CLA-2:CO:R:C 555241 RA
John J. Scanlon, Jr., Esq.
Kemp, Smith, Duncan & Hammond
2000 MBank Plaza
P.O. Drawer 2800
El Paso, Texas 79999-2800
RE: Applicability of subheading 9801.00.10 or subheading
9802.00.50, HTSUS, to backing paper containing labels
which is cut abroad to length and width
Dear Mr. Scanlon:
This is in response to your letter of December 30, 1988,
requesting a ruling on behalf of Avery Commercial Products
Division, Inc., concerning the tariff treatment of various types
of office labels exported in bulk on backing paper and processed
into small packaged rolls of labels abroad. You also request
advice on the country of origin marking requirements applicable
to the returned product.
FACTS:
Self-adhesive office labels or colored dots affixed to
backing paper, all of U.S. origin, are sent to Mexico in large
rolls which are then fed into an automatic cutting machine which
cuts the backing paper containing the labels or dots into
specified widths and lengths. The resulting small rolls of paper
with the labels or dots attached are inserted into cardboard
boxes of U.S. manufacture. The boxes are exported to Mexico in
finished condition ready to be folded manually and closed after
the rolls have been inserted.
ISSUE:
Will the packaged rolls of labels or dots qualify for tariff
treatment as American goods returned or as altered articles under
the provisions of subheading 9801.00.10, Harmonized Tariff
Schedule of the United States (HTSUS) or subheading 9802.00.50,
HTSUS?
LAW AND ANALYSIS:
Subheading 9801.00.10, HTSUS, provides that products of the
U.S. may be admitted free of duty if they have not been advanced
in value or improved in condition by any process of manufacture
or other means while abroad. It is your contention that this
provision should be applicable to the labels or dots attached to
the backing paper as they are the identical items exported from
the U.S. and have undergone no change while abroad. However, the
backing paper has been cut to both length and width which
processing abroad constitutes an advancement in value and an
improvement in condition. The returned rolls of paper strips
with labels or dots attached are not the same articles which were
exported from the U.S. They have been advanced into a usable,
easily dispensed tape with removable labels or dots which cannot
be constructively segregated from the paper backing. The cutting
of the exported rolls to shorter lengths and specific widths for
retail sale results in a marketable product in an improved
condition. The court decisions cited in your letter did not
involve cutting to length or width. In Headquarters Ruling
Letter 555174, dated April 25, 1989, copy enclosed, we held that
plastic decorated banners cut to shorter lengths and packaged in
Mexico were not eligible for the duty exemption in subheading
9801.00.10, HTSUS, or the partial exemption for altered articles
in subheading 9802.00.50, HTSUS.
To be eligible for treatment under subheading 9802.00.50,
HTSUS, as articles returned after alterations performed abroad,
the articles must have been completed and finished products when
exported from the U.S., and intermediate processing operations
performed to manufacture finished articles are considered to
exceed alterations. Dolliff & Company, Inc. v. U.S., 66 CCPA 77,
C.A.D. 1225, 599 F. 2d 1015 (1979). The cutting of the exported
rolls of labels or dots in order to obtain smaller widths and
lengths constitutes a finishing step in the manufacture of the
completed imported product.
The boxes of U.S. origin into which the finished product
will be packaged in Mexico will be entitled to duty-free
treatment as American goods returned under subheading 9801.00.10,
HTSUS. See Headquarters ruling letter dated November 18, 1988
(HQ 731420).
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
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 the instant case, we believe that for purposes of
marking, the imported rolls of labels are products of the U.S.
Although the exported product is advanced in value and improved
in condition in Mexico by the cutting operation, it is our
opinion that this processing does not substantially transform the
article into a product of Mexico. Accordingly, the returned
labels 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.
HOLDING:
The cutting to width and length of backing paper containing
self-adhesive labels to produce smaller rolls in tape dimensions
constitutes an advancement in value and improvement in condition
exceeding an alteration, and precludes classification under
subheading 9801.00.10 or subheading 9802.00.50, HTSUS. However,
the U.S. boxes will be entitled to duty-free treatment under
subheading 9801.00.10, HTSUS. The returned product is excepted
from the marking requirements of 19 U.S.C. 1304.
Sincerely,
John Durant, Director
Commercial Rulings Division
Enclosure