CLA-2 OT:RR:CTF:VS H020437 KSG
Stanley J. Marcus, Esq.
Bryan Cave LLP
700 Thirteenth Street NW
Washington, D.C. 20005
RE: Subheading 9802.00.50; golf putter heads
Dear Mr. Marcus:
This is in response to your letter of August 24, 2007, on behalf of Ping, Inc., requesting a binding ruling regarding the applicability of subheading 9802.00.50, of the Harmonized Tariff Schedule of the United States ("HTSUS"), to imported putter heads.
FACTS:
Ping Inc. produces various models of redwood putter heads that undergo manufacturing or other processing in Taiwan, the United States, and China. The putter heads are forged in Taiwan and then imported into the U.S.
In the U.S., the putter heads are milled, rough edges are smoothed, a hosel hole is drilled and the Ping logo is engraved into the piece. You state that this results in a usable Ping putter head. These putter heads are then shipped to China for processing.
In China, the putter heads are coated in black nickel, painted with decorative lines and affixed with the Ping badge/logo. They are then re-imported into the U.S. to be assembled with other component parts into finished golf clubs.
The Taiwan processing costs roughly half for each putter head models of the U.S. processing costs. The Chinese processing costs are roughly 6% of the U.S. processing costs for each putter head.
You state that the quality of the putter head is enhanced somewhat because the Chinese plating aids in the resistance of corrosion and may improve the putter head’s appearance but the plating is not required under any industry standard or athletic association standard.
You state that the putter heads are classified in subheading 9506.39.0060, HTSUS.
You ask if these re-imported putter heads are eligible for a partial duty exemption under subheading 9802.00.50, HTSUS.
ISSUE:
Whether the imported putter heads are eligible for the partial duty exemption under subheading 9802.00.50, HTSUS.
LAW AND ANALYSIS:
Subheading 9802.00.50, HTSUS, provides a partial duty exemption for articles that are returned after having been exported to be advanced in value or improved in condition by means of repairs or alterations, provided that the documentary requirements of 19 CFR 10.8 are met. For qualifying articles, duty is assessed only on the cost or value of the foreign processing.
However, in circumstances where the operations abroad destroy the identity of the exported article or create a new or commercially different article, entitlement to subheading 9802.00.50, HTSUS, is precluded. See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956), aff’d C.D. 1752, 36 Cust. Ct. 46 (1956); Guardian Industries Corporation v. United States; 3 CIT 9 (1982). Additionally, entitlement to this tariff treatment is not available where the exported articles are incomplete for their intended purposes prior to their foreign processing and the foreign processing is a necessary step in the preparation or manufacture of the finished articles. Dolliff & Company, Inc. v. United States, 455 F. Supp. 618 (CIT 1978), aff’d, 599 F.2d 1015 (Fed. Cir. 1979).
At issue in Guardian Industries was the question of whether U.S.-produced annealed glass subjected to a tempering process in Canada to create sliding glass patio doors qualified as an “alteration” under item 806.20, TSUS (the precursor to subheading 9802.00.50). The court noted that glass must be tempered (i.e. strengthened) for practical safety use reasons and to conform to U.S. federal regulations before it could be marketed for use in sliding glass patio doors. The court concluded that the tempering process was not an alteration because the exported raw annealed glass was not a completed article and “completely unsuitable for their intended use.”
In Dolliff & Company, Inc. v. United States, 81 Cust. Ct. 1, 455 F. Supp. 618 (1978), aff’d 66 CCPA 77, 599 F.2d 1015 (1979), the issue presented was whether certain U.S.-origin Dacron polyester fabrics which were exported to Canada as griege goods for heat setting, chemical scouring, dyeing and treating with chemicals, were eligible for the partial duty exemption under item 806.20, TSUS, when returned to the U.S. The court found that the processing steps performed on the exported griege goods were undertaken to produce finished fabric and could not be considered as alterations. The court stated that:
…repairs or 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 manufacture of finished articles.
In Amity Fabrics, Inc. v. United States, 43 Cust. Ct. 64, “pumpkin” colored fabrics were exported to Italy to be redyed black since the pumpkin color had gone out of fashion and black was a consistently good seller. The court held that the identity of the goods was not lost or destroyed by the dying process, and that no new article was created since there was no change in the character, quality, texture, or use of the merchandise; it was merely changed in color. The court held that such change constituted an alteration.
In Royal Bead Novelty Co. v. United States, 342 F. Supp. 1394(1972), uncoated glass beads were exported so that they could be half-coated with an Aurora Borealis finish which imparted a rainbow-like luster to the half-coated beads. The court found that the identity of the beads was not lost or destroyed in the coating process and no new article was created. Moreover, there was no change in the beads’ size, shape, or manner of use in making articles of jewelry (evidence was presented which indicated that both uncoated and half-coated beads were used interchangeably). Accordingly, the court held that the application of the finish constituted an alteration.
In this case, the foreign processing involves coating the putter heads in black nickel, painting with decorative lines and affixing the Ping badge/logo. While the painting and affixing of the logo are merely decorative, coating the putter heads in black nickel changes the quality and adds a significant characteristic to the putter head. Counsel acknowledges that this processing affects the products’ resistance to corrosion and we note that Ping markets these putters as having a black nickel chrome finish. Accordingly, we find that the putter heads in question are not finished for their intended use prior to being exported from the U.S. and are not eligible for a partial duty exemption under subheading 9802.00.50, HTSUS.
HOLDING:
The imported putter heads, processed as described above in China, are not eligible for a partial duty exemption under subheading 9802.00.50, HTSUS.
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 official handling the transaction.
Sincerely,
Monika R. Brenner
Chief, Valuation & Special Programs Branch