CLA-2 CO:R:C:S 557295 MLR
Mr. Clarence Dykhouse
Wallaceburg Bookbinding & Mfg. Co. Ltd.
95 Arnold Street
P.O. Box 104
Wallaceburg, Ontario N8A 4L5
Canada
RE: Applicability of duty exemption under HTSUS subheading
9802.00.50 to various books and periodicals sent to Canada
for binding or rebinding; country of origin marking
Dear Mr. Dykhouse:
This is in reference to your letter dated April 22, 1993,
requesting a ruling regarding the applicability of subheading
9802.00.50, Harmonized Tariff Schedule of the United States
(HTSUS), to various books and magazines sent to Canada for
binding or rebinding.
FACTS:
Wallaceburg Bookbinding & Mfg. Co. Ltd. plans to pickup
various items such as worn-out library monographs, textbooks,
song books, bibles, theses, reports, and periodical issues from
colleges, universities, medical, public and private libraries in
the U.S., and send them to Canada for hardcover binding. Either
the items will be rebound if the original binding is worn, or in
the case of periodicals, loose copies will be bound into one hard
cover and be labeled. It is stated that periodical binding
represents the largest category of items sent for binding. The
shipments may vary from ten to five hundred items. After the
items are bound or rebound, they will be returned to their owners
in the U.S. In a telephone conversation with a member of my
staff, you indicated that your main concern is that the
documentary requirements be kept to a minimum.
ISSUES:
I. Whether the binding operations performed on books and
periodicals in Canada constitutes an alteration or repair,
thereby entitling them to the partial duty exemption
available under subheading 9802.00.50, HTSUS, when returned
to the U.S.
II. Whether the books and periodicals are required to be marked
with their country of origin upon their return to the U.S.
LAW AND ANALYSIS:
All books are duty-free under the HTSUS. If the books are
in single sheets, whether or not folded, they are classified in
subheading 4901.10.00, HTSUS. If they are dictionaries and
encyclopedias, and serial installments thereof, they are
classified in subheading 4901.91.00, HTSUS. If they are
textbooks, bound newspapers, journals and periodicals, or bibles,
they are classified in subheading 4901.99.00, HTSUS. If they are
children's picture, drawing, or coloring books, they are
classified in subheading 4903.00.00, HTSUS. If it is music,
printed or in manuscript, whether or not bound or illustrated, it
is classified in subheading 4904.00.00, HTSUS. If they are books
other than the types already mentioned, they are classified in
subheading 4901.99.00, HTSUS. See HRL 084664 dated September 7,
1989. [Enclosed, please find a copy of Chapter 49, HTSUS, which
provides the classification for printed books, newspapers,
pictures and other products of the printing industry;
manuscripts, typescripts and plans.] If the items at issue are
entered under one of the applicable subheadings of Chapter 49,
you will be required to pay a merchandise processing fee in the
amount of 17 percent of the full value of the returned items.
However, articles properly entered under subheading 9802.00.50,
HTSUS, are exempt from this fee.
Articles returned to the U.S. after having been exported to
be advanced in value or improved in condition by repairs or
alterations may qualify for the partial duty exemption under
subheading 9802.00.50, HTSUS, provided the foreign operation does
not destroy the identity of the exported articles or create new
or commercially different articles through a process of
manufacture. See A.F. Burstrom v. United States, 44 CCPA 27,
C.A.D. 631 (1956), aff'g C.D. 1752, 36 Cust. Ct. 46 (1956);
Guardian Industries Corp. v. United States, 3 CIT 9 (1982).
Accordingly, entitlement to this tariff treatment is precluded
where the exported articles are incomplete for their intended
purpose prior to the foreign processing and the foreign
processing operation is a necessary step in the preparation or
manufacture of finished articles. Dolliff & Company, Inc. v.
United States, 455 F. Supp. 618 (CIT 1978), aff'd, 599 F.2d 1015
(Fed. Cir. 1979). Articles entitled to this partial duty
exemption are dutiable only upon the cost or value of the foreign
repairs or alterations when returned to the U.S., provided the
documentation requirements of section 10.8, Customs Regulations
(19 CFR 10.8), are satisfied.
In regard to the rebinding operations which restore the
books to their original condition, we find that this constitutes
an acceptable repair within the meaning of subheading 9802.00.50,
HTSUS. The books are complete articles when they are exported to
Canada, and the binding operations do not create new or different
articles, but merely render the books useful again. With regard
to the facts presented and consistent with the cases above, we
are of the opinion that rebinding the books constitutes an
acceptable repair within the meaning of subheading 9802.00.50,
HTSUS.
In regard to binding loose periodicals together into
hardcover volumes and labeling them, these articles are not being
repaired; however, we find that this constitutes an acceptable
alteration. In Headquarters Ruling Letter (HRL) 555708 dated
September 21, 1990, we held that thread and yarn wound on "dye
tubes" and sent to Taiwan to be despooled and rewound onto
smaller plastic spools constituted an alteration. Furthermore,
in HRL 555865 dated June 4, 1991, halogen bulbs were sent to
Mexico, where one of the four metal leads were bent in an angle,
and upon their return to the U.S. the bulbs were incorporated
into automobile headlights. It was stated that the bulbs upon
their exportation to Mexico were intended for use in automobiles
headlights, and after the foreign processing still retained this
sole use. The basic structural characteristics of the bulbs
remained the same. Consequently, as in HRL 555708 and HRL
555865, we find that the periodicals are complete articles upon
exportation from the U.S., and the binding operations in Canada
do not create new articles. The periodicals are only returned in
a different form that make them easier to use.
