CLA-2 CO:R:C:V 555577 KAC
John N. Politis, Esq.
Politis, Pollack & Doram
680 Wilshire Place, Suite 404
Los Angeles, California 90005
RE: Applicability of duty exemption available under HTSUS
subheading 9801.00.10 to U.S. chip capacitors inspected,
printed and packaged abroad.Packaging;John V. Carr;C.S.D.
89-27(6)(554838);057553;052042;071449;555183
Dear Mr. Politis:
This is in response to your letters dated January 10, and
June 6, 1990, on behalf of Kyocera Northwest, Inc., requesting a
ruling concerning the applicability of subheading 9801.00.10,
Harmonized Tariff Schedule of the United States (HTSUS), to chip
capacitors imported from Mexico. Samples were submitted for
examination.
FACTS:
Kyocera Northwest, Inc. plans on shipping U.S.-manufactured
chip capacitors, and U.S.-origin packaging materials, including a
reel, carrier tape and cover tape for packaging operations in
Mexico. After their manufacture, the chip capacitors are stored
in containers by their capacitance rating in picofarads and then
exported to Mexico. In Mexico, the chips will be inspected under
a microscope for visible physical defects, such as chips, cracks,
scratches at termination points, dust which has permeated the
capacitor, voids, and faulty solder points. If any of these
defects are detected, the chips are rejected and scrapped.
Those chips which pass the inspection will be marked with an
alphanumeric color code to identify the capacitance in
picofarads, placed into the slotted piece of paper tape, covered
with a plastic film for protection, and then wound onto a plastic
reel. Upon completion of these operations, the chip capacitors
will be imported into the U.S.
ISSUE:
Whether the chip capacitors are eligible for the duty
exemption available under HTSUS subheading 9801.00.10 when
imported into the U.S.
LAW AND 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. In United States v.
John V. Carr & Sons, Inc., 69 Cust.Ct. 78, C.D. 4377, 347 F.Supp.
1390 (1972), 61 CCPA 52, C.A.D. 1118, 496 F.2d 1225 (1974), the
court stated that absent some alteration or change in the item
itself, the mere repackaging of the item even for the purpose of
resale to the ultimate consumer, is not sufficient to preclude
the merchandise from being classified under item 800.00, Tariff
Schedules of the United States (TSUS) (the precursor to
subheading 9801.00.10, HTSUS).
In the instant case, we believe that the foreign
operations performed in Mexico are simple packaging operations
that do not advance in value or improve in condition the chip
capacitors. Prior to export from the U.S. the chip capacitors
are fully manufactured products, which have been sorted by their
capacitance rating. We have previously held that
testing/inspecting results in an advancement in value where the
testing is required by law or regulation. See, C.S.D. 89-27(6),
Headquarters Ruling Letter (HRL) 554838 dated October 31, 1988,
which held that electronically testing condoms abroad advances
their value by making an unmarketable product marketable.
However, testing/inspecting merely as part of the manufacturer's
internal quality control is not deemed to advance in value or
improve in condition the product. See, HRL's 057553 dated
November 1, 1979, and 052042 dated July 27, 1979. Therefore,
since the inspection in this case is for the purpose of detecting
physical defects resulting from the manufacturing process, we
believe that it does not advance in value or improve the
condition of the chip capacitors.
It has also been held that foreign stamping or printing of a
product to identify the manufacturer and describe the product
does not advance its value or improve its condition so as to
preclude entry under item 800.00, TSUS. See, HRL 071449 dated
October 17, 1983, which held that surgical drapes stamped in ink
with the name of the company, size, and model number were not
precluded from item 800.00, TSUS, treatment. See, also, HRL
555183 dated February 15, 1989 (printing on a dental floss
dispenser the company name and a description of the floss type,
flavor and length will not preclude 9801.00.10, HTSUS, treatment
for the dispensers.) Color coding the chip capacitors to
identify their capacitance rating is similar to stamping or
printing such identification markings as size and model number.
Therefore, color coding the chip capacitors will not preclude
HTSUS subheading 9801.00.10 treatment.
After inspection and color coding, the chip capacitors are
merely inserted into slotted paper, covered with plastic film and
wound onto a reel. Accordingly, as no aspect of the foreign
operations advances in value or improves in condition the chip
capacitors, they will be eligible for the duty exemption under
HTSUS subheading 9801.00.10.
HOLDING:
On the basis of the information and samples submitted, as
the chip capacitors will not be advanced in value or improved in
condition abroad as a result of the foreign operations, they will
qualify for the duty exemption under HTSUS subheading 9801.00.10,
upon compliance with the documentary requirements of 19 CFR 10.1.
Sincerely,
John Durant, Director
Commercial Rulings Division