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HQ 555387


September 11, 1989

CLA-2 CO:R:C:V 555387 GRV

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.50

Mr. C. Gustavo Farell
President
Cesar-Scott, Inc.
7701 Ewald Terrace
Minneapolis, Minnesota 55426

RE: Applicability of partial duty exemption under HTSUS subhead- ing 9802.00.50 to various heat shrink tubings from Mexico

Dear Mr. Farell:

This is in response to your letter of May 2, 1989, request- ing a ruling on the applicability of subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), to vari- ous heat shrink tubings to be imported from Mexico. Samples of the article to be exported for processing and the article to be returned to the U.S. were submitted for examination.

FACTS:

You state that various heat shrinkable types of tubing will be purchased on spools from U.S. distributors and exported to Mexico for manufacture into two types of electrical insulators. In Mexico, some of the tubing will be cut to length--typically one inch--and marked for use as identification labels for wires in the building of cable/harness/chassis assemblies. Other tub- ings will merely be cut to length--from 0.5 to 10 inches. These tubings will serve as an insulator over the ends of crimped con- tacts or any other conductive terminations. The two products will then be returned to the U.S. for sale.

ISSUE:

Whether the various heat shrink tubings qualify for the partial duty exemption under HTSUS subheading 9802.00.50 when returned to the U.S.

LAW & ANALYSIS:

Articles returned to the U.S. after having been exported to be advanced in value or improved in condition by repairs or alterations may qualify for the partial duty exemption under HTSUS subheading 9802.00.50 provided the foreign operation does not destroy the identity of the exported articles or create new or different articles. Further, entitlement to this tariff treatment is precluded where the exported articles are incomplete for their intended use and the foreign processing operation is a necessary step in the preparation or manufacture of finished articles. Dolliff & Company, Inc., v. United States, 81 Cust.Ct. 1, C.D. 4755, 455 F.Supp. 618 (1978), aff'd, 66 CCPA 77, C.A.D. 1225, 599 F.2d 1015, 1019 (1979). Articles entitled to this par- tial duty exemption are dutiable only upon the cost or value of the foreign repairs or alterations, provided the documentary requirements of section 10.8, Customs Regulations (19 CFR 10.8), are satisfied.

It is clear from the information you have provided that the tubing exported on spools is not a completed product suitable for its intended use as wire identification labels or as insulators prior to the foreign processing. We have previously stated that where rolls of material are exported and finished goods are re- turned after cutting the material to length, the cutting opera- tion constitutes a finishing step in the manufacture of the goods to be returned. Headquarters Ruling Letter (HRL) 071475 (Septem- ber 20, 1983). See also, HRL 554736 (February 16, 1988). Thus, although the cutting and marking operations advance the heat shrink tubing in value by improving its marketable condition, the exported articles are not finished or completed products when exported and cannot qualify for the duty exemption available under HTSUS subheading 9802.00.50 when returned.

HOLDING:

On the basis of the information and samples presented, it is our opinion that the foreign operations comprise further process- ing steps which are performed on unfinished goods and which lead to completed articles. Accordingly, the various heat shrink tub- ings are not eligible for the partial duty exemption available under HTSUS subheading 9802.00.50 when returned to the U.S.

Sincerely,


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