CLA-2 CO:R:C:S 556555 RAH
Richard Haroian
Senior Counsel
Sony Corporation of America
Sony Drive
Park Ridge, New Jersey 07656
RE: Applicability of duty exemption under subheading
9802.00.50, HTSUS, to certain blank magnetic tapes
exported to Mexico for repackaging
Dear Mr. Haroian:
This is in response to your letter of February 28, 1992,
requesting a ruling under subheading 9802.00.50, Harmonized
Tariff Schedule of the United States (HTSUS), concerning certain
blank magnetic tapes which are exported to Mexico for
repackaging.
FACTS:
You state that your client imports certain blank audio and
video tapes as well as other blank recording media (e.g. floppy
disks or data cartridges) from Japan or France. At the time of
importation into the United States, the tapes and other media are
completed articles and individually shrink wrapped. The articles
are classified under subheading 8523.90.00, HTSUS. After
importation into the United States, some of the imported tapes
are sent to your client's maquiladora plant in Mexico for
repackaging. The tapes are placed in plastic bags, plastic
sleeves and cardboard trays, etc. The number of tapes or other
media placed in these packages varies from one to six or more.
Samples of the plastic bag, plastic sleeve, and cardboard tray
were submitted for our review.
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ISSUE:
Whether blank magnetic tapes imported into the United States
and then exported to Mexico for repackaging are entitled to a
partial duty exemption under subheading 9802.00.50, HTSUS, when
reimported into the United States.
LAW AND ANALYSIS:
Subheading 9802.00.50, HTSUS, provides a partial duty
exemption for articles returned to the United States after having
been exported to be advanced in value or improved in condition by
means of repairs or alterations. Such articles are dutiable only
upon the value of the foreign repairs or alterations, provided
the documentary requirements of section 10.8, Customs Regulations
(19 CFR 10.8), are satisfied.
However, entitlement to this tariff treatment is precluded
in circumstances where the operations performed 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); Guardian Industries Corp. v. United
States, 3 CIT 9 (1982). Tariff treatment under subheading
9802.00.50, HTSUS, is also precluded where the exported articles
are incomplete for their intended use prior to the foreign
processing. Guardian; 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, 82, 599 F.2d 1015, 119 (1979).
We have held that foreign repacking of merchandise for
retail sale will not, in and of itself, preclude tariff treatment
under subheading 9802.00.50, HTSUS. Headquarters Ruling Letter
(HRL) 555180 dated December 26, 1989. However, to qualify for a
partial duty exemption under that subheading, the article itself
must be advanced in value or improved in condition. In that
regard, we have held that the mere repacking of an article does
not advance its value or improve its condition. See, HRL 555806
dated January 14, 1991 (thin gauge plastic bags used as an
alternative to paper stuffing often used in imported sport and
handbags, are not advanced in value or improved in condition
abroad as a result of the packing operation). You cite C.S.D.
90-58 (HRL 555213, dated February 21, 1990) to support your
position that the tapes which are exported to Mexico solely for
repackaging are entitled to 9802.00.50, HTSUS, treatment. In
that case, we found that greeting cards which were exported to
Mexico to be folded and packaged are entitled to a partial duty
exemption under subheading 9802.00.50. The folding operation
resulted in a change or alteration which advanced the value or
improved the condition of the cards. Id. For that reason the
cards were denied duty free treatment under subheading
9801.00.00, HTSUS (a provision which provides for free entry of
articles of U.S. origin which are returned without having been
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advanced in value or improved in condition while abroad).
Unlike the cards in C.S.D. 90-58, the blank magnetic tapes
in question are exported to Mexico solely for repackaging. The
individual tapes will not be advanced in value or improved in
condition in Mexico. Accordingly, the tapes will be dutiable
under subheading 8523.90.00, HTSUS, when reimported into the
United States. The applicable duty rate will be 4.2 percent ad
valorem.
With respect to the dutiability of the packing materials,
General Rule of Interpretation 5(b), HTSUS, provides that:
[p]acking materials and packing containers entered with
the goods therein shall be classified with the goods if
they are of a kind normally used for packing such
goods. However, this provision does not apply when
such packing materials or packing containers are
clearly suitable for repetitive use.
Therefore, the value of non-reusable packing materials or
containers normally used for packing such goods is considered a
part of the value of its contents and is dutiable at the rate of
its contents. However, we have held that U.S.-origin packaging
materials which are not advanced in value or improved in
condition while abroad are separately entitled to duty-free
treatment under subheading 9801.00.10, HTSUS. The act of being
filled with their contents is not considered to be an advancement
in the condition of the container or materials. See,
Headquarters Ruling Letter 731806 dated November 18, 1988. Thus,
the packaging materials in the instant case, if of foreign
origin, will be dutiable at the same rate as the tapes. If of
U.S. origin, the packaging materials will be entitled to duty-
free treatment under subheading 9801.00.10, HTSUS, upon
compliance with the documentation requirements of 19 CFR 10.1.
HOLDING:
Blank magnetic tapes which are imported into the United
States and then exported to Mexico solely for repackaging are not
themselves advanced in value or improved in condition, as
required by subheading 9802.00.50, HTSUS. Accordingly, the
packaged tapes will be dutiable on their full value under
subheading 8523.90.00, HTSUS, at the rate of 4.2 percent ad
valorem.
Sincerely,
John Durant, Director
Commercial Rulings Division