Section 10.8, Customs Regulations (19 CFR 10.8) (copy
enclosed), indicates which documents are required to obtain
subheading 9802.00.50, HTSUS, treatment. Basically, what is
required is the filing of a Certificate of Registration (top
portion of Customs Form 4455) before the articles are exported; a
declaration by the person who performed the repairs or
alterations when the articles are imported; and a declaration by
the owner, importer, consignee, or agent having knowledge of the
facts that the articles entered in their repaired or altered
condition are the same articles covered by the Certificate of
Registration. The declaration by the person who performed the
operations abroad asks for the value of the repairs or
alterations and for the total value of the articles after the
repairs or alterations have been made. You indicated that you
are unsure of these values.
U.S. Note 3 of Subchapter II, Chapter 98, states that:
(a) the value of repairs, alterations ... shall be:
(i) the cost to the importer for such change; ... as
set our in the invoice and entry papers.... (b) No
appraisement of the imported article in its changed
condition shall be required unless necessary to a
determination of the rate or rates of duty applicable
to such article. (c) The duty upon the value of the
change in condition shall be at the rate which would
apply to the article itself....
Therefore, for purposes of this case, the value of the repairs or
alterations is the cost to the library for the binding and
rebinding operations; and because books and periodicals may be
entered duty-free no appraisement of their value after the
repairs or alterations is required. Furthermore, since there is
no duty upon books and periodicals, no duty is collectable on the
value of the binding or rebinding operations performed in Canada.
You also indicated that it would not be feasible to indicate
on the entry form the country of origin of each of the items
being returned to the U.S. The marking statute, section 304,
Tariff Act of 1930, as amended (19 U.S.C. 1304) provides that,
unless excepted, every article of foreign origin (or its
container) imported into the U.S. shall be marked in a
conspicuous place as legibly, indelibly, and permanently as the
nature of the article (or its container) will permit, in such a
manner as to indicate to the ultimate purchaser in the U.S. the
English name of the country of origin of the article.
Part 134, Customs Regulations (19 CFR Part 134), implements
the country of origin marking requirements and exceptions of 19
U.S.C. 1304. Section 134.1(b), Customs Regulations (19 CFR
134.1(b)), defines the country of origin of an article as the
country of manufacture, production, or growth of any article of
foreign origin entering the U.S. Further work or material added
to an article in another country must effect a substantial
transformation in order to render such other country the country
of origin for country of origin marking purposes. A substantial
transformation occurs when articles lose their identity and
become new articles having a new name, character or use. United
States v. Gibson-Thomsen Co., 27 CCPA 267, 270 (1940).
Several rulings have addressed the country of origin marking
requirements for used articles. In HRL 732258 dated March 28,
1990, automotive alternators, taken out of used cars that were
scrapped in the U.S., were exported to Mexico for repair. It was
determined that the rebuilt alternators did not have a new name,
character or use; rather, the alternators were rebuilt so that
they could function in their intended use. Therefore, since the
rebuilding of the alternators in Mexico was not a substantial
transformation, pursuant to 19 CFR 134.1(b), Mexico was not the
country of origin for these articles. The country of origin of
the rebuilt alternators was rather the country where the
alternators were originally built. Customs also determined that
those alternators which were installed and used in automobiles in
the U.S., and which were not already marked with a foreign
country of origin and for which it was impossible to trace the
original country of manufacture, were considered to be of U.S.
origin, and, therefore, were excepted from marking pursuant to
section 134.32(m), Customs Regulations (19 CFR 134.32(m)), which
excepts products of the U.S. exported and returned to the U.S.
from marking. Those alternators which were already marked with a
foreign country of origin were considered properly marked
pursuant to 19 CFR 134.1(b) and required no further marking.
In HRL 732409 dated September 25, 1989, it was held that the
country of origin for marking purposes for used clothing worn in
Canada was Canada. The used clothing was regarded to be of U.S.
origin because it was purchased from the Salvation Army, Goodwill
Industries stores, and similar organizations within the U.S.,
and, therefore, presumed to have been worn and used in the U.S.
This eliminated the need to sort the clothing by original country
of origin, and also eliminated the problem of not knowing the
original country of origin of every single garment. As in HRL
732409 and HRL 730174, the books and periodicals in this case are
presumed to have been used in various libraries within the U.S.
Consequently, for marking purposes, we find that they are of U.S.
origin, and, therefore, are not required to be marked upon their
return to the U.S. The binding operations performed in Canada do
not substantially transform them into products of Canada.
HOLDING:
I. On the basis of the information submitted, the articles may
be entered under one of the applicable subheadings of
Chapter 49. We also find that the binding and rebinding
operations in Canada, which restore the books or gather the
periodicals into one volume, constitute an alteration or
repair within the meaning of subheading 9802.00.50, HTSUS.
Therefore, the books and periodicals are entitled to
classification under this tariff provision, which is exempt
from the merchandise processing fee, upon compliance with
the documentary requirements of 19 CFR 10.8.
II. The books and periodicals are not required to be marked
because they are considered to be of U.S.-origin.
For further information on entry requirements, please
contact the port of entry.
Sincerely,
John Durant, Director
Commercial Rulings Division
Enclosure