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HQ 555610


February 1, 1991

CLA-2 CO:R:C:S 555610 LS

CATEGORY: CLASSIFICATION

TARIFF NO.: 3823.90.2900; 9503.90.6000; 9505.90.6000; 7117.90.4000; 9801.00.10; 9802.00.80

Mr. John Moriarty
Import Manager
Spearhead Industries, Inc.
9971 Valley View Road
Minneapolis, Minnesota 55344

RE: Mini "lite stik" refills containing cyalume chemical, and Halloween items containing a "lite stik"; repackaging; Superscope; U.S. fabricated component

Dear Mr. Moriarty:

This is in response to your letters dated January 31 and February 1, 1990, to the New York Seaport Customs office, requesting a ruling on the tariff classification of six Halloween items. Your letters, and the samples, were referred to our office for a reply. We regret the delay in responding.

FACTS:

Item 24030 consists of two 60 mm. "lite stiks," blister packaged on cardboard and known as "Mini Lite Stik Refills." The lite stik or refill is a plastic tube which contains a vial of cyalume chemical. When the user bends the plastic tube so that it snaps, the chemical glows in the dark. The refill lite stiks are made in Japan from a U.S. manufactured chemical exported from the U.S. in liquid form. The other components are believed to be of Japanese origin. The completed lite stiks are sealed in a foil wrapper in Japan and then sent to Taiwan to be blister packaged before being imported into the U.S. for retail sale.

Item 24020, known as a "Lite Stik Fun Ball," consists of a plastic perforated ball packaged with a 60 mm. lite stik. The ball itself is believed to be of Japanese origin. The lite stik is made in Japan from the same components as those comprising item 24030. Both the wrapped lite stik and ball are sent to Taiwan where they are blister packaged together for retail sale. When the consumer is ready to use the item, the lite stik is removed from the foil wrapper, bent so as to activate the glow, and inserted through the perforations in the ball so that it fits inside.
Item 24040, known as a "Lite-Stik Whistler," consists of a plastic "whistler" with a handle and string, and a 4 inch lite stik in a foil wrapper, sold together in blister packaging. This lite stik is manufactured and sealed in a foil wrapper in the U.S. It is exported to Hong Kong where it is blister packaged with the whistler, which is produced in China. When the consumer is ready to use the item, the inner vial of the lite stik is bent to allow it to glow, and the glowing lite stik is inserted through the whistler until it snaps into place. After the string is tied to the end of the lite stik, the user then grips the handle and swings the lite stik whistler in a circular motion to create a whistling sound.

Item 24060, known as a "Lite Stik Clip-On Costume Light," consists of a plastic sleeve, which depicts a ghost figure; a plastic pin in the shape of a bat; and a lite stik sealed in a foil wrapper. The lite stik is manufactured and sealed in its wrapper in the U.S. It is then exported to Hong Kong where it is blister packaged with the other articles, which are produced in China. The costume light is used by inserting the glowing lite stik into an opening in the plastic sleeve, and then attaching the pin onto the hole of the lite stik. The item is then pinned to a child's clothing as a Halloween decoration and safety light.

Item 24100, known as a "Lite Stik Glowing Ghost Decoration," consists of a plastic ghost decoration, made in China, and a 4 inch lite stik in a foil wrapper, made in the U.S. These articles are exported to Hong Kong where they are blister packaged together. The consumer uses this item by placing the glowing lite stik on top of a stand inside the ghost decoration.

Item 24050, known as a "Lite Stik Pumpkin Light," consists of a plastic holder, made in China, and a 4 inch lite stik in a foil wrapper, made in the U.S. These articles are exported to Hong Kong where they are blister packaged together. The consumer uses this item by inserting the glowing lite stik onto the holder, and then placing it on the bottom of a carved pumpkin.

You requested a ruling on the tariff classification of these six items. Because all of these items contain U.S. origin articles which are exported abroad and returned, we also considered whether any of them are eligible for the duty exemption under subheading 9801.00.10, Harmonized Tariff Schedule of the United States (HTSUS), upon their return to the U.S. We also addressed whether items 24020 and 24030 are eligible for the partial duty exemption under subheading 9802.00.80, HTSUS.

