CLA-2 OT:RR:CTF:VS H026901 EE
Patricia Hanson
Bryan Cave LLP
161 North Clark Street Suite 4300
Chicago, IL 60601-3315
RE: Revocation of HQ H020437, dated December 10, 2007; subheading 9802.00.50, HTSUS; golf putter heads
Dear Ms. Hanson:
This concerns Headquarters Ruling Letter ("HQ") H020437, dated December 10, 2007, which was issued on behalf of Ping, Inc., concerning the applicability of subheading 9802.00.50, of the Harmonized Tariff Schedule of the United States ("HTSUS"), to putter heads which are processed in China and returned to the U.S. Upon further review of this matter, and in light of additional information that has come to our attention, we have determined that the imported putter heads are eligible for a partial duty exemption under subheading 9802.00.50, HTSUS. Therefore, HQ H020437 is revoked for the reasons set forth in this ruling.
Pursuant to section 625(c), Tariff Act of 1930 (19 U.S.C. § 1625(c)), as amended by section 623 of Title VI (Customs Modernization) of the North American Free Trade Agreement Implementation Act, Pub. L. 103-182, 107 Stat. 2057, 2186 (1993), notice of the proposed revocation of HQ H020437, as described below, was published in the Customs Bulletin on February 19, 2009. No comments were received in response to the notice.
FACTS:
Your request to our office for a ruling, dated June 27, 2007, provided the following facts:
Ping, Inc. produces various models of Redwood putter heads that undergo manufacturing or other processing in Taiwan, the U.S., and, in certain instances, 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 finished Ping putter head. After the U.S. processing, some of the finished putter heads are sold in the U.S. The remainder is exported to China for additional processing.
In China, the putter heads are coated in black nickel, painted with decorative lines, and affixed with the Ping logo. They are then re-imported into the U.S. to be assembled with other component parts into finished golf clubs.
On the basis of your submission, dated June 27, 2007, Customs held in HQ H020437 that the imported putter heads, processed in China, are not eligible for a partial duty exemption under subheading 9802.00.50, HTSUS. In support of this conclusion, Customs stated that coating the putter heads in black nickel changes the quality and adds a significant characteristic to the putter head. Thus, Customs found that the putter heads are not finished for their intended use prior to being exported from the U.S. In light of our ruling, you seek reconsideration of the application of subheading 9802.00.50, HTSUS, to the subject merchandise.
In your letters of April 17, 2008 and December 2, 2008, you claim that there was a factual error in the submission of June 27, 2007 and that application of the black nickel coating is only an aesthetic alteration and does not change the quality of the putter head and make it more anti-corrosive. To support this statement, you submit third-party laboratory tests which state that the black nickel coating does not make the putter heads any more anti-corrosive than when they are uncoated.
Additionally, you state that Ping markets both black nickel coated putter heads and “starshot media” coated putter heads. You state that the unfinished putter heads are more typically used by golfers on the professional tournament circuit; whereas the Redwood putters are offered at retail with either a black nickel or starshot media coating. To establish the fact that some of the putter heads are sold with just the starshot media treatment, you submit two customer order forms for orders of Redwood putters with just the starshot finish. You also provide a company report showing order quantities of putters sold with only the starshot finish during the first eight months of 2008.
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 to the U.S. 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.
With regard to the imported putter heads, the foreign processing involves coating the putter heads in black nickel, painting with decorative lines and affixing the Ping logo. Customs found in HQ H020437 that while the painting and affixing of the logo were merely decorative, coating the putter heads in black nickel changed the quality and added a significant characteristic to the putter head. This processing affected the products’ resistance to corrosion and Ping marketed these putters as having a black nickel chrome finish. Accordingly, Customs found that the putter heads were not finished for their intended use prior to being exported from the U.S. and were not eligible for a partial duty exemption under subheading 9802.00.50, HTSUS.
Based on the new information submitted, it appears that the coating of the putter heads in black nickel in China does not change the quality of the putter heads and does not add a significant characteristic to the putter heads as noted by the third-party empirical tests. In light of this new information, we find that the putter heads are finished for their intended use at the time they are exported to China and are eligible for a partial duty exemption under subheading 9802.00.50, HTSUS.
HOLDING:
On the basis of the additional facts submitted, we find that the imported putter heads, processed as described above in China, are eligible for a partial duty exemption under subheading 9802.00.50, HTSUS, provided that the documentation requirements of 19 CFR § 10.8 are met.
EFFECT ON OTHER RULINGS:
HQ H020437, dated December 10, 2007, is hereby revoked. In accordance with 19 U.S.C. § 1625(c), this ruling will become effective 60 days after publication in the Customs Bulletin.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division