goods in primary form as defined in explanatory notes with specific reference to the term “primary forms”. That aqueous emulsions of acrylic polymer in liquid form come under the purview Heading 3906 being primary form of acrylic resin provided it does not contain any other added substances apart from permitted additions to the products of Chapter 39 (that is fillers, plasticizers, solvents, pigments, emulsifiers/stabilizer etc).
After explaining primary forms (liquids and pastes), the important provision given at subsequent paragraph says, “When as a result of the addition of certain substances, the resultant products answer to the description in a more specific heading elsewhere in the Nomenclature, they are excluded from Chapter 39.”
The committee members added that for the classification of “acrylic polymer in primary form-370” as a primary form of acrylic resin under Heading 3906, it is necessary that apart from permitted additions to the products of Chapter-39 (that is fillers, plasticisers, solvents, stabilizers and colouring matter) it should not contain other added substances.
It is pertinent to mention that paints and varnishes (enamels and lacquers) based on synthetic polymers or chemically modified natural polymers, dispersed or dissolved in non-aqueous medium are classified under heading 3208 and in case dispersed or dissolved in aqueous medium as classified under heading 32.09. Besides primary ingredients of colouring matter, solvent and binder, the secondary ingredients are required for the formulation of non-aqueous paints and varnish such as anti-skinning agents, or drying agents, and for aqueous based varnish formulation high performance waxes are required and Antifoam are required to improve slip, rub and scratch resistance and for defect-free finish by controlling crates or fisheyes, such additions make them suitable for use solely as varnish. Reference was made to ACTEGA, the manufacturers of coatings and sealants, who clarified the position vide Certificate of Analysis that Acrylic Polymer in Primary Form-370 contain 30-60% Styrene Acrylic Resin and/or emulsion; 5-10% Polyethylene /Wax; 0.1% Silicon Defoamer; 1-10% Wetting Agent/Sulfosuccinate and 30-50% Water. The Certificate of Analysis confirmed that the product contains Polyethylene Wax and Silicone Antifoam; these added substances are beyond the permitted addition to the products of Chapter-39.
The committee also opined over a number of other issues and in the light of the deliberations, test report, literature, explanatory notes to the HS, concluded that the referred product complies with the description given in heading 32.09 and as such it is appropriately classifiable under sub-heading 3209.1010 being Water-based varnish by application of Rule 1 to the General Rules for Interpretation.
The public notice, dated November 18, 2014, of the same was issued by Additional Collector I Zeba Bashir Ahmed. She is also the chairperson of the Classification Committee.