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HQ 555509


January 29, 1990

CLA-2 CO:R:C:V 555509 KAC

CATEGORY: CLASSIFICATION

TARIFF NO.: 9801.00.10 - 9802.00.80

Mr. David S. Simpson, Jr.
William F. Joffroy Customs Brokers, Inc.
Nogales Foreign Trade Zone
P.O. Box 698
Nogales, Arizona 85628-0698

RE: Applicability of duty exemption under HTSUS subheading 9801.00.10 and subheading 9802.00.80 to "Hilari-Tees" to be imported from Mexico.

Dear Mr. Simpson:

This is in response to your letter of October 20, 1989, on behalf of U.S. Leisure Products, requesting a ruling on the applicability of subheading 9801.00.10, Harmonized Tariff Schedule of the United States (HTSUS), to golf tees wrapped with pieces of paper printed with jokes ("Hilari-Tees") to be imported from Mexico. Samples of the "Hilari-Tees" were submitted.

FACTS:

You state that U.S. Leisure Products intends to ship golf tees, pieces of paper printed with jokes, glue, and plastic boxes, all of which are U.S. products, to Mexico for foreign operations. The foreign operations performed in Mexico will be:

(1) place the golf tee on the edge of the paper which contains glue;
(2) roll paper around golf tee;
(3) put a spot of glue on paper so that it will not unravel; and
(4) place golf tees into plastic box.

After the foreign operations are completed the "Hilari-Tees" will be imported into the U.S.

ISSUE:

Whether the U.S. products to be exported will qualify for the duty exemption available under HTSUS subheading 9801.00.10 or subheading 9802.00.80 when returned to the United States.

LAW & 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, Customs Regulations (19 CFR 10.1), are met. While some change in the condition of the product while it is abroad is permissible, operations which either advance the value or improve the condition of the exported product render it ineligible for duty free entry upon return to the U.S. See, Border Brokerage Company Inc. v. United States, 65 Cust.Ct. 50, C.D. 4052, 314 F.Supp. 788, (1970), appeal dismissed, 58 CCPA 165 (1970). In Air Carrier Supply Corporation, Carmas Supply Corporation v. United States, 35 Cust.Ct. 173, C.D. 1740 (1955), aff'd, 44 CCPA 116, C.A.D. 647 (1957), the court stated that the question of whether merchandise is advanced in value or improved in condition by a manufacturing process is one of fact and that the burden is on the importer to show, as a matter of fact, that there has been no advance in value or improvement in condition in the article for which he is seeking free entry.

In the instant case, we believe that the foreign operations performed in Mexico advance in value and improve in condition the exported product. Attaching the paper with the joke to the golf tee by gluing converts the golf tee and printed joke into a new and different commercial article, a novelty item, whose value when imported surely is greater than the value of the separated golf tee and paper exported to Canada. In sum, we are not persuaded by the information provided that the "Hilari-Tees" have not been advanced in value or improved in condition by the operations performed in Mexico.

However, the information submitted indicates that an allowance in duty for the value of the U.S. components may be made under HTSUS subheading 9802.00.80 upon importation of the "Hilari-Tees" from Mexico. This tariff provision provides a partial duty exemption for:

[a]rticles 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.

All three requirements of HTSUS subheading 9802.00.80 must be satisfied before a component may receive a duty allowance. An article entered under this tariff provision is subject to a duty upon the full value of the imported assembled article, less the cost or value of the U.S. components assembled therein, provided there has been compliance with the documentation requirements of section 10.24, Customs Regulations (19 CFR 10.24).

In the instant case, the description of the foreign operations show that the U.S. components will be eligible for the partial duty exemption of subheading 9802.00.80, HTSUS. The operation of gluing one edge of the paper to the golf tee, winding the paper around the tee, and gluing the paper to itself to prevent unraveling securely affixes the paper to the golf tee until it is removed by the consumer. These operations are considered assembly operations. See, section 10.16(a), Customs Regulations (19 CFR 10.16(a)) and General Instrument Corporation v. United States, 61 CCPA 86, C.A.D. 1128, 499 F.2d 1318 (1974), rev'g, 70 Cust.Ct. 151, C.D. 4421, 359 F.Supp. 1390 (1973), which held that winding and taping wire (to prevent unraveling) are considered assembly operations. Although the printed joke is not meant to be permanently attached to the golf tee, this will not disqualify the assembled article from the benefit of this tariff provision. See, Mattel, Inc. v. United States, 67 CCPA 74, C.A.D. 1248, 624 F.2d 1076 (1980), rev'g, 82 Cust.Ct. 234, C.D. 4805, 475 F.Supp. 683 (1979), which held that phonograph records packaged in envelopes and stapled to talking toy phones were classifiable under item 807.00, TSUS (now subheading 9802.00.80, HTSUS). In Mattel, the records were not meant to be permanently attached to the toy phone. As the U.S. components are in a condition ready for assembly without further fabrication, do not lose their physical identities in the assembly operations, and are not otherwise advanced in value or improved in condition except by assembly operations, the returned "Hilari-Tees" will be eligible for the partial duty exemption under HTSUS subheading 9802.00.80.

HOLDING:

On the basis of the information and samples submitted, as the U.S. components will be advanced in value and improved in condition abroad as a result of the foreign operations, the "Hilari-Tees" will not qualify for the duty exemption under HTSUS subheading 9801.00.10. However, allowances in duty may be made under HTSUS subheading 9802.00.80 for the cost or value of the U.S. tees and printed jokes when the assembled articles are
returned to the U.S., upon compliance with the applicable Customs Regulations (19 CFR 10.11-10.24). The U.S. packaging materials, including the plastic boxes, are entitled to free entry under subheading 9801.00.10, HTSUS.

Sincerely,

John Durant, Director
Commercial Rulings Division

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