SERVICE ADDS EPICHLOROHYDRIN AND ALLYL CHLORIDE TO TAXABLE SUBSTANCES LIST.

Notice 94-65

TAX ON CERTAIN IMPORTED SUBSTANCES; NOTICE OF DETERMINATIONS

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice.

SUMMARY: This notice announces determinations, under Notice 89-61, that the list of taxable substances in section 4672(a)(3) will be modified to include epichlorohydrin and allyl chloride.

EFFECTIVE DATE: This modification is effective October 1, 1992.

FOR FURTHER INFORMATION CONTACT: Tyrone J. Montague, Office of Assistant Chief Counsel (Passthroughs and Special Industries), (202) 622-3130 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

BACKGROUND

Under section 4672(a), an importer or exporter of any substance may request that the Secretary determine whether such substance should be listed as a taxable substance. The Secretary shall add such substance to the list taxable substances in section 4672(a)(3) if the Secretary determines that taxable chemicals constitute more than 50 percent of the weight, or more than 50 percent of the value, of the materials used to produce such substance. This determination is to be made on the basis of the predominant method of production. Notice 89-61, 1989-1 C.B. 717, sets forth the rules relating to the determination process.

DETERMINATION

On May 23, 1994, the Secretary determined that epichlorohydrin and allyl chloride should be added to the list of taxable substances in section 4672(a)(3), effective October 1, 1992.

The rate of tax prescribed for epichlorohydrin, under section 4671(b)(3), is $8.58 per ton. This is based upon a conversion factor for propylene of 0.61, a conversion factor for chlorine of 1.98, and a conversion factor for sodium hydroxide of 0.96.

The rate of tax prescribed for allyl chloride, under section 4671(b)(3), is $6.45 per ton. This is based upon a conversion factor for propylene of 0.66 and a conversion factor for chlorine of 1.20.

The petitioner is Dow Chemical Company, a manufacturer and exporter of these substances. No material comments were received on these petitions. The following information is the basis for the determinations.

EPICHLOROHYDRIN

HTS number: 2910.30.00.00

CAS number: 106-89-8

Epichlorohydrin is derived from the taxable chemicals propylene, chlorine, and sodium hydroxide. Epichlorohydrin is a liquid produced predominantly by the chlorohydration of allyl chloride, which is obtained by chlorination of propylene, followed by the hydrochlorination of the formed dichlorohydrin.

The stoichiometric material consumption formula for epichlorohydrin is:

(propylene) + 2 (chlorine) + (sodium hydroxide) ---> (epichlorohydrin) + (hydrogen chloride) + (sodium chloride)

Epichlorohydrin has been determined to be a taxable substance because a review of its stoichiometric material consumption formula shows that, based on the predominant method of production, taxable chemicals constitute 100 percent by weight of the materials used in its production.

ALLYL CHLORIDE

HTS number: 2903.29.00.00

CAS number: 107-05-1

Allyl chloride is derived from the taxable chemicals propylene and chlorine. Allyl chloride is a liquid produced predominantly by noncatalytic flow-pressure, high temperature chlorination of propylene.

The stoichiometric material consumption formula for allyl chloride is:

(propylene) + (chlorine) ---> (allyl chloride) + (hydrogen chloride)

Allyl chloride has been determined to be a taxable substance because a review of its stoichiometric material consumptions formula shows that, based on the predominant method of production, taxable chemicals constitute 100 percent by weight of the material used in its production.

                                   Dale D. Goode.