CLA-2 CO:R:C:V 555520 KCC
R. Brian Burke, Esq. Rode & Qualey 295 Madison Avenue New York, New York 10017
RE: Tariff treatment and the applicable duty exemptions for the "E-Z Prep Kit" and the "Safe Start IV Start Pak".GRI 3(c); 083137; assembly; sonic welding; 554885; packaging; Superscope; 058345/058346
Dear Mr. Burke:
This is in response to your letters of October 31, 1989, and March 16, 1990, on behalf of Becton Dickinson and Company, requesting a ruling on the applicability of subheadings 9802.00.80 and 9801.00.10, Harmonized Tariff Schedule of the United States (HTSUS), to "E-Z Prep Kit" and "Safe Start IV Start Pak" to be imported from Mexico. Samples were submitted for examination. We regret the delay in responding to your request.
FACTS:
A wholly-owned subsidiary of Becton Dickinson and Company, Deseret Medical, Inc., will export various articles and packaging materials of U.S. origin, and latex gloves of Taiwanese origin to Mexico for assembly and packaging operations. Becton plans on producing kits and paks which will be used for cleaning and sterilizing patients prior to performing medical procedures. The products under consideration are the "E-Z Prep Kit" and the "Safe Start IV Start Pak". However, there will be eighteen different variations to the "E-Z Prep Kit" and fifteen different variations to the "Safe Start IV Start Pak".
The contents of the "E-Z Prep Kit" under consideration are a blue hospital wrap (coated paper), slit urethane sponges, stick sponges, compartmentalized plastic trays, a white paper hospital wrap, seamless latex gloves, paper towels, blue blotting towels, and six-inch wooden applicator sticks with cotton tips.
The contents of the "Safe Start IV Start Pak" under consideration are seamless latex gloves, a tegaderm transparent dressing, an alcohol wipe, a povidine-iodine topical skin prep solution, an ointment containing povidone-iodine, a latex tourniquet, gauze sponges, a roll of plastic tape, and an ID label.
In Mexico, the U.S.-origin urethane head and plastic stick will be sonically welded together, and then packaged with the other specified products to form the "E-Z Prep Kit". The packaging operation for the "E-Z Prep Kit" entails inserting the products into a plastic bag and then sealing the bag. The packaging operation for the "Safe Start IV Start Pak" entails using a multivac blister-type packaging machine which creates a blister in plastic roll stock in which the products are inserted, and adhesively applying a paper lid to complete the package.
Upon completion of the packaging operations, the "E-Z Prep Kit" and "Safe Start IV Start Pak" will be imported into the U.S. In the U.S., the kit and pak will be subjected to a sterilization process without being removed from their packaging.
ISSUE:
1. What is the tariff classification of the "E-Z Prep Kit" and "Safe Start IV Start Pak"?
2. Whether the "E-Z Prep Kit" and "Safe Start IV Start Pak" will qualify for the duty exemptions available under HTSUS subheadings 9802.00.80 and 9801.00.10 when returned to the U.S.
LAW AND ANALYSIS:
I. Classification of "E-Z Prep Kit" and "Safe Start IV Start Pak"
The General Rules of Interpretation (GRI's) set forth the manner in which merchandise is to be classified under the HTSUS. GRI 1 requires that classification be determined first according to the terms of the headings of the tariff and any relative section or chapter notes and, unless otherwise required, according to the remaining GRI's, taken in order.
GRI 3 states, in pertinent part:
When by application of Rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be affected as follows:
(a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only ... of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.
Since the two kits at issue consist of, at least, both paper and plastic articles, which are separately provided for in the HTSUS, GRI 3(b) applies as follows:
[G]oods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.
The Explanatory Notes constitute the official interpretation of the HTSUS at the international level. Explanatory Note (X) to GRI 3(b) states that the term "goods put up in sets for retail sale" means goods which:
(a) consist of at least two different articles which are, prima facie, classifiable in different headings;
(b) consist of products or articles put up together to meet a particular need or carry out a specific activity;
(c) are put up in a manner suitable for sale directly to users without repackaging.
