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HQ 083711


November 6, 1989

CLA-2 CO:R:C:G 083711 JMH

CATEGORY: CLASSIFICATION

TARIFF NO.: 9608.10.00; 9801.00.10; 9802.00.80

Richard G. Seley
Rudolph Miles & Sons, Inc.
4950 Gateway East
P.O. Box 144
El Paso, Texas 79942

RE: Ball point pen and pen holder

Dear Mr. Seley:

Your letter of December 27, 1988, requesting a classification ruling under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA) and a country of origin determination for a ball point pen and pen holder desk set has been referred to this office for a reply.

FACTS:

The merchandise in question is a desk set consisting of a ball point pen with an ostrich feather glued to its end and a metal and plastic pen holder. The items are packaged together. The pen, pen holder and packaging materials are made in the United States. The ostrich feather is from Israel. We understand that the ostrich feather is Israeli grown. Furthermore, it has also been bleached and dyed in Israel. The ostrich feather is glued to the pen in Mexico and the items are packed for sale in Mexico.

ISSUES:

1. What is the proper classification of the ball point pen and pen holder under the HTSUSA?

2. Is the pen holder entitled to treatment as American good returned, not advanced in value or improved in condition within subheading 9801.10.00, HTSUSA? Is there an allowance for the U.S. pen under subheading 9802.00.80, HTSUSA?

3. Does the assembly operations within Mexico affect the country of origin of the packaged pen set for marking purposes?

4. Do restrictions exist on the importation of Israeli ostrich feathers?

LAW AND ANALYSIS:

Issue 1: What is the proper classification of the ball point pen and pen holder under the HTSUSA?

The classification of merchandise under the HTSUSA is governed by the General Rules of Interpretation (GRI's). GRI 1 states in part that "for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes...and according to the following provisions."

The following provisions" includes GRI 3(b) which refers to articles in sets "for retail sale..." GRI 3(b) states:
goods put up in sets for retail sale... shall be classified as if they consisted of the material or component which gives them their essential character, as far as this criterion is applicable.

To determine what is a "set" so to implement this rule, the Explanatory Notes to the HTSUSA must be examined. The Explanatory Notes, although not dispositive, are to be looked to for the proper interpretation of the HTSUSA. 54 Fed. Reg. 35127, 35128 (August 23, 1989). The Explanatory Note for Rule 3(b) gives a three part test for "goods put up in sets for retail sale." Harmonized Commodity Description and Coding System (HCDCS), Vol. 1, p. 4.

The three step definition states "For the purposes of this Rule, the term 'goods put up in sets for retail sale' shall be taken to mean goods which:

(a) consist of at least two different articles which are prima facie, classifiable in different headings.
(b) consist of products or articles put up together to meet a particular need or carry out a specific activity; and
(c) are put up in a manner suitable for sale directly to users without repacking (e.g., in boxes or cases or on boards)." (emphasis added)

Since these three steps are listed in the conjunctive, all three must be met. First, the pen and pen holder are different articles, classifiable within different headings. Secondly, they are put together to meet a particular writing need. Finally, the items are packaged together for sale directly to users without further packing. Therefore, the pen and pen holder are a "set" within the meaning of GRI 3(b), HTSUSA.

The classification of sets is determined by the item which gives the set its "essential character." This office agrees that the ball point pen gives the set in question its essential character. Therefore, the ball point pen set is classifiable within subheading 9608.10.00, HTSUSA, which describes "Ball point pens...".

Issue 2: Is the pen holder entitled to treatment as American goods returned, not advanced in value or improved in condition within subheading 9801.00.10, HTSUSA? Is there an allowance for the U.S. pen under subheading 9802.00.80, HTSUSA?

Subheading 9801.00.10, HTSUSA, provides for the duty free entry of U.S. origin merchandise when returned to the United States from abroad without an advancement in value or improvement in condition. The constructive segregation of the items or components forming a set is not allowed under this tariff provision. The application required is "all or nothing." If the imported article consists of any foreign materials or components or U.S. origin goods that have been advanced or improved, then the requirements of subheading 9801.00.10 are not met. See Headquarters Ruling Letter 084930, dated September 14, 1989.

