CLA-2-39:OT:RR:NC:N1:421
Donny Lombardi
OpSec Security, Inc.
1857 Colonial Village Lane
Lancaster, PA 17601
RE: The tariff classification of metallized plastic film from the United Kingdom and Germany and holographically printed foil from the United Kingdom; Applicability of special provision 9802.00.5060
Dear Mr. Lombardi:
In your letter dated April 10, 2017 you requested a tariff classification ruling. You specifically requested classification of a product at time of first importation, then again after exportation, additional processing and re-importation. You also inquire as to whether the item is eligible for duty-free treatment under special classification provision 9802.00.5060, Harmonized Tariff Schedule of the United States (HTSUS), upon re-importation.
The items under consideration, referred to as “stamping foils,” are identified as Part Number 30170031 and Part Number 30170005. Based on telephone conversations with this office, Part Number 30170031 is a metallized plastic film. Imported in coil form, from either the United Kingdom (UK) or Germany, this product measures 23 microns in thickness and is comprised of a polyethylene terephthalate (PET) film with a metallized lacquer coating containing resin, wax and aluminum. Once in the US, this raw material is unrolled and holographic optical images are embossed onto the shiny side using a hot stamping process. The film is then re-rolled and exported to an OpSec affiliated company located in the UK for further processing. Here, the jumbo rolls are demetallized, via an acid wash, in order to achieve the holographic image’s final visual effect. Next, the film is coated with a heat-activated adhesive and finally placed onto a slitter where the images are numbered and the coils are made into “skinny rolls.” This product is then re-imported into the US as Part Number 30170005. This finished product is supplied to transaction card customers to be adhered to credit cards as a security feature.
The applicable subheading for the metallized plastic film (Part Number 30170031) will be 3920.62.0050, HTSUS, which provides for Other plates, sheets, film, foil and strip, of plastics, noncellular and not reinforced, laminated, supported or similarly combined with other materials: Of polycarbonates, alkyd resins, polyallyl esters or other polyesters: Of poly (ethylene terephthalate); Metallized PET film: Other. The rate of duty will be 4.2 percent ad valorem.
You suggest classification of the finished holographic, numbered foil (Item 30170005) in subheading 3212.10.0000, HTSUS, as stamping foils, and also inquire as to whether the item is eligible for duty-free treatment under special classification provision 9802.00.5060, HTSUS.
The product at issue does not meet the terms of heading 3212, HTSUS, stamping foils. The hologram, which is a photographically produced image, imparts the essential character of the finished foil strips. Therefore, the applicable subheading for Item 30170005 will be 4911.91.4040, HTSUS, which provides for Other printed matter, including printed pictures and photographs: Other: Pictures, designs and photographs: Printed not over 20 years at time of importation: Other: Other: Other. The rate of duty will be free.
Subheading 9802.00.5060 provides for Articles returned to the United States after having been exported to be advanced in value or improved in condition by any process of manufacture or other means: Articles exported for repairs or alterations.
Under this tariff provision, there is a duty only upon the value of the foreign repairs or alterations, provided the documentation requirements of section 10.8, Customs Regulations (19 CFR 10.8), are met.
In your submission you rely on definitions of “repair and alteration” provided in 19 CFR 10.624. However, this regulation is within the language of the Central American Free Trade Agreement (CAFTA), to which the UK is not a party. In Dolliff & Company, Inc., v. United States, 66 CCPA 77, C.A.D. 1225, 599 F.2d 1015, 1019 (1979), the court stated 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 the manufacture of finished articles. (Court's emphasis). Thus, "the focus is upon whether the exported article is 'incomplete' or 'unsuitable for its intended use' prior to the foreign processing." Guardian Industries Corp. v. United States, 3 CIT 9 (1982), at page 13.
We find that the rolls in their exported condition from the United States (US) for further processing in the UK are incomplete and unsuitable for their intended use prior to foreign processing. The intended use as a security feature on a credit card cannot be achieved until the full holographic image is revealed through the demetallization operation and the numbers are added. Further, the strips cannot be mounted to the credit cards without the adhesive; nor will they fit on the cards without benefit of the slitting operation. The operations performed in the UK represent the final steps of the manufacturing process rather than mere alteration.
Accordingly, the scenario presented for sending the goods abroad for further manufacturing processes fails to meet the requirements for treatment under subheading 9802.00.5060, HTSUS.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the World Wide Web at https://hts.usitc.gov/current.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding heading 3920, contact National Import Specialist April Cutuli at [email protected]. For questions involving heading 4911 or heading 9802, please contact National Import Specialist Charlene Miller at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division