In this case, the "E-Z Prep Kit" and the "Safe Start IV Start Pak" qualify as sets within the meaning of GRI 3. Both the "E-Z Prep Kit" and "Safe Start IV Start Pak" consist of at least two different articles which are classifiable in different headings. The kits contain products which are intended for use during specific medical procedures. And, although these kits as imported are "not suitable for sale directly to users" due to the fact that they must first be sterilized, sterilization of goods while still in the packages is not considered "constructive unpacking and repacking" so as to disqualify these kits as sets. See, Headquarters Ruling Letter 083137 (HRL) dated October 31, 1989.
Since the "E-Z Prep Kit" and the "Safe Start IV Start Pak" are sets, and classification of their component parts cannot be made pursuant to GRI 3(a), we must determine the essential character of each set in accordance with GRI 3(b).
Explanatory Note VIII to GRI 3(b) states that: The factor which determines essential character will vary as between different kinds of goods. It may, for example, be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of a constituent material in relation to the use of the goods.
In this case, the essential characters of the "E-Z Prep Kit" and the "Safe Start IV Start Pak" are not readily apparent. Each component plays a role in the medical purpose for which the sets are designed. No single item imparts a unique character to the function of either set as a whole, and, moreover, none of the factors given prove determinative in any respect.
When, as in the instant case, the component which gives the goods at issue their essential character cannot be determined, classification is ascertained by utilizing GRI 3(c). GRI 3(c) provides as follows:
When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.
The competing provisions for the "E-Z Prep Kit" are found under the following subheadings:
1. Hospital wraps 4823.90.65, HTSUS - articles of coated paper, other. 2. Urethane sponges 3005.90.50, HTSUS - wadding, gauze, bandages and similar articles, put up in forms or packings for retail sale for medical, surgical purposes, other, other. 3. Stick sponges 3926.90.90, HTSUS - other articles of plastics, other, other. 4. Plastic trays 3923.90.00, HTSUS - articles for the conveyance or packing of goods, of plastic, other. 5. Latex gloves 4015.10.00, HTSUS - articles of apparel and clothing accessories, for all purposes, of vulcanized rubber, other than hard rubber, gloves, surgical and medical. 6. Paper and blotting 4818.20.20, HTSUS - towels of paper. 7. Wooden applicator 4221.90.90, HTSUS - articles of stick wood, other, other.
The competing provision for the "Safe Start IV Start Pak" are found under the following subheadings: 1. Latex gloves 4015.10.00, HTSUS - articles of apparel and clothing accessories, for all purposes, of vulcanized rubber, other than hard rubber, gloves, surgical and medical. 2. Tegaderm transparent 3005.90.10, HTSUS - wadding, gauze, dressing/alcohol wipe bandages and similar articles, impregnated or coated with pharmaceutical substances, other, coated or impregnated with pharmaceutical substances. 3. Skin prep solution 3004.90.60.90, HTSUS - medicaments ointment containing consisting of mixed or unmixed povidine-iodine products for therapeutic or prophylactic uses, put up in measured doses for in forms or packings for retail sale, other, other, other. 4. Latex tourniquet 4014.90.50, HTSUS - hygienic or pharmaceutical articles, of vulcanized rubber other than hard rubber, other, other. 5. Gauze sponges 3005.90.50, HTSUS - wadding, gauze, bandage and similar articles put up in forms or packings for retail sale for medical, surgical purposes, other, other. 6. Plastic tape 3919.90.50.50, HTSUS - adhesive tape of plastic, other, other, other. 7. ID label 4821.10.40, HTSUS - for paper and paperboard labels of all kinds, whether printed or not printed, printed, other.
The classification of the products containing paper were based on visual examination of the products. Applying GRI 3(c), the "E-Z Prep Kit" is classified under Heading 4823, and the "Safe Start IV Start Pak" is classified under Heading 4821, both of which appear last in numerical order among the competing headings which equally merit consideration.
