OT:RR:CTF:VS H004448 GG
Mr. Robert Gardenier
M.E. Dey & Co.
P.O. Box 370080
Milwaukee, Wisconsin 53237-0080
RE: Subheading 9802.00.8068 and 9802.00.50, HTSUS; subheading 3925.90.00, HTSUS; plastic handrail supports sent to Malaysia for application of a colored film; classification; country of origin.
Dear Mr. Gardenier:
This is in response to your ruling request, dated October 31, 2006, made on behalf of your client, InPro Corporation. Your request concerns the classification and origin of plastic handrail supports.
FACTS:
The article in question is a plastic support part of a handrail. The plastic component is made in the United States and has a value of $0.76 per unit. The component is exported to Malaysia where a colored film, which is manufactured in Japan, is applied to give it the appearance of being of wood. The per unit cost of the application operation is $1.0125. The article is then exported from Malaysia to the U.S. and returned to the importer of record.
In Malaysia, the process by which the wood grain surface is applied is called hydrographics or hydrographics immersion. The wood pattern is printed onto a thin, water-soluble film. The film is cut to a size appropriate to the immersion tank in which the parts will be coated. The cut film is floated atop a clear water surface in the tank. A special chemical is used to dissolve the film, leaving just the solvent/ink image floating on the water’s surface. The handrail component is then immersed in the tank through the graphic and quickly removed. The component takes on all the color and design elements of the original image, which clings uniformly to the component’s surface, wrapping itself around every contour.
The importer requests a ruling that confirms that the handrail components, when imported into the United States, may be properly classified under subheadings 9802.00.80/3925.90.00 of the Harmonized Tariff Schedule of the United States (“HTSUS”). The importer also seeks a country of origin determination.
ISSUE:
What is the proper classification and country of origin of the handrails when they are imported from Malaysia?
LAW AND ANALYSIS:
Subheading 9802.00.80, HTSUS, provides a partial duty exemption for:
[a]rticles assembled abroad in whole or in part of fabricated components, the product of the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process such as cleaning, lubricating and painting.
All three requirements of subheading 9802.00.80, HTSUS, must be satisfied before a component may receive a duty allowance. An article entered under this tariff provision is subject to duty upon the full appraised value of the imported assembled article, less the cost or value of the U.S. components assembled therein, upon compliance with the documentation requirements of section 10.24, Customs Regulations (19 CFR § 10.24).
Section 10.16(a), Customs Regulations (19 CFR § 10.16(a)), provides that the assembly operation performed abroad may consist of any method used to join or fit together solid components, such as welding, soldering, riveting, force fitting, gluing, laminating, sewing, or the use of fasteners. We have previously held that coating operations are not acceptable assembly operations. See, Headquarters Ruling Letter (“HRL”) 555743, dated April 26, 1991 (aluminizing of automobile glass reflectors by application of an electric field in a vacuum chamber which vaporizes aluminum metal and causes it to be deposited on the inner faces of the reflectors); HRL 555766, dated April 2, 1991 (acrylic coating of fabric); HRL 555499, dated June 6, 1990 (extruding xanthate cellulose solution over U.S. origin paper which regenerates into a cellulose coating); HRL 554357, dated December 3, 1986, HRL 554416, dated March 6, 1987, and HRL 554577, dated June 25, 1987 (merely coating wire with plastic cannot be characterized as an acceptable assembly or joinder of separate solid components); and HRL 067533, dated October 30, 1981 (coating a glove liner with latex is not an acceptable assembly of solid components).
In the instant case, we find that the application of the wood grain surface to the plastic components does not constitute an acceptable assembly process for the purposes of subheading 9802.00.80, HTSUS. This is because it does not involve the joinder of two solid components, but rather is accomplished by immersing the plastic components into a tank of water on which the solvent/ink is floating. This operation is analogous to a proscribed painting operation of the type described in 19 CFR § 10.16(c)(3). However, as no assembly processes are performed in Malaysia, we do not reach the issue of whether operations incidental to assembly are performed.
Subheading 9802.00.50, HTSUS, is another tariff provision that merits consideration given these particular facts. Subheading 9802.00.50, HTSUS, provides for a partial duty exemption for articles exported from and returned to the United States after having been advanced in value or improved in condition by repairs or alterations, provided the documentary requirements of section 10.8, Customs Regulations (19 CFR § 10.8), are satisfied. The articles must be completely finished when they leave the United States and not undergo any intermediate processing to finish them in the foreign country.
Court cases considering the applicability of subheading 9802.00.50, HTSUS, and its precursor provisions (item 806.20, Tariff Schedules of the United States (TSUS), and, before that, paragraph 1615(g), Tariff Act of 1930), have held that this tariff provision is inapplicable where: (1) 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; or (2) the operations performed abroad destroy the identity of the exported articles or create new or commercially different articles through a process of manufacture.
