CLA-2-95:RR:NC:2:224 B87049
Larry Garrison
Circle International, Inc.
901 W. Hillcrest Blvd.
Inglewood CA 90301
RE: Applicability of duty exemption available under HTSUSA subheading 9802.00.50 to golf club heads subjected to a painting treatment in Mexico: Alteration; Guardian v.United States; Doliff v. United States; Sec. 181.64, CR.
Dear Mr. Garrison:
In your letter dated April 28, 1997, and in further corrospondence dated June 13, 1997, you requested a tariff classification ruling on behalf of Itec Overseas, Ltd.
The merchandise is described as titanium golf club heads manufactured in Russia. The heads are said to be complete in their condition as imported meaning they need no further work for their intended use as golf club heads. Subsequent to importation into the United States, the club heads are sent to Mexico for a painting operation that is described as for decorative purposes only, whereupon the heads are then returned to the United States for assembly with golf club shafts. You have stressed that "the paint or finish is not a protective coating as titanium does not require protection from the elements." The painting process is said to be performed for cosmetic purposes only, manifesting the personal preferences of individuals or companies using the finished golf clubs. Documents you have supplied indicate that the process imparts no other features or characteristics to the club head (or club) that would differentiate it from an unpainted or otherwise uncoated golf club head.
The applicable subheading for golf club heads is 9506.39.0060, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for "Articles and equipment for general physical exercise, gymnastics, athletics, other sports...; Golf clubs and other golf equipment; parts and accessories thereof: Other, Parts of golf clubs." The general rate of duty is 4.9 percent ad valorem.
Articles returned to the United States after having been exported to be advanced in value or improved in condition by repairs or alterations may qualify for a duty exemption under subheading 9802.00.50, HTSUSA, provided the foreign operation does not destroy the identity of the exported articles or create new or different articles through a process of manufacture. Such articles returned after having been repaired or altered in Mexico, whether or not pursuant to a warranty, are eligible for duty-free treatment, upon compliance with the regulatory and documentary requirements of section 181.64, Customs Regulations (19 C.F.R. 181.64). For purposes of this section, "repairs or alterations" means restoration, addition, renovation, redyeing, cleaning, resterilizing, or other treatment which does not destroy the essential characteristics of, or create a new or commercially different good from, the good exported from the United States.
However, entitlement to this tariff treatment is precluded where the exported articles are incomplete for their intended purpose prior to the foreign processing, because "repairs and alterations [under heading 9802]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." Dolliff and Company, Inc. v. United States, C.D. 4755, 455 F. Supp. 618 (1978), 599 F.2d 1015 (1979).
In applying this provision, the courts in several cases have focused upon whether the exported article is incomplete or unsuitable for its intended use prior to the foreign processing, or whether the foreign processing creates a new and different article in comparison to the exported article. See, for example, Doliff, and Guardian Industries Corp. v. United States, 3 CIT 9 (1982).
In the Guardian case, annealed glass was sent to Canada for heat treatment, producing a tempered glass which was then returned to the U.S. The court concluded that the exported articles of raw annealed glass were not "completed articles" since they were entirely unsuitable for their intended use in the U.S. as sliding glass patio doors. Additionally, the court, in determining whether the articles were "complete", looked to see if the tempering of the annealed glass transformed the glass in name, use, performance characteristics and tariff classification and determined that there was a change in use and performance characteristics between the annealed glass sent to Canada and the tempered glass returned to the U.S. and that the returned tempered glass article was a new and different article compared to the exported annealed glass. The merchandise was ruled ineligible for the partial duty exemption.
Applying the rationale utilized in Guardian to this case, the use of the golf club heads does not change after the foreign processing. Upon exportation from the U.S., the heads are intended for use with golf shafts, and they are suitable for that use at the time of exportation. Upon return to the U.S. they have retained this sole use. In addition, the painting operation only slightly changes the appearance of the heads, but does not change their basic structural characteristics or their performance characteristics. Whether in a painted or unpainted state, they have essentially the same characteristics.
The court in Guardian also looked to a change in tariff classification as an indication of whether the article exported from the U.S. was a complete article. After examining the sample golf club heads you submitted, we note that there would be no change in tariff classification from the heads exported from the U.S., and those which are returned after the painting operation in Mexico. This would support the conclusion that the golf club heads are completed articles upon exportation from the U.S., and that the operations in Mexico did not constitute a step in the manufacturing process nor did they create a new article. That the exported heads are complete and ready for use and that the operation in Mexico can be considered nothing more than an alteration is additionally demonstrated by the fact that, like the treated heads, unpainted golf club heads and golf clubs with untreated titanium heads can be purchased at the retail level by the ultimate consumer.
The court in Guardian also stated that the two glass products are known by different names. The glass before it is tempered is described as annealed glass and is known in the trade as "float glass," whereas the tempered glass is known in the trade as "tempered glass" or "safety glass." Guardian at p.15. The golf club heads at the time of importation into Mexico and upon return to the U.S. have no change in name, and no differentiation is recognized in the industry between the heads.
In summary, the painting operation in Mexico does not transform the club heads in name, use, performance characteristics or tariff classification. Consideration of all of these factors leads to the conclusion that the golf club heads are complete articles upon exportation to Mexico, and that the painting operation constitutes an alteration within the meaning of subheading 9802.00.50, HTSUSA. Therefore, the golf club heads may be entered under this tariff provision with a duty only upon the value of the painting alteration operation. However, such articles returned after having undergone the alteration in Mexico, are eligible for full duty-free treatment, upon compliance with the documentary and regulatory requirements of section 181.64, Customs Regulations (19 CFR 181.64).
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 the ruling, contact National Import Specialist Tom McKenna at 212-466-5475.
Sincerely,
Gwenn Klein Kirschner
Chief, Special Products Branch
National Commodity
Specialist Division