CLA-2 CO:R:C:V 555093 DBI
Mr. Mark D. Alcorn
One Marlton Court
Sacramento, California 95831
RE: Applicability of subheading 9802.00.50, HTSUS, to wooden
parts of furniture kits shipped to Mexico to be stained and
lacquered
Dear Mr. Alcorn:
This is in response to your letter of August 1, 1988, in
which you request a ruling concerning the applicability of item
806.20, Tariff Schedules of the United States (TSUS), to certain
wooden parts of furniture kits which will be shipped to Mexico to
be stained, lacquered and packaged.
FACTS:
You advise that U.S. origin woods will be cut, shaped and
sanded in the U.S. in preparation for the application of a wood
finish. The wooden parts along with stains, lacquers, and
prelabelled retail kit boxes will be shipped to Mexico.
In Mexico, the wooden parts will be stained, lacquered and
put into kits, and then returned to the U.S. for retail sale.
You note that some articles are sold "unfinished" (without stain
and lacquer) to some of the same retailers who purchase the
finished kits.
ISSUE:
Whether the described wooden furniture parts, when returned
to the U.S., will be eligible for the partial exemption from duty
provided for in subheading 9802.00.50, Harmonized Tariff Schedule
of the United States (HTSUS) (806.20, TSUS).
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LAW AND ANALYSIS:
As you are probably aware, the HTSUS replaced the TSUS, on
January 1, 1989. Item 806.20, TSUS, was carried over into the
HTSUS as subheadings 9802.00.40 (repairs or alterations made
pursuant to warranty) and 9802.00.50 (other repairs or
alterations). A copy of the pertinent provisions is enclosed for
your information. These provisions provide for the assessment of
duty on the value of repairs or alterations performed on articles
returned to the U.S. after having been exported for that purpose.
However, the application of these tariff provisions is precluded
in circumstances where the operations performed abroad destroy
the identity of the articles or create new or commercially
different articles. See A.F. Burstrom v. United States, 44 CCPA
27, C.A.D. 631 (1957); Guardian Industries Corporation v. United
States, 3 CIT 9, Slip-Op 82-4 (Jan. 5, 1982). Treatment under
subheadings 9802.00.40 and 9802.00.50, HTSUS, also is precluded
where the exported articles are incomplete for their intended use
and the foreign processing operation is a necessary step in the
preparation or manufacture of finished articles. Dolliff and
Company, Inc. v. United States, 66 CCPA 77, C.A.D. 1225, 599
F.2d 1015 (1979).
We have previously held in a ruling dated June 28, 1988 (HQ
555002), that item 806.20, TSUS, was precluded where door knobs
and rosettes were sent to Mexico for electroplating through a
liquid bath process and spray lacquering. As you will note from
the enclosed copy, we reasoned that the exported articles were
incomplete for their intended use and the electroplating and
lacquering were a necessary step in the preparation of the
finished product.
In the present case, the wooden furniture parts will be
incomplete when they are sent to Mexico for finishing operations,
namely the staining and lacquering. That some of the same
retailers who purchase the stained and lacquered furniture parts
also buy furniture kits containing parts that have not been
stained or lacquered, does not change the fact that these foreign
processing operations are necessary to the preparation of the
finished articles. Therefore, the staining and lacquering
processes constitute operations that exceed an alteration based
on the Dolliff decision.
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HOLDING:
On the basis of the information submitted, it is our
opinion that the foreign staining and lacquering may not be
considered an alteration as that term is used in subheading
9802.00.50, HTSUS, thereby precluding the returned wooden
furniture parts from receiving the benefits of this tariff
provision.
Sincerely,
John Durant
Director, Commercial
Rulings Division
Enclosures