CLA-2 CO:R:C:S 557939 MLR
Area Director
New York Seaport
6 World Trade Center
New York, New York 10048
RE: Internal Advice Request No. 25/94; Applicability of duty
exemption under HTSUS subheading 9802.00.50 to serpentine;
building stone; stone slabs; cutting; slicing; polishing
Dear Sir:
This is in reference to your memorandum of May 16, 1994,
seeking internal advice regarding the applicability of subheading
9802.00.50, Harmonized Tariff Schedule of the United States
(HTSUS), to serpentine.
FACTS:
Vermont Verde Antique ("Verde") (a.k.a. Marble Modes)
quarries building stone in the U.S. by using diamond impregnated
wire saws and diamond impregnated belt saws. First, the area to
be cut is assessed, and the block size desired is determined.
Using a diamond impregnated belt saw, precision cuts are made
horizontally and vertically into the walls of the quarry. The
diamond impregnated wire saw is then inserted at the back of the
cuts, enabling the blocks to be cut free from the quarry wall.
This step is repeated on the floor of the quarry. The product is
a precisely cut rectangular block of stone. These blocks are
then shipped to Italy. The record indicates that the exported
stone blocks are classifiable in Chapter 25, HTSUS. Their size
is approximately 10 x 7 x 5 feet.
In Italy, Verde states that the blocks are sliced. For
example, a stone block roughly the size above is cut into 43
slabs of 320 x 142 x 3 millimeters each. Next, the slabs are
nominally polished, and bundled for shipment to the U.S. The
record indicates that when serpentine is imported in the form of
building stone (i.e., slabs, tiles, etc.), it is classifiable in
subheading 6802.99, HTSUS. The importer contends that the
serpentine is classified in subheading 9802.00.50, HTSUS, as U.S.
articles exported for repairs or alterations since the product
sent to Italy is the same product returned, only that it has been
cut down in size and lightly polished. The importer states that
the stone slabs imported into the U.S. are still in a "rough
stage" and must be cut to size and highly polished before they
may be used for their final purposes, such as table tops, etc.
ISSUE:
Whether the slicing and polishing operations performed in
Italy constitute an alteration, thereby entitling the serpentine
to the partial duty exemption available under subheading
9802.00.50, HTSUS, when returned to the U.S.
LAW AND ANALYSIS:
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
documentary requirements of section 10.8, Customs Regulations (19
CFR 10.8), are satisfied. See 59 Fed. Reg. 25563 (May 17, 1994),
for recent amendments to 19 CFR 10.8.
In Headquarters Ruling Letter (HRL) 555085 dated September
27, 1988, Customs considered glass rectangles exported to Japan
in sheets measuring 36 x 31.2 inches, where they were cut into
rectangles measuring 6 x 6 inches, the edges were ground, and the
surface was lightly polished. The glass returned was also not
ready for use without further processing in the U.S. Customs
found that the exported glass was not complete for its intended
use and the Japanese operations were necessary steps in the
preparation of the finished glass, and that the returned glass
was commercially different from the exported glass.
Consequently, item 806.20, Tariff Schedules of the United States
(TSUS) (now subheading 9802.00.50, HTSUS), treatment was
precluded. See also HRL 555343 dated May 30, 1989 (jumbo rolls
of multistrike coated film, 34 inches in width and 20,000 feet
long, slit into ribbon material was held to amount to more than a
mere alteration, since it was a necessary step to finish the
final product).
In HRL 555640 dated August 13, 1990, gold jewelry with a
tumbled lustre was exported to Mexico where it was polished and a
diamond cut lustre was added. The polishing process employed the
use of pastes and a rotating polishing wheel to produce a high
gloss lustre, different in appearance from the tumbled lustre
applied in the U.S. before exportation. The diamond cutting
process made small cuts on the jewelry. Recognizing Royal Bead
Novelty Co. v. United States, 68 Cust. Ct. 154, C.D. 4353 (1972),
which held that glass beads exported for the application of a
half coating of "Aurora Borealis" to impart a luster effect were
entitled to item 806.20, TSUS, treatment because the application
of the coating did not change the "quality, texture, or
character" of the beads, Customs held that, in the case of the
gold jewelry, the diamond cut imparted a new and different
texture to the jewelry by giving it a "diamond-like sparkle",
thereby precluding subheading 9802.00.50, HTSUS, treatment.
In HRL 555787 dated October 2, 1991, Customs reconsidered
HRL 555640 focusing primarily on the diamond cutting operation.
The factors the courts have considered in determining whether a
foreign processing operation creates a new or commercially
different article were reevaluated, namely, changes in the name,
value, appearance, size and shape; subsequent handling and use;
performance characteristics; and markets or classes of buyers.
See Burstrom; Guardian Industries; and Dolliff. Although HRL
555640 found that the gold jewelry's quality, texture, and
character was changed as a result of the diamond cutting
operation, HRL 555787 noted that these court decisions also
considered changes in characteristics which alter the subsequent
commercial use, usually ascertained by a change in the market and
class of buyers. Consequently, HRL 555787 noted that while both
the polishing and diamond cutting operations enhanced the
marketability of the jewelry to potential customers, both the
polished and diamond cut jewelry were sold at the same commercial
level in the same commercial market as the tumbled lustre
jewelry. Furthermore, while the polishing and diamond cutting
operations imparted different lustres to the jewelry, they were
only alternatives to an already finished article. Therefore, the
gold jewelry diamond cut in Mexico was eligible for subheading
9802.00.50, HTSUS, treatment.
With regard to the facts presented and consistent with the
cases above, we are of the opinion that the slicing operation is
a necessary step in the final use of the serpentine as table
tops, etc. The fact that further cutting or polishing is
required in the U.S. after importation is not relevant, since
subheading 9802.00.50, HTSUS, concerns the condition of the
article as imported into the U.S. As in HRL 555085 and unlike
HRL 555787, the stone is not complete for its intended use
without the slicing operation performed in Italy. Consequently,
we find that the serpentine is not entitled to subheading
9802.00.50, HTSUS, treatment.
HOLDING:
On the basis of the information submitted, we find that the
stone block exported to Italy is incomplete for its intended use
and that the slicing operation is a necessary step in the
preparation of the stone as a finished article. Consequently,
the serpentine is not entitled to subheading 9802.00.50, HTSUS,
treatment.
Sincerely,
John Durant, Director
Commercial Rulings Division