CLA-2 OT:RR:CTF:TCM H108456 JRB
Miguel Aristizabal
Enka de Colombia, S.A.
CRA 37A # 8-43 Of. 901
Medellin, Colombia 99999
RE: Applicability of subheadings 9802.00.50 or 9802.00.80, HTSUS to nylon tire cords; nylon resin
Dear Mr. Aristizabal:
This is in response to your ruling request in the form of an email, dated May 4, 2010, to an attorney at U.S. Customs and Border Protection (“CBP”) Office of International Trade, Regulations and Rulings, Tariff Classification and Markings Branch. In that request you asked us if the value of U.S. origin nylon resin used to produce tire cord in Colombia may be excluded from the customs value of the finished tire cord when it is imported into the United States. In addition to the information contained within that request we also took into account further information that you submitted in an email on June 24, 2010. Our response to your ruling request is below.
FACTS:
In your request you indicate that U.S. origin polyamide (nylon 6) resin or chip will be exported to Colombia. In Colombia, the nylon resin undergoes an extrusion process to produce high tenacity nylon yarn. The nylon yarn is then twisted, corded, warped and woven with cotton yarn to produce tire cord fabric that is then dipped in a latex solution. The tire cord fabric is then exported to the United States to be used in manufacturing tires.
ISSUE:
Whether tire cord made with nylon resin from the United States is eligible for the partial duty exemptions under subheading 9802.00.50 or subheading 9802.00.80, HTSUS, when imported into the United States?
LAW AND ANALYSIS:
Subheading 9802.00.50, HTSUS, provides a partial duty exemption for articles that are returned after having been exported to be advanced in value or improved in condition by means of repairs or alterations, provided that the documentary requirements of 19 CFR 10.8 are met. For qualifying articles, duty is assessed only on the cost or value of the foreign processing. The Court of International Trade has previously stated that, “[u]nder subheading 9802.00.50, HTSUS, ‘[c]hanges and additions to an article constitute alterations so long as the article has not lost its identity or has not been converted into something else.’” See May Food Mfg. dba Mrs. May’s Naturals v. United States, 616 F. Supp. 2d 1349, 1352 (2009), quoting Chevron Chem. Co. v. United States, 59 F. Supp. 2d 1361, 1369 (Ct. Int’l Trade 1999). Additionally, entitlement to this tariff treatment is not available where the exported articles are incomplete for their intended purposes prior to their foreign processing and the foreign processing is a necessary step in the preparation or manufacture of the finished articles. Dolliff & Company, Inc. v. United States, 455 F. Supp. 618 (CIT 1978), aff’d, 599 F.2d 1015 (Fed. Cir. 1979).
In this case, the nylon resin is being extracted into nylon yarn that is then used to make woven tire cord fabric. The nylon resin is no longer identifiable as nylon resin. It is a new and commercially different product. Further, the foreign processing is necessary in the manufacturing of the finished article. In this case the nylon resin is simply chips or pieces of nylon that have to be extruded to form thin yarns and then woven to make the tire cord fabric. All of this requires extensive manufacturing to make the finished tire cord fabric. Therefore, we find that subheading 9802.00.50, HTSUS, is not applicable.
Subheading 9802.00.80, HTSUS, provides a partial duty exemption for:
[a]rticles, except goods of heading 9802.00.90 and goods imported under provisions of subchapter XIX of this chapter and goods imported under provisions of subchapter XX, 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 cost or value of the imported assembled article, less the cost or value of the U.S. components assembled therein, upon compliance with the documentary requirements of section 10.24, CBP Regulations (19 CFR §10.24).
Section 10.14(a), CBP Regulations (19 CFR §10.14(a) provides, in pertinent part that:
[t]he components must be in condition ready for assembly without further fabrication at the time of their exportation from the United States to qualify for the exemption. Components will not loose their entitlement to the exemption by being subjected to operations incidental to the assembly either before, during or after their assembly with other components.
Section 10.16(a), CBP 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, lamination, sewing, or the use of fasteners. Operations incidental to the assembly process are not considered further fabrication operations, as they are of a minor nature and cannot always be provided for in advance of the assembly operations. See 19 CFR §10.16(a). However, any significant process, operation or treatment whose primary purpose is the fabrication, completion, physical or chemical improvement of a component precludes the application of the exemption under subheading 9802.00.80, HTSUS, to that component. See 19 CFR §10.16(c).
The nylon tire cord will not qualify for the duty exemption provided under subheading 9802.00.80, HTSUS. The cord is made from nylon resin pellets or chips which are not exported from the United States in a condition ready for assembly without further fabrication. As indicated in the facts section, the resin must be extruded to manufacture the yarn which is then used in producing the cord. Extruding the resin into nylon yarn is a significant process whose primary purpose is the fabrication of a component in the finished product. Therefore, subheading 9802.00.80, HTSUS, is not applicable to this case. See Headquarters Ruling Letter (HQ) 555674, dated June 27, 1990 for a similar analysis.
HOLDING:
We find that the nylon tire cord is not eligible to receive the benefits provided under headings 9802.00.50 or 9802.00.80, HTSUS. Therefore, you must declare the full custom value of your merchandise and cannot exclude the value of the U.S. origin nylon.
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 CBP officer handling the transactions.
Sincerely,
Monika R. Brenner
Chief
Valuation and Special Programs Branch