CLA-2 CO:R:C:V 555724 KCC
Leslie A. Glick, Esq.
Porter, Wright, Morris & Arthur
1233 20th Street, N.W.
Washington, D.C. 20036-2395
RE: Applicability of duty exemption available under HTSUS
subheading 9802.00.50 to airbag sensors re-labeled and
tested.Alteration; 055053; 058662; 063112; 200136; T.D.
56320(1); 071159; 554996
Dear Mr. Glick:
This is in response to your letter dated August 21, 1990, on
behalf of PEBAC, S.A. de C.V., Breed Automatic Corporation, and
Parker and Company, requesting a ruling concerning the
applicability of subheading 9802.00.50, Harmonized Tariff
Schedule of the United States (HTSUS), to airbag sensors imported
from Mexico.
FACTS:
Breed Automatic imports airbag sensors into the U.S., which
are electro-mechanical crash sensors designed to activate an
airbag in a crash situation. Breed sometimes returns the airbag
sensors to Mexico for a re-labeling process. The re-labeling is
done, at the request of customers, to conform the label to actual
specifications of the product (e.g., a label may not have the
correct automobile reference marking), engineering changes or for
identification. Occasionally, customers find a defective airbag
sensor in a batch and request that the entire batch be returned
for re-labeling and testing. If a sensor is found to be
defective, it is disposed of and not re-exported into the U.S.
When the re-labeling process occurs, industry requirements
mandate that a testing operation also take place. The re-
labeling process consists of:
1. scanning the old and new label;
2. testing for electrical continuity in the circuits; and
3. scanning the old and new label again;
4. re-labeling with the new label; and
5. entering the new label number into the tracing system.
Upon completion of the re-labeling and testing processes,
the airbag sensors are returned to the U.S.
ISSUE:
Whether the airbag sensors will be eligible for the partial
duty exemption under subheading 9802.00.50, HTSUS, when returned
to the U.S.
LAW AND ANALYSIS:
Subheading 9802.00.50, HTSUS, provides for the assessment of
duty on the value of repairs or alterations performed on articles
returned to the U.S. after having been exported for that purpose.
However, the application of this tariff provision is precluded in
circumstances where the operations preformed abroad destroy the
identity of the articles or create new or commercially different
articles. 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),
Slip Op. 82-4 (Jan. 5, 1982). Subheading 9802.00.50, HTSUS,
treatment is also precluded where the exported articles are
incomplete for their intended use and the foreign processing
operation is a necessary step in the preparation or manufacture
of finished articles. Dolliff & Company, Inc. v. United States,
81 Cust.Ct. 1, C.D. 4755, 455 F.Supp. 618 (1978), aff'd, 66 CCPA
77, C.A.D. 1225, 599 F.2d 1015 (1979).
Mere testing abroad will not qualify the articles for
subheading 9802.00.50, HTSUS, treatment. See, Headquarters
Ruling Letter (HRL) 055153 dated August 17, 1978, (electronic
components which are visually inspected for defects and then
returned to the U.S. are not eligible for treatment under item
800.00 or 806.20, Tariff Schedules of the United States (TSUS)
(the precursor provisions to subheadings 9801.00.10 and
9802.00.50, HTSUS, respectively)). However, when testing is
performed in connection with another operation, such as a
cleaning or repair operation, the articles returned to the U.S.
will be eligible for the duty exemption available under item
806.20, TSUS. See, HRL 055153 (cleaning and testing of
electronic components is permissible under item 806.20, TSUS);
HRL 058662 dated December 29, 1978, (testing and replacement of
parts qualifies as a repair under item 806.20, TSUS); and HRL
063112 dated July 31, 1979, (visual and electronic testing and
repair of defective parts qualifies the returned articles for the
duty exemption available under item 806.20, TSUS).
We have previously ruled that marking or affixing a label to
a product constitutes an alteration. See, T.D. 56320(1) dated
September 17, 1964 (electrical diodes exported to Mexico for
inspection, evaluation, and stamping of their electrical diode
characteristics were entitled to treatment under 806.20, TSUS);
HRL 071159 dated March 2, 1983 (zener diodes exported to Mexico
for marking and packaging operations were entitled to treatment
under item 806.20, TSUS, as the printing operation has no more
significance that a label for identification purposes); and HRL
554996 dated June 30, 1988 (sunglasses exported for inspection,
adjustment, and retagging were eligible for entry under item
806.20, TSUS).
Based on our prior rulings, testing, by itself, does not
constitute an alteration. However, testing accompanied by re-
labeling of the airbag sensors is considered an alteration under
subheading 9802.00.50, HTSUS. In the present case, the airbag
sensors are complete articles when returned to Mexico for the re-
labeling process. The re-labeling and testing are not part of
the original manufacturing operation, but are merely performed to
conform the airbag sensors to the actual specifications of the
product into which the airbag sensors will be installed. The
airbag sensors can be used even if improperly labeled. The re-
labeling and testing operations will not destroy the identity of
the airbag sensors, nor create a new or commercially different
article.
HOLDING:
On the basis of the information submitted, it is our opinion
that the re-labeling and testing operations performed abroad are
considered an alteration. Therefore, the imported airbag
sensors may be entered under subheading 9802.00.50, HTSUS, with
duty only on the value of the foreign processing, upon compliance
with the documentary requirements of section 10.8, Customs
Regulations (19 CFR 10.8).
Sincerely,
John Durant, Director
Commercial Rulings Division