II. Applicability of subheadings 9802.00.80 and 9801.00.10, HTSUS
HTSUS subheading 9802.00.80 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, lubrication, 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 duty upon the full value of the imported assembled article, less the cost or value of such U.S. components, upon compliance with the documentary requirements of section 10.24, Customs Regulations (19 C.F.R. §10.24).
Section 10.16(a), Customs Regulations (19 C.F.R. §10.16(a)), provides that the assembly operation performed abroad may consist of any method used to join or fit together solid components, such as welding, soldering, riveting, force fitting, gluing, laminating, sewing, or the use of fasteners.
The sonic welding operation is considered an acceptable assembly operation pursuant to 19 C.F.R. §10.16(a). See also, HRL554885 dated February 23, 1990, which held that sonic welding is clearly analogous to the assembly operations enumerated in 19 C.F.R. §10.16(a). Therefore, the stick sponge is entitled to an allowance in duty for the cost or value of the urethane head and plastic handle under HTSUS subheading 9802.00.80 when imported into the U.S. in the "E-Z Prep Kit."
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 C.F.R. §10.1), are met. In Superscope, Inc. v. United States, 13 CIT , 727 F.Supp. 629 (CIT 1989), the court found that glass panels of U.S. manufacture that were exported, packaged with other components of foreign origin to make unassembled stereo cabinets, and then imported into the U.S. as an entirety were not advanced in value or improved in condition while abroad, but were merely repacked. Therefore, the court held that the glass panels were entitled to duty free entry under item 800.00, Tariff Schedules of the United States (TSUS) (the precursor provision to HTSUS subheading 9801.00.10).
With the exception of the assembly of the stick sponges, the operations performed in Mexico to create the "E-Z Prep Kit" consist merely of repackaging the U.S. products with the Taiwanese latex gloves and the assembled stick sponge. We have previously held that blister packaging operations do not preclude the entry of the blister packaging material under item 800.00, TSUS. See, HRL 058345/058346 dated April 19, 1978. Therefore, as the mere packaging of U.S. products with other products does not advance in value or improve in condition the U.S. products, the portion of the Kit or Pak consisting of U.S. products (excluding the assembled stick sponge) will be eligible for the duty exemption under HTSUS subheading 9801.00.10. This assumes that the documentation requirements of 19 C.F.R. §10.1 are met and that the district director of Customs at the port of entry is satisfied of the U.S. origin of each product claimed to be entitled to this duty exemption.
Based on the foregoing discussion, we find that the "E-Z Prep Kit" is dutiable on its full value (at the rate of 5.6 percent ad valorem under subheading 4823.90.65, HTSUS), less the cost or value of the urethane head and plastic handle comprising the assembled stick sponge pursuant to subheading 9802.00.80, HTSUS. Additionally, a classification allowance may be made under subheading 9801.00.10, HTSUS, for the value of the U.S. articles that are merely repackaged abroad.
The "Safe Start IV Start Pak" is dutiable on its full value (at the rate of 4.2 percent ad valorem under subheading 4821.10.40, HTSUS), with a classification allowance for the value of the U.S. articles that are merely packaged abroad and returned under subheading 9801.00.10, HTSUS.
HOLDING:
On the basis of the information and samples provided, the "E-Z Prep Kit" is classified in accordance with GRI 3(c) under subheading 4823.90.65, HTSUS, dutiable at the rate of 5.6 percent ad valorem. Allowances in duty may be made for the cost or value of the urethane head and plastic handle under subheading 9802.00.80, HTSUS, and for the value of the U.S. articles that are merely packaged abroad under subheading 9801.00.10, HTSUS.
The "Safe Start IV Start Pak" is classified in accordance with GRI 3(c) under subheading 4821.10.40, HTSUS, dutiable at the rate of 4.2 percent ad valorem, with a classification allowance under subheading 9801.00.10, HTSUS, for the value of the U.S. articles that are merely packaged abroad.
The above allowances in duty presume compliance with the applicable documentation requirements of 19 C.F.R. §10.1 and 19 C.F.R. §10.24.
Sincerely,
John Durant, Director
Commercial Rulings Division