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HQ 555119


May 30, 1989

CLA-2-CO:R:C 555119 RA

CATEGORY: CLASSIFICATION

TARIFF NOS.: 9802.00.50, HTSUS; 9802.00.80, HTSUS

Mr. Howard Shube
Special Projects Manager
Shube's Manufacturing, Inc.
2010 Ridgecrest Drive, S.E.
Albuqueque, New Mexico 87108

RE: Classification of silver jewelry from Mexico under subheading 9802.00.50, HTSUS, or 9802.00.80, HTSUS

Dear Mr. Shube:

This is in response to your letter of August 25, 1988, requesting a ruling on the eligibilty for reduced duty treatment of certain silver articles of jewelry cast in the U.S. and exported to Mexico for processing and return to this country.

FACTS:

You propose to export to Mexico certain silver rings, earrings, charms, and similar items, which were cast in the U.S., for certain processing operations, which may include clipping, grinding, tumbling, soldering, and straightening. The pieces are then inspected, tagged, and returned to the U.S. for finishing. The clipping consists of closely removing any unwanted material left by the U.S. clipping operation. Any rough spots are then removed by means of a grinding wheel and then the silver articles are tumbled in a steel drum using an abrasive or steel shot media to remove scratches or oxides. In the case of the rings, it may be necessary for them to be placed on a spindle and tapped until straightened and restored to true round. Certain items, such as earrings, pins, or dangles, are subjected to assembly operations to attach wires, posts, or pins by soldering or crimping. Burn marks or oxidation caused by soldering are removed by tumbling. The remaining processing steps are done on return to the U.S. and may include cutting facets, enameling, plating, and inspection.

ISSUE:

Whether the returned silver jewelry will be eligible for the partial duty exemption provided for in subheading 9802.00.50 or 9802.00.80, Harmonized Tariff Schedule of the U.S. (HTSUS).

LAW AND ANALYSIS:

Subheading 9802.00.50, HTSUS, provides for the assessment of duty on the value of repairs or alterations performed abroad on articles exported for that purpose. However, this partial duty exemption is applicable only when the exported article is in a finished condition. Dolliff & Company Inc. v. U.S., 16 CCPA 77, C.A.D. 1225 (1979). Alterations do not apply to intermediate operations which are performed in the manufacture of completed articles. If the foreign processing is a step in the work needed to finish the articles for its intended use, the statutory provision for alterations will not apply. Guardian Industries Corporation v. U.S., 3 CIT 9 (1982) and U.S. v. J.D. Richardson Co., 36 CCPA 15, C.A.D. 390 (1948).

The clipping, grinding, tumbling, and straightening operations to be performed in Mexico all constitute processing which is a step in the manufacture of the jewelry items essential to their intended use after return to the U.S. Accordingly, this processing amounts to more than an alteration, thereby precluding classification of the returned jewelry under subheading 9802.00.50, HTSUS.

Subheading 9802.00.80, HTSUS, applies to articles assembled abroad in whole or in part of fabricated components of U.S. origin with no operations performed thereon except the attachment of the components to form the imported merchandise and operations incidental thereto. Duty is assessed on the total appraised value of the imported article less the cost or value of the fabricated components of U.S. origin.

Operations such as combining parts of earrings or broach pins by attaching and soldering or crimping posts, wires, or pins are considered qualified assemblies under this provision. See section 10.16(a), Customs Regulations (19 CFR 10.16(a)). However, in order to be eligible for this tariff treatment, the parts would have to be completely fabricated components when exported from the U.S. and ready for assembly with only incidental operations performed abroad. Section 10.16(c)(5), Customs Regulations (19 CFR 10.16(c)(5)), provides, in part, that polishing, burnishing and similar processes are not considered incidental to the assembly operation. Therefore, if it is
necessary to grind or tumble the various components before they are joined, subheading 9802.00.80, HTSUS, would not be applicable as these operations are more than incidental to assembly. For your information, we have enclosed a copy of the Customs Regulations relating to subheading 9802.00.80, HTSUS.

HOLDING:

Silver items of jewelry which are cast in the U.S. and exported to Mexico where they are subjected to operations, such as clipping, grinding, tumbling, or assembly, are processed beyond the meaning of the term "alterations," and, therefore, subheading 9802.00.50, HTSUS, would not be applicable to these items. Moreover, jewelry items assembled abroad by soldering or crimping wires or posts onto parts of earrings or broach pins would not be eligible for the partial duty allowance under subheading 9802.00.80, HTSUS, if the components are subjected to grinding or tumbling operations abroad prior to the assembly process.

Sincerely,

John Durant, Director

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