CLA-2 RR:TC:SM 559639 KBR
TARIFF NO: 9802.00.50, HTSUS
James Taylor, Jr.
Ablondi, Foster, Sobin & Davidow, P.C.
1130 Connecticut Avenue, N.W., Suite 500
Washington, D.C. 20036
RE: Applicability of duty exemption to flashlights imported
into the U.S. from the Philippines and processed in Mexico for
pad printing and packaging.
Dear Mr. Taylor:
This is in response to your letter of January 17, 1996, and
a subsequent meeting on May 30, 1996, on behalf of your client
Black & Decker (U.S.) Inc. ("Black & Decker"), in which you
request a ruling concerning the applicability of subheading
9802.00.50, Harmonized Tariff Schedule of the United States
("HTSUS"), to flashlights imported into the U.S. from the
Philippines and subsequently processed in Mexico for pad
printing/labeling and packaging. You submitted a sample
flashlight for our review.
FACTS:
You state that Black & Decker will import flashlights
manufactured in the Philippines through the Port of Los
Angeles/Long Beach, CA. You state that the flashlights are
classifiable under subheading 8513.10.2000, HTSUS. Further, you
state that the flashlights are eligible for duty-free treatment
under the Generalized System of Preferences ("GSP")(assuming that
Congress reinstates this program), since the Philippines is a
beneficiary country under the GSP. Black & Decker will then
export the flashlights to Mexico where two operations will be
performed on the flashlights.
In the first operation, a product nameplate or label will be
affixed to the underside of the flashlights. The label will
include the product catalog number, the "UL" symbol (signifying
the product is listed with Underwriters Laboratories, Inc.), and
a product warning statement. In the second operation, the Black
& Decker logo and product name will be pad-printed on the
flashlight adjacent to the on/off switch. After the two
operations are performed, the flashlight will be packaged in
blister packaging, placed in master cartons and shipped to the
U.S.
In an affidavit dated June 10, 1996, Clifford Hall, Director
of Marketing - Cordless, Black & Decker (U.S.), Inc., stated that
the placement of the brand name "Black & Decker" on the
flashlight adds a relatively significant value to the flashlight,
thereby increasing its selling price. The affidavit states that,
according to a 1990 magazine article submitted with the
affidavit, "Black & Decker" is the seventh most "powerful" brand
in the U.S. Mr. Hall also states that this "name recognition",
generated by advertising over a period of 85 years, has
established a reputation of quality and value. Further, you
submitted several other newspaper and magazine articles with the
affidavit which extoll the virtues of Black & Decker's "VersaPak"
system, of which the flashlight is only one of the possible tools
using the interchangeable rechargeable battery system.
ISSUE:
Whether the flashlight, when returned to the U.S., will be
eligible for the duty-free treatment pursuant to subheading
9802.00.50, HTSUS.
LAW AND ANALYSIS:
Articles returned to the U.S. after having been exported
to be advanced in value or improved in condition by repairs or
alterations may qualify for the partial or complete duty
exemption under subheading 9802.00.50, HTSUS, provided the
foreign operation does not destroy the identity of the exported
articles or create new or commercially different articles through
a process of manufacture.
Annex 307 of the North American Free Trade Agreement
(NAFTA) and Annex 307.1 of the Agreement provide, that articles
exported from the U.S. to Mexico for "repairs or alterations"
may, upon their return, enter into the U.S. free of duty.
Subheading 9802.00.50, HTSUS, provides a partial or complete
duty exemption for articles exported from and returned to the
U.S. after having been advanced in value or improved in condition
by repairs or alterations, provided the documentary requirements
of section 181.64, Customs Regulations (19 CFR 181.64), are
satisfied. Section 181.64, which implements Article 307 of
NAFTA, provides that goods returned after having been repaired or
altered in Mexico are eligible for duty-free treatment, provided
that the requirements of this section are met. However,
entitlement to this tariff treatment is precluded in
circumstances where the operations performed abroad destroy the
identity of the exported articles or create new or commercially
different articles through a process of manufacture. See A.F.
Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956), aff'g
C.D. 1752, 36 Cust. Ct. 46 (1956); Guardian Industries
Corporation v. United States, 3 CIT 9 (1982).
"Repairs or alterations" for purposes of 19 CFR 181.64 are
defined as:
... restoration, addition, renovation, redying,
cleaning, resterilization, or other treatment which
does not destroy the essential characteristics of, or
create a new or commercially different good from, the
good exported from the United States.
Treatment under subheading 9802.00.50 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, CAD 1225, 599 F.2d
1015 (1979).
Customs held in Headquarters Ruling Letter ("HRL") 063112
dated July 31, 1979, that defective wiring harnesses sent to
Mexico for testing, replacing faulty components, and labeling,
before being returned to the U.S., constituted an acceptable
repair or alteration within the meaning of item 806.20, Tariff
Schedule of the United States ("TSUS") (the predecessor to
section 9802.00.50, HTSUS). The labeling consisted of proper
identification of the components by affixing the proper tags,
decals, part numbers, or plastic labels, to identify the
components. See also T.D. 56320(1) (September 17, 1964)
(electrical diodes exported to Mexico for inspection, evaluation,
and stamping of their electrical diode characteristics were
entitled to treatment under 806.00, TSUS (now 9802.00.50, HTSUS);
HRL 071159 (March 2, 1983) (diodes exported to Mexico for marking
and packaging operations were entitled to treatment under 806.20,
TSUS, as the printing operation had no more significance than a
label for identification purposes); HRL 554996 dated June 30,
1988 (sunglasses exported for inspection, temple adjustment and
retagging were entitled to the partial duty exemption in item
806.20, TSUS). Customs ruled that the operations performed
abroad must amount to a repair or alteration. Mere testing
abroad will not qualify an article for subheading 9802.00.50,
HTSUS, treatment. HQ 555724 (December 17, 1990); see also HQ
055153 (August 17, 1978).
The information submitted by counsel establishes that the
flashlights in this case are suitable for their intended use in
their condition as exported. Therefore, we are persuaded that
the foreign processing operations performed in Mexico in no way
destroy the identity of the exported article or create a new or
different article of commerce or significantly change the
quality, texture or character of the flashlights. The
flashlights retain the identical function as the articles which
are exported into Mexico.
Further, we find that the requirement that the article be
"advanced in value or improved in condition" abroad is satisfied
in this case as the information submitted establishes to our
satisfaction that pad printing the "Black & Decker" name and the
"VersaPak" name onto the flashlight adds a relatively significant
value to the flashlight. The information submitted establishes
that, due to advertising, name recognition, and reputation, the
value of the flashlight is increased when the manufacturer of the
article is identified as Black & Decker. This particular product
is a member of a group of products, VersaPak, all using the same
interchangeable battery pack. A person owning one of the tools
use this battery pack is more likely to purchase another member
of the VersaPak system, and would need to be informed that the
flashlight is a member of that group. Thus, the name VersaPak
has name recognition and value of its own.
Thus, we find that the operations performed in Mexico
constitute proper alterations within the meaning of subheading
9802.00.50, HTSUS, and therefore, the flashlights (including its
packaging materials) are entitled to duty-free treatment when
returned to the U.S., provided the documentary requirements of 19
CFR 181.64 are satisfied.
HOLDING:
Based on the information provided, we find that pad
printing/labeling and packaging the flashlights in Mexico qualify
as alterations within the meaning of subheading 9802.00.50,
HTSUS, and therefore, the flashlights are entitled to duty-free
treatment when returned to the U.S., provided the documentary
requirements of 19 CFR 181.64 are satisfied.
A copy of this ruling letter should be attached to the entry
documents filed at the time this merchandise is entered. If the
documents have been filed without a copy, this ruling should be
brought to the attention of the Customs officer handling the
transaction.
Sincerely,
John Durant Director,
Tariff Classification Appeals
Division