In Guardian Industries v. United States, 3 CIT 9 (1982), the Court of International Trade stated that, in construing “the tariff provision for repairs and alterations performed abroad, the focus is upon whether the exported article is ‘incomplete’ or ‘unsuitable for its intended use’ prior to the foreign processing.” At issue in Guardian Industries was the question of whether subjecting U.S.-produced annealed glass to a tempering process in Canada to create glass for sliding glass patio doors qualifies as an “alteration” under item 806.20, TSUS. The court noted that glass must be tempered (i.e., strengthened) for practical safety use reasons and to conform to U.S. federal regulations before it may be marketed for use in sliding glass patio doors. In concluding that the tempering process was not an “alteration”, the court stated that “the exported articles of raw annealed glass were not ‘completed articles’ since they were entirely unsuitable for their intended use” as sliding glass patio doors and required a manufacturing process to make them complete. The court further concluded that, because the tempering of the annealed glass transformed the glass in name, use, performance characteristics and tariff classification, the operation created a new and different commercial article.
Similarly, in 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), the issue presented was whether certain U.S.-origin Dacron polyester fabrics which were exported to Canada as griege goods for heat setting, chemical scouring, dyeing, and treating with chemicals, were eligible for the partial duty exemption available under item 806.20, TSUS, when returned to the United States. The U.S. Court of Customs and Patent Appeals found that the processing steps performed on the exported greige goods were undertaken to produce finished fabric and could not be considered as alterations. The court stated (66 CCPA at 82) that:
. . . repairs and alterations are made to completed articles and do not include intermediate processing operations, which are performed as a matter of course in the preparation or manufacture of finished articles. In the instant situation, the operations performed in Canada comprise further processing steps which are performed on unfinished goods and which lead to completed articles, i.e., the finished fabrics, and, therefore, the processing cannot be considered alterations.
In Amity Fabrics, Inc. v. United States, 43 Cust. Ct. 64, C.D. 2104 (1959), "pumpkin" colored fabrics were exported to Italy to be redyed black since the pumpkin color had gone out of fashion and black was a consistently good seller. The court held that the identity of the goods was not lost or destroyed by the dyeing process, that no new article was created since there was no change in the character, quality, texture, or use of the merchandise; it was merely changed in color. The court found that such change constituted an alteration for purposes of paragraph 1615(g) of the Tariff Act of 1930.
In Royal Bead Novelty Co. v. United States, 68 Cust.Ct. 154, C.D. 4353, 342 F. Supp. 1394 (1972), uncoated glass beads were exported so that they could be half coated with an Aurora Borealis finish which imparted a rainbow like luster to the half coated beads. The court found that the identity of the beads was not lost or destroyed in the coating process and no new article was created. Moreover, there was no change in the beads' size, shape, or manner of use in making articles of jewelry (evidence was presented which indicated that both uncoated and half coated beads were used interchangeably). Accordingly, the court concluded that the application of the Aurora Borealis finish constituted an alteration within the meaning of item 806.20, TSUS.
In HRL 557161, dated June 28, 1993, Customs considered whether wooden interior shutters exported to Mexico for certain operations, including the application of several coats of paint or stain, were eligible for subheading 9802.00.50, HTSUS, treatment when returned to the U.S. The manufacturer also sold shutters in an “unfinished” condition; that is, without any paint or stain applied. Customs found that the shutters in their condition as exported from the U.S. (unfinished) were complete for their intended use to control light, ventilation, and to provide privacy, and that the painting or staining was not a necessary step in the production of the shutters. Therefore, Customs determined that the returned shutters were eligible for the partial duty exemption under subheading 9802.00.50, HTSUS. In making that determination, Customs also modified a past ruling, HRL 555093, dated April 26, 1989, to the extent that it disallowed subheading 9802.00.50, HTSUS, treatment for wooden furniture kits also sold in an unfinished condition and sent abroad for staining and lacquering.
Although Customs issued a notice in the September 6, 1995, Customs Bulletin (Volume 29, Number 36) proposing to modify HRL 557161 to reflect that the painting or staining abroad of unfinished interior shutters, and the staining and lacquering abroad of furniture kits under HRL 555093, would not be considered alterations under subheading 9802.00.50, HTSUS, this proposed action was withdrawn in a notice published on December 17, 1997, in the Customs Bulletin, Volume 31, Number 51. Thus, it remains Customs position that the painting or staining of the shutters in HRL 557161 and the staining and lacquering of the wooden furniture kits in HRL 555093 constitute permissible alterations under subheading 9802.00.50, HTSUS.
HRL 560325 dated January 27, 1998, concerned the eligibility for subheading 9802.00.50, HTSUS, treatment of U.S.-origin glass stemware which was decorated by a silkscreening process with a pictorial winter scene abroad and returned. The stemware was offered for sale both in its decorated and undecorated state. In holding that the decorating process constituted an alteration, CBP stated that:
. . . the processing abroad results only in a change
to the appearance of the stemware, and does not alter
the function, character or identity of the exported
articles. The merchandise sent is finished white wine
stemware, marketable in the condition exported, and what
is returned is the same merchandise, available to the
same class of customers, albeit enhanced in appearance
by a decorative winter scene.
