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HQ 555144


April 9, 1990

CLA-2 CO:R:C:V 555144 GRV

CATEGORY: CLASSIFICATION

TARIFF NO.: 9801.00.10; 9802.00.80

Luis Chavez, Esq.
Kemp, Smith, Duncan & Hammond, P.C.
2000 MBank Plaza
P.O. Drawer 2800, 79999-2800
El Paso, Texas 79901-1441

RE: Applicability of duty exemptions under HTSUS subheadings 9801.00.10 and 9802.00.80 to certain kitchen appliance spare parts packages from Mexico

Dear Mr. Chavez:

This is in response to your four letters of September 14, 1988, and your letter of March 22, 1989, on behalf of Whirlpool Corporation, requesting rulings on the applicability of subhead- ing 9801.00.10, Harmonized Tariff Schedule of the United States (HTSUS) (formerly item 800.00, Tariff Schedules of the United States (TSUS)), to certain kitchen appliance spare part packages to be imported from Mexico. A sample of one of the spare parts packages was submitted for examination. We regret the delay in responding to your request.

FACTS:

Some nineteen kitchen appliance spare parts and polyethylene bags, all of U.S. manufacture, will be shipped to Mexico for packaging operations (bag assemblies). Four separate bag assemblies are described in your letters, which will entail placing various combinations (5, 10, 13 and 14) of the nineteen constituent parts into polyethylene bags. Common to each of these bag assemblies are the following steps:

(1) stamping a part number on a polyethylene bag with a rubber stamper;
(2) placing a specified quantity (5, 10, 13 or 14) of constituent parts into a plastic bag, and; (3) sealing the bag, either with staples or heat-sealing equipment.

Other packaging steps include folding a beaded wire tie twice and securing it with a rubber band--a step common to three of the bag assemblies--, and power fitting a nut-lock to a threaded bolt (denominated a front foot)--a step common to two of the bag assemblies.
Following these packaging operations, the filled and sealed bags will be placed in shipping containers, e.g., knock-down boxes, and returned to the U.S.

ISSUE:

Whether the U.S. products (kitchen appliance spare parts and packaging materials) to be exported will qualify for the duty exemption available under HTSUS subheadings 9801.00.10 and/or 9802.00.80 (formerly TSUS item 807.00) when returned to the U.S.

LAW AND ANALYSIS:

HTSUS subheading 9801.00.10 provides for the free entry of U.S. products that are exported and returned without having been advanced in value or improved in condition by any means while abroad, provided the documentary requirements of section 10.1 of the Customs Regulations (19 CFR 10.1) are met.

Court decisions have interpreted the provisions of HTSUS subheading 9801.00.10 as extending duty-free treatment to U.S. products that are merely repackaged abroad and returned. Super- scope, Inc. v. United States, Slip Op. 89-167, 727 F.Supp. 629 (1989); Border Brokerage Company, Inc. v. United States, C.D. 4052, 65 Cust.Ct. 50, 314 F.Supp. 788 (1970), appeal dismissed, 58 CCPA 165 (1970); and, United States v. John V. Carr & Son, Inc., C.D. 4377, 69 Cust.Ct. 78, 347 F.Supp. 1390 (1972), aff'd, C.A.D. 1118, 61 CCPA 52, 496 F.2d 1225 (1974).

Regarding the stamping of part numbers on the bag containing the parts, in Headquarters Ruling Letter (HRL) 071449 (October 17, 1983) we found that surgical drapes, which were folded and stamped with the company name, size and model number before being packaged in plastic bags, were not advanced in value or improved in condition so as to preclude entry under TSUS item 800.00. Similarly, in HRL 555183 (February 15, 1989) we stated that the printing of the company name and a content description of the product on individual dispensers does not preclude them from receiving duty-free treatment under this tariff provision. See also, HRLs 555329 (June 16, 1989) and 555333 (March 15, 1990).

In the instant case, seventeen of the nineteen U.S. component parts--not including the threaded bolt and nut-lock component parts--will be eligible for the duty-free exemption available under HTSUS subheading 9801.00.10, as the foreign packaging operation does not advance their value or improve their condition. The seventeen component parts are merely selectively sorted and repackaged for return to the U.S. However, the other two component parts--the threaded bolt and nut-lock--will not be eligible for the duty exemption, as the nut-lock is power fitted to the threaded bolt, an operation which improves their condition by rendering the front foot more convenient to use by the U.S. customer.

However, power-fitting the nut-lock to the threaded bolt constitutes a valid assembly operation and, therefore, these two components may receive an allowance in duty under HTSUS subheading 9802.00.80. This tariff provision applies to articles assembled abroad in whole or in part of fabricated components, the product of the U.S., which are exported in condition ready for assembly without further fabrication, have not lost their physical identity in such articles by change in form, shape or otherwise, and have not been advanced in value or improved in condition abroad except by the assembly operation and operations incidental thereto. An article entered under HTSUS subheading 9802.00.80 is subject to duty upon the full appraised value of the imported article, less the cost or value of such products of the U.S., provided there is compliance with the documentary requirements of section 10.24 of the Customs Regulations (19 CFR 10.24).

As the stapling or heat-sealing of the U.S. polyethylene bags is not considered to advance their value or improve their condition, they will be entitled to duty-free treatment under HTSUS subheading 9801.00.10. Similarly, the containers of U.S. origin into which the bags will be placed will qualify for the duty exemption under this tariff provision.

HOLDING:

On the basis of the information and samples submitted, seventeen of the various kitchen appliance parts--not including the nut-lock and threaded bolt parts--will be eligible for the duty exemption available under HTSUS subheading 9801.00.10, when imported into the U.S., as the foreign packaging does not advance their value nor improve their condition. The nut-lock and threaded bolt parts will be eligible for the partial duty exemp- tion under HTSUS subheading 9802.00.80, when imported into the U.S., as the power fitting of the two components together consti- tutes a valid assembly operation. In both instances, the docu- mentary requirements of 19 CFR 10.1 (HTSUS subheading 9801.00.10) and 19 CFR 10.24 (HTSUS subheading 9802.00.80) must be met.

Sincerely,

John Durant, Director
Commercial Rulings Division

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