CLA-2 CO:R:C:S 556355 SER
Mr. Arthur J. Humphreys
Border Brokerage Co., Inc.
P.O. Box 249
Sumas, WA 98295
RE: Tariff status of a shoe shine kit with box from Canada; HRL
555632; Superscope v. U.S.
Dear Mr. Humphreys:
This is in response to your letter of September 16, 1991, on
behalf of Aroma Cedar Inc., concerning the tariff status of shoe
shine kits to be imported from Canada.
FACTS:
A cedar shoe shine box with three compartments and a handle
is made in Canada. Imported into Canada for incorporation into
the shoe shine kit are two shoe shining brushes and two dauber
brushes made in Brazil, two shoe polishes made in England, and
two shoe shining cloths made in the U.S. The kits are packaged
and sold in the U.S. as "cedar shoe shine kits".
ISSUES:
1. What is the proper classification of the shoe shine kits?
2. Whether the kits are eligible for preferential treatment
under the U.S.-Canada Free Trade Agreement (CFTA).
3. Whether the two shoe shining cloths of U.S. origin will
qualify for the duty exemption provided under subheading
9801.00.10, Harmonized Tariff Schedule of the United States
Annotated (HTSUSA), when returned to the U.S.
LAW AND ANALYSIS:
1. Tariff Classification under the HTSUSA
Classification of goods under the HTSUSA is governed by the
General Rules of Interpretation (GRIs), taken in order. When
goods are prima facie classifiable under two or more headings,
GRI 3 is applicable. In this case, classification is determined
by application of GRI 3(b), which provides:n-2-
[G]oods put up in sets for retail sale, ...shall be
classifiable as if they consisted of the ...component
which gives them their essential character ....
The Explanatory Notes to the HTSUSA constitute the official
interpretation of the tariff at the international level. The
Explanatory Notes to GRI 3(b) provide, in part:
For the purposes of this Rule, the term "goods put in
sets for retail sale" shall be taken to mean goods
which:
(a) consist of at least two different articles
which are, prima facie, classifiable in
different headings;
(b) consist of products or articles put up
together to meet a particular need or carry
out a specific activity; and
(c) are put up in a manner suitable for sale
directly to users without repacking.
The merchandise at issue meets this three part test as they
are, prima facie, classifiable in different headings, packed and
sold together as "cedar shoe shine kits", and put up together to
carry out a specific activity.
It remains to determine what item in the shoe shine kits
constitutes the essential character of the set. In general,
essential character has been construed to mean the attribute
which strongly marks or serves to distinguish what an article is;
that which is indispensable to the structure, core or condition
of the article. In addition, the Explanatory Notes set forth
additional factors in determining the essential character of
goods. Such factors include the material's bulk, quantity,
weight or value, or its role in relation to the use of the goods.
However, the factors which determine essential character will
vary between different kinds of goods.
Based on the cost, bulk, and use of the cedar box, it is our
opinion that the essential character of this set is imparted by
the cedar box. Accordingly, the proper classification of the
cedar shoe shine kit would be subheading 4420.90.4000, HTSUSA,
which provides for tool or utensil cases and similar boxes, cases
and chests of wood, not lined with textile fabrics. The duty
rate applied to articles entered under this subheading is 6.7% ad
valorem, or 4.6% ad valorem for articles from Canada which
satisfy the CFTA's legal requirements.
n -3-
2. Eligibility for Preferential Treatment under the CFTA
To be eligible for tariff preferences under the CFTA,
imported merchandise must qualify as "originating goods" under
the rules of origin in General Note 3(c)(vii)(B), HTSUSA. This
Note states, in relevant part, that goods are considered to be of
Canadian origin for CFTA purposes if they are (1) wholly obtained
or produced in Canada and/or the U.S., or (2) they have been
transformed in the territory of Canada and/or the U.S., so as to
be subject to a change in tariff classification under the rules
of General Note 3(c)(vii)(R), HTSUSA. However, General Note
3(c)(vii)(C)(1), HTSUSA, provides that, even if articles are
considered to be "goods originating in the territory of Canada"
pursuant to General Note 3(c)(vii)(B), HTSUSA, they will not be
eligible for preferential treatment under the FTA "merely by
virtue of having undergone simple packaging or ...combining
operations."
In Headquarters Ruling Letter (HRL) 555632 dated March 18,
1991, Customs ruled on the eligibility for preferential duty
treatment under the FTA of first aid kits from Canada. The kits
contained various articles such as gauze, bandages, tweezers,
etc., some of which were of Canadian and U.S. origin and some of
which were of third-country origin. Customs held that the first
aid kits which contained articles of third-country origin, which
were merely packaged or combined in Canada with the Canadian and
U.S. components precluded the entire set from receiving CFTA
preferential duty treatment. Consistent with HRL 555632, the
simple packaging or combining of the third-country shoe shine
items with the Canadian cedar box and the U.S. shining cloths
will preclude the entire cedar shoe kit from receiving CFTA
tariff treatment.
3. Entitlement of U.S.-manufactured goods to duty-free
treatment under subheading 9801.00.10, HTSUSA, when returned
to the U.S.
Since the shining cloths are of U.S.-origin, and are to be
returned to the U.S. as part of the shoe shine kits, the issue
arises as to whether the cloths are entitled to a duty exemption
as American goods returned. Subheading 9801.00.10, HTSUSA,
provides for the free entry of products of the U.S. that are
exported and returned without having been advanced in value or
improved in condition by any process of manufacture or other
means while abroad, provided the documentary requirements of
section 10.1, Customs Regulations (19 CFR 10.1) are met.
In the case of Superscope, Inc. v. U.S., 13 CIT ___, 727
F.Supp. 629 (1989), the court held that certain glass panels of
U.S. origin that were exported, repacked abroad with certain
foreign components, and returned to the U.S. as part of n-4-
unassembled audio cabinets, were entitled to duty-free entry
under item 800.00, Tariff Schedules of the United States (TSUS)
(now subheading 9801.00.10, HTSUSA). This was based on the fact
that the U.S. panel portion of the imported article was "not
'advanced in value or improved in condition ... while abroad,'
but [was] merely repacked." id. at 631. Although the Superscope
case concerned the TSUS, not the HTSUSA, the decision is believed
to be equally applicable to similar situations arising under the
HTSUSA, since item 800.00, TSUS, and the relevant Schedule 8,
TSUS, headnotes was carried over virtually unchanged into the
HTSUSA.
Applying the rationale of the Superscope case, the mere
packaging of the U.S.-origin shining cloths within the shoe shine
kit neither advances the cloths in value nor improves them in
condition. Therefore, an allowance in duty may be made under
subheading 9801.00.10, HTSUSA, for the cost or value of the U.S.-
origin shine cloths upon their return to the U.S. as part of the
shoe shine kits. This is contingent upon compliance with the
documentation requirements of 19 CFR 10.1 and satisfying the
district director of Customs at the port of entry that the shine
cloths are, in fact, of U.S. origin.
HOLDING:
The shoe shine kits are properly classified in subheading
4420.90.4000, HTSUSA, dutiable at the rate of 6.7% ad valorem.
The kits are not eligible for preferential duty treatment under
the CFTA pursuant to General Note 3(c)(ii)(C), HTSUSA. An
allowance in duty may be made under subheading 9801.00.10,
HTSUSA, subject to the documentation requirements of 19 CFR 10.1,
for the cost or value of the U.S.-origin shine cloths, that are
merely packaged abroad in the kits and returned.
Sincerely,
John Durant, Director