ISSUES

I. What is the proper classification of the above-described merchandise?
II. Whether any of the items qualify for the duty exemption under subheading 9801.00.10 or 9802.00.80, HTSUS.

LAW AND ANALYSIS:

ISSUE I

Classification of merchandise under the HTSUS is in accordance with the General Rules of Interpretation (GRI's), taken in order. GRI 1 provides that classification is determined according to the terms of the headings and any relative section or chapter notes.

Item 24030

Heading 3823, HTSUS, provides, in pertinent part, for "chemical products and preparations of the chemical or allied industries...not elsewhere specified or included." The Explanatory Notes, which represent the official interpretation of the tariff at the international level, offer guidance in understanding the headings. The Explanatory Note to heading 3823, HTSUS, indicates that the preparations and chemical products of this heading include, inter alia:

(34) Articles producing a lighting effect by the phenomenon of chemiluminescence, e.g., lightsticks in which the lighting effect is obtained by a chemical reaction between oxalic acid type esters and hydrogen peroxide in the presence of a solvent and a fluorescent compound.

Heading 3823 and its accompanying Explanatory Note describe item 24030. Accordingly, the Mini Lite-Stik refills are classifiable in heading 3823.

Items 24020, 24040, 24060, and 24100

Before items 24020, 24040, 24060, and 24100 can be used as intended, they must be assembled. Consequently, GRI 2(a) applies.

GRI 2(a) provides for unassembled goods. It mandates that complete or finished articles entered unassembled or disassembled are to be classified in the same heading as the assembled article, provided that, as entered, they have the essential character of the complete or finished article.

As each item contains several components whose end use is readily apparent to the consumer and the assembly of these components involves a simple process, the unassembled articles, as entered, bear the essential character of their finished form. Accordingly, each of these unassembled articles is classifiable under the heading which applies to that article as completed.

Items 24020 and 24040

Heading 9503, HTSUS, provides, in pertinent part, for "[o]ther toys." In the Explanatory Notes, the general notes for Chapter 95 indicate that this chapter "covers toys of all kinds whether designed for the amusement of children or adults." The phrase "designed for the amusement of" is generally understood to indicate that the use of an article will be a factor when classificaton as a toy is being considered.

Additional U.S. Rule of Interpretation 1(a), HTSUSA, provides that absent language to the contrary:

[A] tariff classification controlled by use (other than actual use) is to be determined in accordance with the use in the United States at, or immediately prior to, the date of importation, of goods of that class or kind to which the imported goods belong, and the controlling use is the principal use.

Therefore, in order to be classified as toys, items 24020 and 24040 must be principally used for amusement.

These articles are principally used for amusement; the Lite Stik Whistler is swung around in circles and the Fun Ball is tossed about by children. Accordingly, they are classifiable as other toys in heading 9503, HTSUS.

Item 24060

While the costume light ghost pin provides minimal amusement, it is not of a comical nature nor does it feature humorous words or sayings -- it is simply a novelty pin. Consequently, it is not classifiable in heading 9503 as a toy.

Heading 9505, HTSUS, provides, in pertinent part, for "[f]estive, carnival or other entertainment articles." The Explanatory Note to heading 9505 indicates that the heading covers:

(A) Festive, carnival or other entertainment articles which in view of their intended use are generally made of non- durable material. They include:

(1) Decorations such as festoons, garlands, Chinese lanterns, etc., as well as various decorative articles made of paper, metal foil, glass fibre, etc., for Christmas trees (e.g., tinsel, stars, icicles), artificial snow, coloured balls, bells, lanterns, etc. Cake and other decorations (e.g., animals, flags) which are traditionally associated with a particular holiday are also classified here.

For the most part, the items described above function primarily as decorative articles. Additionally, heading 9505 is generally regarded as a use provision.

Here, the subject pin serves to adorn, not to decorate. Moreover, while the instant article displays a holiday motif, the pin itself does not belong to a class of merchandise whose principal use is festive. Consequently, the pin is not classifiable in heading 9505.