The instant imported article is a set with the essential character of a ball point pen. Part of the materials, the Israeli ostrich feather, is foreign. Additionally, the pen has been advanced or improved with the attachment of the feather. Since all of the set does not meet the requirements of subheading 9801.00.10, HTSUSA, none of the set is granted American goods returned status. The U.S. made pen holder, although not advanced or improved while abroad, is a part of the set and, therefore, does not fall within the classification of subheading 9801.00.10, HTSUSA.

However, the entire set does fall within the purview of subheading 9802.00.80, HTSUSA. This subheading describes:

Articles 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...

The application of subheading 9802.00.80, HTSUSA, essentially results in the segregation of the U.S. components from the remainder, or dutiable portion, of the imported article. It is clear that this tariff provision does not contemplate an "all or nothing" approach. Therefore, the duty on the ball point pen set is placed on the full value of the imported article, minus the cost or value of the U.S. origin pen. No deduction may be made for the cost or value of the pen holder since it is not assembled abroad.

Issue 3: Does the assembly operations within Mexico affect the country of origin of the packaged pen set for marking purposes?

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), requires that every article (or its container) imported into the United States, subject to specified exceptions, shall be marked to indicate the country of origin to the ultimate purchaser in the United States. Country of origin is generally determined on the basis of substantial transformation. In this regard, 19 CFR 134.1(b) defines country of origin as "the country of manufacture, production, or growth of any article of foreign origin entering the United States. 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."

The substantial transformation test is also used to determine whether U.S. articles which are exported and returned to the United States are subject to the requirements of 19 U.S.C. 1304. Except as discussed below, such articles are excepted from marking under 19 CFR 134.32(m) as U.S. articles exported and returned, unless the articles are substantially transformed prior to their return to the United States.

An exception to the substantial transformation rule is found in 19 CFR 10.22, which applies to the country of origin marking requirements of articles assembled abroad in whole or in part from U.S. components and entitled to a partial exemption from duty under subheading 9802.00.80, HTSUSA. Section 10.22 provides that assembled articles entitled to the exemption are considered products of the country of assembly for the purposes of the country of origin marking requirements of 19 U.S.C. 1304.

In this case, a pen holder in the United States and a ball point pen assembled in Mexico from U.S. and Israeli components are to be imported. Although they are considered a set for tariff classification purposes, this fact is not relevant to the country of origin marking requirements for these items. See Headquarters Ruling Letter 084935, dated August 23, 1989.

In this case, the pen holder manufactured in the United States is excepted from marking under 19 CFR 134.32(m), as a U.S. article exported and returned. Nothing is done in Mexico to the pen holder to substantially transform it into a product of Mexico. The pen, however, which is eligible for importation under subheading 9802.00.80, HTSUSA, is subject to the requirements of 19 CFR 10.22. As indicated above, under this provision, the country of assembly in considered the country of origin for purposes of 19 U.S.C. 1304, which in this case is Mexico. The pen may be marked "Mexico", "Product of Mexico", "Assembled in Mexico", "Assembled in Mexico from U.S. and foreign components", etc. See Headquarters Ruling Letter 731507, dated October 17, 1989.

Issue 4: Do restrictions exist on the importation of Israeli ostrich feathers?

You state that the ostrich feather which is to be glued to the ball point pen is a product of Israel and is bleached and dyed in Israel. There is no prohibition or restriction on such ostrich feathers.

HOLDING:

The U.S. ball point pen with an attached Israeli ostrich feather, packaged in U.S. packing materials with a U.S. made pen holder are a set and classified within subheading 9608.10.00, HTSUSA. The U.S. produced goods which are assembled in Mexico are within subheading 9802.00.80, HTSUSA. There is no allowance for the U.S. made pen holder.

Since the pen holder is manufactured in the United States and is not substantially transformed while in Mexico, it is excepted from the marking requirements. The ball point pen is assembled abroad of U.S. and foreign components and is eligible for the allowance within subheading 9802.00.80, HTSUSA. Therefore, according to 19 CFR 10.22, the pen's country of origin for marking purposes is the country in which it was assembled. The pen may be marked "Mexico", "Product of Mexico", Assembled in Mexico, or "Assembled in Mexico from U.S. and foreign components."

There are no prohibitions or restrictions on the importation of ostrich feathers from Israel.

Sincerely,

John Durant, Director
Commercial Rulings Division

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