In a notice published in the Customs Bulletin on October 4, 2000, (34 Cust. Bull. 40), CBP revoked four ruling letters and modified one ruling letter pertaining to the applicability of subheading 9802.00.50, HTSUS, to certain articles that were exported for decorating operations and returned to the United States. In the notice, it was stated that, upon reconsideration, CBP determined that the decorating operations performed in those cases qualified as acceptable alterations under subheading 9802.00.50, HTSUS, as the merchandise in its condition as exported and returned was marketed and sold to consumers for the same use. Furthermore, CBP found that the operations performed abroad did not result in the loss of the good’s identity or create a new article with a different commercial use. The ruling letters concerned: carpet tiles that were dyed abroad and returned; imitation plastic fingernails that were painted with decorative designs abroad; lace fabric “reembroidered” abroad with rope, sequins or beads, or a combination of these items; and decals and paint bands applied to ceramic dinnerware abroad.
The plastic handrail components are suitable for use as handrail parts when they are exported to Malaysia. The application of the wood grain surface merely changes the color of the otherwise finished components, and does not destroy their identity as handrail components. Accordingly, the application of the wood grain surface constitutes an alteration within the meaning of subheading 9802.00.50, HTSUS.
The ruling requester also asks whether, in addition to subheading 9802.00.80, the handrail components are also properly classified under subheading 3925.90.00, HTSUS. This provides for builders’ ware of plastics, not elsewhere specified or included: other. Legal note 11 to Chapter 39 lists the articles described by heading 3925. Legal note 11(ij) lists fittings and mountings intended for permanent installation in or on doors, windows, staircases, walls or other parts of buildings, for example, knobs, handles, hooks, brackets, towel rails, switch plates and other protective plates. The handrail support is used to mount a staircase railing to a wall, and accordingly, is classifiable under this particular tariff provision.
Finally, we are asked to rule upon the country of origin of the plastic components. Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. §1304), provides that, unless excepted, every article of foreign origin imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or 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 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' within the meaning of this part." By definition, only merchandise which is "of foreign origin," i.e., of a country of origin other than that of the U.S., is subject to the requirements of 19 U.S.C. § 1304. Stated differently, products of the U.S. are not subject to these requirements.
U.S. products exported and returned are specifically excepted from country of origin marking requirements under section 134.32(m), Customs Regulations (19 CFR § 134.32(m)). With certain exceptions not applicable here, Customs has ruled that products of the U.S. which are exported for further processing and subsequently returned, are not subject to country of origin marking upon importation to the U.S. unless the further processing in the foreign country constitutes a substantial transformation of the product. See HQ 732480, (July 31, 1989). In defining what constitutes a substantial transformation, Courts have held that the further work or material added to an article must result in the article taking on a new name, character or use. See United States v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267, C.A.D. 98 (1940).
In general, Customs has determined that laminating, coating and encapsulating generally does not result in a substantial transformation. See HRL 561605, dated July 20, 2000 (bonding teak veneer to plywood core); HRL 557931 dated August 30, 1995, affirming upon reconsideration HRL 557034/557072 dated July 14, 1993 (laminating paper through the gluing/pressure melting of a thin layer of polypropylene did not constitute a substantial transformation); and HRL 730034 dated January 8, 1987 (joining of silk-screened metal sheets with a foil-laminated board and the minor cutting of those sheets was not a substantial transformation.) See also HRL 734907 dated May 12, 1993 (Canadian-origin vinyl bonded with foam in the U.S. to produce foam-bonded vinyl did not constitute a substantial transformation for country of origin marking purposes. In that case, Customs pointed out that the operations performed in combining these materials were simple and did not require a great deal of skill or time, and the vinyl still had the appearance and texture of vinyl after being bonded with the foam.)
In HRL 734152, dated August 26, 1991, balloons made in the United States were exported to Canada, where they were printed with a design and/or letters and then returned to the United States. Customs determined that the printing did not effect a substantial transformation of the balloons, because it did not materially alter the name, character, or use of the balloons.
In HRL 732964 dated August 3,1990, Customs determined that ceramic bells hand painted in the United States were not substantially transformed. The bells were imported from Taiwan in a cast and fired condition, and were sanded, filled, sprayed with a base paint, hand painted with a Southwestern design, and sprayed with a fixative in the U.S. The ruling quotes T.D. 89-21, which states that Customs "continues to adhere to its position that the mere decoration of porcelain ware does not constitute a substantial transformation." See also HRL 707057 dated December 10, 1976; HRL 058996 dated June 21, 1979; HRL 724978 dated July 13, 1984; and HRL 735595 dated August 2,1994.
Based on the above precedent, the application of the wood grain surface does not change the handrail component into a product with a new name, character, or use. The handrail component, although advanced in value by means of the processing in Malaysia, does not undergo a substantial transformation, and remains a product of the United States. Therefore, no country of origin marking is required on the imported goods.
HOLDING:
The handrail components are properly classified under subheadings 9802.0050/3925.90.00, HTSUS. They do not qualify for a partial duty exemption under subheading 9802.00.80, HTSUS. However, they are eligible for a partial duty exemption under subheading 9802.00.50, HTSUS. They are products of the United States for country of origin purposes.
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs official handling the transaction.
Sincerely,
Monika R. Brenner
Chief, Valuation and Special Programs Branch