Heading 7117, HTSUS, provides for " [i]mitation jewelry." Chapter 71, HTSUS, Note 10 indicates that "[f]or the purposes of heading 7117, the expression 'imitation jewelry' means articles of jewelry within the meaning of paragraph (a) of note 8 above...." Note 8(a) defines "articles of jewelry" as: "Any small objects of personal adornment (gem set or not) (for example rings...brooches...)...." A brooch is defined in the Jeweler's Dictionary, 3rd edition, 1976, published by Jewelers' Circular Keystone, as: "A piece of jewelry to be worn pinned to clothing, as at the neck or shoulder, on the breast or hat, or in the hair."

The pin features a bar-pin clasp (the type of clasp routinely used on jewelry pins or brooches) and is worn on the breast. As the article adorns the body and presents features associated with brooches, it is classifiable in heading 7117, HTSUS, which provides for imitation jewelry.

Item 24100

This item is a plastic rendition of a traditional Halloween ghost. Consequently, it qualifies as a festive article in heading 9505, HTSUS.

Item 24050

No single heading in the HTSUS provides for a combination glow stick and plastic holder as assembled; hence, a classification determination cannot be made by way of GRI 2(a).

GRI 2(b) pertains to mixtures or combinations of a material or substance, and goods consisting of two or more materials or substances. This rule further provides: "The classification of goods consisting of more than one material or substance shall be according to the principles of rule 3." As item 24050 is made up of two different materials (and, thus, classifiable in two separate headings: heading 3823, HTSUS, for chemical products and preparations of the chemical or allied industries, not elsewhere specified or included; and heading 3926, HTSUS, other articles of plastics), GRI 3 must be consulted.

Here, the two headings at issue refer to part only of the subject Pumpkin Light, and according to GRI 3(a) are to be regarded as equally specific, thereby making resort to GRI 3(b) necessary. According to GRI 3(b), mixtures and composite goods consisting of different materials, or made up of different components, shall be classified as if they consisted of the material or component which gives them their essential character. The Explanatory Notes to GRI 3(b) indicate that "essential character" may be determined by considering "the nature of the material or component, its bulk, quantity, weight, value, or by the role of the constituent material in relation to the use of the goods."

The role that the glow stick plays in relation to the use of the article strongly suggests that the glow stick represents the essential character of item 24050. While the plastic holder holds the glow stick in place, it is the stick which produces the item's desired effect. The glow stick and holder, therefore, are classifiable under heading 3823 -- the provision which provides for chemical lightsticks.

ISSUE II

Subheading 9801.00.10, HTSUS, provides for the duty-free entry of products of the U.S. that are returned after having been exported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, provided there has been compliance with the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1). Although 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 product render it ineligible for duty free entry upon return to the U.S. See Border Brokerage Co. v. United States, 65 Cust. Ct. 50, C.D. 4052, 314 F. Supp. 788 (1970), appeal dismissed, 58 CCPA 165 (1970).

In Superscope, Inc. v. United States, 13 CIT ___, 727 F. Supp. 629 (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), since the U.S. panel portion of the imported article was "not 'advanced in value or improved in condition . . . while abroad,' but [was] merely repacked." Id. at 631. Although Superscope concerned the TSUS, not the HTSUS, the decision is believed to be equally applicable to similar situations arising under the HTSUS, since item 800.00, TSUS, and relevant Schedule 8, TSUS, headnotes were carried over virtually unchanged into the HTSUS.

We believe that the decision in Superscope is controlling with respect to items 24040, 24050, 24060, and 24100. All of them contain a lite stik which is manufactured and foil wrapped in the U.S., then exported to Hong Kong for blister packaging with foreign articles, and returned to the U.S. This mere repackaging of the lite stiks with foreign articles neither advances them in value nor improves them in condition. Therefore, with respect to each of these items, a classification allowance in duty may be made under subheading 9801.00.10, HTSUS, for the cost or value of the U.S. manufactured lite stik. This assumes that the documentation requirements of 19 CFR 10.1 are met and that Customs at the port of entry is satisfied that the lite stiks are, in fact, of U.S. origin.

