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HQ 555290


April 18, 1990

CLA-2-CO:R:C 555290 RA

CATEGORY: CLASSIFICATION

TARIFF NOS.: 3923.50.00; 9801.00.10; 9802.00.80

Mr. Richard G. Seley
Rudolph Miles and Sons
P.O. Box 144
El Paso, Texas 79942

RE: Applicability of the duty exemptions under subheadings 9801.00.10 and 9802.00.80, HTSUS, to certain parts of a plastic sports bottle assembled and/or packed in Mexico

Dear Mr. Seley:

This is in response to your letter of January 28, 1989, requesting a ruling on behalf of International Warehouse Inc., on the tariff treatment of certain parts of a plastic sports bottle assembled and/or packaged in Mexico. We regret the delay in responding to your request.

FACTS:

Three plastic components molded in the U.S. and consisting of a plastic lid, cap, and tube will be exported to Mexico for processing, after which they will be returned to the U.S. for use with a squeeze bottle for liquids. When exported to Mexico, the plastic tube (to be used as the bottle's outlet spout) will have been cut to length and beveled at one end. Once abroad, the tube will be heated, bent to the required angle, and then pressed through a hole in the plastic cap. The plastic lid will merely be packaged in Mexico with the assembled cap and tube and returned to the U.S. for use as a stopper for the end of the tube. You believe that the assembled tube and cap should receive the benefits of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), and that the lids should be free of duty under subheading 9801.00.10, HTSUS.

ISSUE:

Whether the plastic lids and the tube and cap assemblies are entitled to the duty exemptions under subheadings 9801.00.10 and 9802.00.80, HTSUS, respectively, when returned to the U.S.

LAW AND ANALYSIS:

Subheading 9801.00.10, HTSUS, 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. In Superscope, Inc. v. United States, 13 CIT , 727 F. Supp. 629 (CIT 1989), the court held that certain glass panels of U.S. origin that were exported, repacked abroad with certain foreign components, and returned to the U.S. as part of unassembled audio cabinets, were entitled to duty-free entry under item 800.00, Tariff Schedules of the United States (TSUS) (now subheading 9801.00.10, HTSUS). The court reasoned that the U.S. panel portion of the imported merchandise was "not 'advanced in value or improved in condition...while abroad' but [was] merely repacked."

Applying the court's rationale in the Superscope decision to the facts of the instant case, it is our opinion that the U.S lids that are merely packaged abroad with the assembled caps and tubes are entitled to duty-free treatment under subheading 9801.00.10, HTSUS, when returned to the U.S., upon compliance with the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1).

Subheading 9802.00.80, HTSUS, 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....

An article classified under this tariff provision is subject to duty upon the full value of the imported assembled article less the cost or value of the U.S. components, provided the documentation requirements of section 10.24, Customs Regulations (19 CFR 10.24), are met.

Regarding the applicability of this tariff provision to the cap and tube assembly, we find that pressing the tube through a hole in the cap constitutes an acceptable assembly operation by force fitting. See section 10.16(a), Customs Regulations (19 CFR 10.16(a)). As the cap component is exported from the U.S. in
condition ready for assembly without further fabrication, and is not advanced in value or improved in condition abroad except by being assembled with the tube, an allowance in duty may be made under subheading 9802.00.80, HTSUS, for the cost or value of the cap, upon compliance with the applicable documentation requirements.

However, we believe that heating and bending the U.S. tube in Mexico prior to its assembly with the cap precludes similar treatment for the tube component. Although 19 CFR 10.16(b)(5) permits "[a]djustments in the shape or form of a component to the extent required by the assembly..." as an operation incidental to the assembly process, 19 CFR 10.16(c) provides that:

[a]ny significant process, operation, or treatment other than assembly whose primary purpose is the fabrication, completion, physical or chemical improvement of a compo- nent,...shall not be regarded as incidental to the assembly and shall preclude the application of the exemption to such article.

In Samsonite Corporation v. U.S., 12 CIT , 702 F.Supp. 908 (1988), aff'd, 8 Fed.Cir. , 889 F.2d 1074 (1989), the court held that the bending of straight strips of U.S. steel into the shape of a square-sided "C" for use in luggage "did more than 'adjust' the article. The process created the component to be assembled, the essence of which is its configuration." After stating that the statute and attendant regulations do not cover a process which is as necessary to the fabrication of the component as it is to the subsequent assembly thereof, the court concluded that the bending of the steel was more a part of the fabrication of the steel frames than of the assembly of the merchandise. Thus, the court held that the strips of steel were not exported in condition ready for assembly without further fabrication, as required by clause (a) of the statute.

Similarly, in the instant case, the process of heating and bending the tube does more than adjust the component; it is a continuation of the fabrication of the tube component, begun in the U.S., and is necessary to the completion of the component to be assembled. Moreover, the heating and bending of the tube clearly is more a part of the fabrication of the component than of the subsequent assembly operation.

With respect to the duty rate applicable to the tube and cap assembly, it is our opinion that it is properly classifiable in subheading 3923.50.00, HTSUS, which provides for articles for the conveyance or packing of goods, of plastics; stoppers, lids, caps and other closures, of plastics. The rate of duty is 5.3 percent ad valorem under the General Duty Rate Column. You contend that this provision is inapplicable to the tube and cap assembly because, even with the lid installed on the end of the tube, there is no total closure due to the presence of an air intake hole in the cap. However, we believe that your assertion is without merit inasmuch as this tariff provision contains no "total" closure requirement. Moreover, the presence of such a hole clearly does not make the article anything other than a cap.

HOLDING:

The plastic lid of U.S. origin which is merely packaged abroad with the assembled tube and cap is entitled to free entry under subheading 9801.00.10, HTSUS, when returned to the U.S., upon compliance with the documentation requirements of 19 CFR 10.1. An allowance in duty may be made under subheading 9802.00.80, HTSUS, for the cost or value of the U.S. cap which is assembled with the tube abroad, provided the documentation requirements of 19 CFR 10.24 are satisfied. However, no such allowance may be granted for the tube component as it is not exported in condition ready for assembly without further fabrication. The tube and cap assembly is classifiable under subheading 3923.50.00, HTSUS, dutiable at the rate of 5.3 percent
ad valorem.

Sincerely,

John Durant, Director

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