CLA-2 CO:R:C:V 555509 KAC
Mr. David S. Simpson, Jr.
William F. Joffroy Customs Brokers, Inc.
Nogales Foreign Trade Zone
P.O. Box 698
Nogales, Arizona 85628-0698
RE: Applicability of duty exemption under HTSUS subheading
9801.00.10 and subheading 9802.00.80 to "Hilari-Tees" to be
imported from Mexico.
Dear Mr. Simpson:
This is in response to your letter of October 20, 1989, on
behalf of U.S. Leisure Products, requesting a ruling on the
applicability of subheading 9801.00.10, Harmonized Tariff
Schedule of the United States (HTSUS), to golf tees wrapped with
pieces of paper printed with jokes ("Hilari-Tees") to be imported
from Mexico. Samples of the "Hilari-Tees" were submitted.
FACTS:
You state that U.S. Leisure Products intends to ship golf
tees, pieces of paper printed with jokes, glue, and plastic
boxes, all of which are U.S. products, to Mexico for foreign
operations. The foreign operations performed in Mexico will be:
(1) place the golf tee on the edge of the paper which
contains glue;
(2) roll paper around golf tee;
(3) put a spot of glue on paper so that it will not
unravel; and
(4) place golf tees into plastic box.
After the foreign operations are completed the "Hilari-Tees" will
be imported into the U.S.
ISSUE:
Whether the U.S. products to be exported will qualify for
the duty exemption available under HTSUS subheading 9801.00.10 or
subheading 9802.00.80 when returned to the United States.
LAW & ANALYSIS:
HTSUS subheading 9801.00.10 provides for the free entry of
U.S. products that are exported and returned without having been
advanced in value or improved in condition by any means while
abroad, provided the documentary requirements of section 10.1,
Customs Regulations (19 CFR 10.1), are met. While some change in
the condition of the product while it is abroad is permissible,
operations which either advance the value or improve the
condition of the exported product render it ineligible for duty
free entry upon return to the U.S. See, Border Brokerage Company
Inc. v. United States, 65 Cust.Ct. 50, C.D. 4052, 314 F.Supp.
788, (1970), appeal dismissed, 58 CCPA 165 (1970). In Air
Carrier Supply Corporation, Carmas Supply Corporation v. United
States, 35 Cust.Ct. 173, C.D. 1740 (1955), aff'd, 44 CCPA 116,
C.A.D. 647 (1957), the court stated that the question of whether
merchandise is advanced in value or improved in condition by a
manufacturing process is one of fact and that the burden is on
the importer to show, as a matter of fact, that there has been no
advance in value or improvement in condition in the article for
which he is seeking free entry.
In the instant case, we believe that the foreign operations
performed in Mexico advance in value and improve in condition the
exported product. Attaching the paper with the joke to the golf
tee by gluing converts the golf tee and printed joke into a new
and different commercial article, a novelty item, whose value
when imported surely is greater than the value of the separated
golf tee and paper exported to Canada. In sum, we are not
persuaded by the information provided that the "Hilari-Tees" have
not been advanced in value or improved in condition by the
operations performed in Mexico.
However, the information submitted indicates that an
allowance in duty for the value of the U.S. components may be
made under HTSUS subheading 9802.00.80 upon importation of the
"Hilari-Tees" from Mexico. This tariff provision provides a
partial duty exemption for:
[a]rticles assembled abroad in whole or in part of
fabricated components, the product of the United States,
which (a) were exported in condition ready for assembly
without further fabrication, (b) have not lost their
physical identity in such articles by change in form, shape,
or otherwise, and (c) have not been advanced in value or
improved in condition abroad except by being assembled and
except by operations incidental to the assembly process such
as cleaning, lubricating, and painting.
All three requirements of HTSUS subheading 9802.00.80 must be
satisfied before a component may receive a duty allowance. An
article entered under this tariff provision is subject to a duty
upon the full value of the imported assembled article, less the
cost or value of the U.S. components assembled therein, provided
there has been compliance with the documentation requirements of
section 10.24, Customs Regulations (19 CFR 10.24).
In the instant case, the description of the foreign
operations show that the U.S. components will be eligible for
the partial duty exemption of subheading 9802.00.80, HTSUS. The
operation of gluing one edge of the paper to the golf tee,
winding the paper around the tee, and gluing the paper to itself
to prevent unraveling securely affixes the paper to the golf tee
until it is removed by the consumer. These operations are
considered assembly operations. See, section 10.16(a), Customs
Regulations (19 CFR 10.16(a)) and General Instrument Corporation
v. United States, 61 CCPA 86, C.A.D. 1128, 499 F.2d 1318 (1974),
rev'g, 70 Cust.Ct. 151, C.D. 4421, 359 F.Supp. 1390 (1973), which
held that winding and taping wire (to prevent unraveling) are
considered assembly operations. Although the printed joke is not
meant to be permanently attached to the golf tee, this will not
disqualify the assembled article from the benefit of this tariff
provision. See, Mattel, Inc. v. United States, 67 CCPA 74,
C.A.D. 1248, 624 F.2d 1076 (1980), rev'g, 82 Cust.Ct. 234, C.D.
4805, 475 F.Supp. 683 (1979), which held that phonograph records
packaged in envelopes and stapled to talking toy phones were
classifiable under item 807.00, TSUS (now subheading 9802.00.80,
HTSUS). In Mattel, the records were not meant to be permanently
attached to the toy phone. As the U.S. components are in a
condition ready for assembly without further fabrication, do not
lose their physical identities in the assembly operations, and
are not otherwise advanced in value or improved in condition
except by assembly operations, the returned "Hilari-Tees" will be
eligible for the partial duty exemption under HTSUS subheading
9802.00.80.
HOLDING:
On the basis of the information and samples submitted, as
the U.S. components will be advanced in value and improved in
condition abroad as a result of the foreign operations, the
"Hilari-Tees" will not qualify for the duty exemption under
HTSUS subheading 9801.00.10. However, allowances in duty may be
made under HTSUS subheading 9802.00.80 for the cost or value of
the U.S. tees and printed jokes when the assembled articles are
returned to the U.S., upon compliance with the applicable Customs
Regulations (19 CFR 10.11-10.24). The U.S. packaging materials,
including the plastic boxes, are entitled to free entry under
subheading 9801.00.10, HTSUS.
Sincerely,
John Durant, Director
Commercial Rulings Division