Both items 24020 and 24030 contain lite stiks made from a U.S. manufactured chemical exported to Japan in liquid form and joined there with components believed to be of Japanese origin. The completed lite stiks are sealed in foil wrappers in Japan and exported to Taiwan where they are blister packaged. In both the mini lite stiks and the lite stik fun ball, the chemical is the only U.S. manufactured article. We believe that the operation performed in Japan of incorporating the chemical into the plastic tube to form the completed lite stik significantly advances the value of the chemical. As a result of this operation, the chemical becomes an integral part of a new and different commercial article, the lite stik. Therefore, the U.S. manufactured chemical will not qualify for a duty exemption under subheading 9801.00.10, HTSUS, when items 24020 and 24030, containing the lite stik, are imported into the U.S.

Since the operation in Japan of forming the lite stiks in items 24020 and 24030 may involve an assembly operation, we will consider whether the U.S. origin chemical inside the stiks is eligible for the partial duty exemption under subheading 9802.00.80, HTSUS.

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 such as cleaning, lubricating and painting.

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

Since the cyalume substance is a chemical product in liquid form as exported, it does not qualify as a "fabricated component, the product of the U.S." The legislative history of subheading 9802.00.80, HTSUS, makes it clear that the partial duty exemption applies to U.S-made fabricated components which are of types designed to be fitted together with other components, and does not apply to chemical products, food ingredients, liquids, gases, powders, etc. H.R. Rep. No. 342, 89th Cong., 1st Sess. 49 (1965). Therefore, the cyalume chemical is not eligible for the partial duty exemption under subheading 9802.00.80, HTSUS, when items 24020 and 24030 are imported into the U.S. Therefore, we need not reach the question of whether the formation of the lite stiks in Japan constitutes an acceptable assembly operation for purposes of this provision.

HOLDING:

Items 24050 and 24030 are classifiable in subheading 3823.90.2900, HTSUS, which provides for prepared binders for foundry molds or cores; chemical products and preparations of the chemical or allied industries (including those consisting of mixtures or natural products)...other: mixtures containing 5 percent or more by weight of one or more aromatic or modified aromatic substances: other. The applicable rate of duty is 3.7 cents per kilogram plus 13.6 percent ad valorem.

Items 24020 and 24040 are classifiable in subheading 9503.90.6000, HTSUS, which provides for other toys; reduced-size ("scale") models and similar recreational models, working or not; puzzles of all kinds; and accessories thereof: other: other: other toys (except models), not having a spring mechanism. The applicable rate of duty is 6.8 percent ad valorem.

Item 24100 is classifiable in subheading 9505.90.6000, which provides for festive, carnival or other entertainment articles, including magic tricks and practical joke articles: parts and accesories thereof: other: other. The applicable rate of duty is 3.1 percent ad valorem.
Item 24060 is classifiable in subheading 7117.90.4000, HTSUS, which provides for imitation jewelry: other: other: valued not over 20 cents per dozen pieces or parts. The applicable rate of duty is 7.2 ad valorem.

As indicated in subheading 9902.71.13, HTSUS, toy jewelry provided for in subheading 7117.90.40 valued not over 5 cents per piece and articles provided for in heading 9503 or subheading 9505.90 valued not over 5 cents per unit may enter the U.S. free of duty.

A classification allowance in duty may be made under subheading 9801.00.10, HTSUS, for the cost or value of the U.S. manufactured lite stik in items 24040, 24050, 24060, and 24100. In each of these items, the U.S. origin lite stik is merely packaged abroad with foreign articles and returned to the U.S.

In items 24020 and 24030, which contain lite stiks made in Japan from a U.S. origin chemical exported from the U.S. in liquid form, the chemical will not qualify for a duty exemption under subheading 9801.00.10, HTSUS, when these two items are imported into the U.S. In addition, this chemical is not eligible for the partial duty exemption under subheading 9802.00.80, HTSUS.

Sincerely,

John Durant, Director
Commercial Rulings Division

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