CLA-2 CO:R:C:V 555174 GRV
9802.00.50, HTSUS (formerly 806.20, TSUS)
Mr. Richard G. Seley
Rudolph Miles & Sons, Inc.
Customhouse Brokers
4950 Gateway East
P.O. Box 144
El Paso, Texas 79942
RE: Applicability of HTSUS subheading 9801.00.10 or HTSUS sub-
heading 9802.00.50 to plastic banner products to be imported
from Mexico
Dear Mr. Seley:
This is in response to your letters of November 4, 1988, and
March 15, 1989, on behalf of Hallmark Marketing Corporation,
requesting a ruling on the applicability of either subheading
9801.00.10 or 9802.00.50, Harmonized Tariff Schedule of the
United States (HTSUS), to plastic decorative banners to be cut to
shorter lengths and packaged in Mexico. You also inquire as to
the proper tariff classification and country of origin marking
requirements for this merchandise. A sample banner was submit-
ted for examination.
FACTS:
You state that decorative banners, bearing repetitive holi-
day greetings, are finished products of U.S. origin. A single
banner greeting measures approximately 32 inches in length and is
repetitively printed approximately 52 times on continuous sheets
of plastic, each measuring 140 feet in length, which are exported
in rolls. The banner rolls and U.S. packaging materials, con-
sisting of plastic baggies and cardboard boxes, will then be sent
to Mexico for packaging. The operations to be performed in
Mexico consist of rolling off as many repetitions of the holiday
greeting as are required (usually 5 to 7), cutting the banner to
length at a right angle, conformity folding the banner to fit
into the 2 inch wide by 4 inch in length baggie, and inserting
the banner into the plastic package for retail sale. These indi-
vidual baggies are then packaged into larger, nonreusable card-
board packing containers of a kind normally used for packaging
such goods.
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ISSUE:
Whether the returned, packaged banners are entitled to the
benefits of either HTSUS subheading 9801.00.10 or 9802.00.50.
LAW & ANALYSIS:
Effective January 1, 1989, the HTSUS superseded and re-
placed the TSUS. TSUS item 800.00 was carried over into the
HTSUS without change as subheading 9801.00.10. This tariff
provision provides for the duty-free entry of U.S. products that
are exported and returned without having been advanced in value
or improved in condition by any means while abroad, provided the
documentary requirements of section 10.1, Customs Regulations (19
CFR 10.1), are met.
TSUS item 806.20 was carried over into the HTSUS, in part,
as subheading 9802.00.50. This tariff provision provides a
partial duty exemption for articles returned to the U.S. after
having been exported to be advanced in value or improved in
condition by means of repairs or alterations (other than under
warranty). Under this tariff provision, there is a duty only
upon the value of the foreign repairs or alterations, provided
the documentary requirements of section 10.8, Customs Regulations
(19 CFR 10.8), are met.
Regarding the duty exemption under HTSUS subheading
9801.00.10, in Border Brokerage Company, Inc. v. United States,
65 Cust.Ct. 50, C.D. 4052, 314 F.Supp. 788, 792 (1970), appeal
dismissed, 58 CCPA 165 (1970), the U.S. Customs Court stated
that:
...the test to be applied in item 800.00 cases is whether
the merchandise of American origin has itself (apart from
its container) been the object of advancement in value or
improvement in condition while abroad.
In the instant case, the exported banner rolls themselves
will be subjected to an operation which results in the merchan-
dise being advanced in value or improved in condition. The ban-
ner product to be packaged abroad is cut to shorter lengths from
a continuous roll of banner messages measuring approximately 140
feet in length. In regard to HTSUS subheading 9801.00.10, we
have previously stated that cutting exported merchandise to
length generally results in advancing it in value or improving it
in condition. Headquarters Ruling Letters 554736 (February 16,
1988) and 554899 (March 4, 1988). In the instant case, decora-
tive banners cut to shorter lengths for retail sale clearly are
more marketable than rolls of banners in 140-foot lengths and
this change in the banners' marketability constitutes an
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improvement in the merchandise's condition. Thus, the returned
banners will not be eligible for the duty exemption available
under HTSUS subheading 9801.00.10.
Regarding the partial duty exemption under HTSUS subheading
9802.00.50, in Dolliff & Company, Inc., v. United States, 66 CCPA
77, C.A.D. 1225, 599 F. 2d 1015 (1979), the U.S. Court of Customs
and Patent Appeals stated that:
...repairs and alterations are made to completed articles
and do not include intermediate processing operations which
are performed as a matter of course in the preparation or
the manufacture of finished articles. (Court's emphasis).
Thus, the focus is upon whether the exported article is
"incomplete" or "unsuitable for its intended use" prior to the
foreign processing. Guardian Industries Corp. v. United States,
3 CIT 9 (1982).
In this case, the sample submitted evidences the fact that
the exported banners are incomplete products since they are
unsuitable for their intended use in the continuous lengths (140
feet) in which they are exported. We have previously held in a
ruling dated September 20, 1983 (HQ 071475), concerning TSUS item
806.20 that:
...where rolls of material are exported and finished goods
are returned merely by cutting to length, this cutting
constitutes a finishing step in the manufacture of the
goods, converting large rolls of raw material to finished,
usable sheets. The conversion from material lengths to
finished products exceeds the meaning of the term
"alterations" under this tariff provision.
See, also, Headquarters Ruling 554736 dated February 16, 1988.
Thus, it is our opinion that the cutting to length operation in
the instant case constitutes a finishing step in the manufacture
of the completed banners, thereby precluding application of HTSUS
subheading 9802.00.50 to the returned merchandise.
Regarding country of origin marking requirements, section
304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304),
generally provides that all articles of foreign origin (or their
containers) imported into the United States are required to be
legibly, conspicuously, and permanently marked to indicate the
country of origin to an ultimate purchaser in the United States.
For purposes of this statute, "country of origin" means the
country of manufacture, product or growth of any article of
foreign origin entering the United States. Further work or
material added to an article in another country must effect a
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substantial transformation in order to render such other country
the "country of origin" (19 CFR 134.1). In Upjohn Co. v. United
States, 623 F.Supp. 1281 (CIT 1985), the U.S. Court of
International Trade stated that:
[e]xported American products retain their identity as
American products, provided they are not transformed into
new products while abroad.
In this case, we believe that for purposes of marking the
imported product is a product of the United States. Although the
exported continuous rolls of banner material are advanced in
value, they are merely processed into finished articles by a
cutting to length operation while abroad, which does not sub-
stantially transform them into products of Mexico. Accordingly,
the returned banners will remain products of the U.S. for country
of origin marking purposes and are excepted from the marking
requirements of 19 U.S.C. 1304.
Your question concerning the tariff classification of the
plastic decorative banners will be addressed in a separate
letter.
HOLDING:
On the basis of the information and sample submitted, we
conclude that the cutting to length operation advances in value
and improves in condition the exported banners. This renders the
returned banners ineligible for the duty exemption available
under HTSUS subheading 9801.00.10. Further, the banners are
incomplete articles as exported and the foreign cutting to length
operation serves as a finishing process. This renders the
returned banners ineligible for the partial duty exemption avail-
able under HTSUS subheading 9802.00.50. Therefore, the returned
banners will be dutiable on their full value. However, the
cutting to length operation does not transform the exported
banner products into new products while abroad. Thus, the
returned banners remain products of the U.S. for country of
origin marking purposes.
Sincerely,
John Durant, Director
Commercial Rulings Division