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HQ 557685


March 28, 1994

CLA-2 CO:R:C:S 557685 MLR

CATEGORY: CLASSIFICATION

TARIFF NO.: 9801.00.10; 9802.00.80

Mr. John G. Bradford
Sara Lee Knit Products
P.O. Box 3019
Winston-Salem, NC 27102

RE: Applicability of HTSUS subheading 9801.00.10 or 9802.00.80 to U.S.-origin labels; ink; J-boards; plastic bags; company name; identifying information

Dear Mr. Bradford:

This is in reference to your letter of August 8, 1993, to U.S. Customs, New York Seaport, requesting a ruling on the applicability of subheading 9801.00.10, Harmonized Tariff Schedule of the United States (HTSUS), to certain U.S.-origin labels. Samples were forwarded on September 28, 1993.

FACTS:

Sara Lee Knit Products plans to export U.S.-origin labels to Honduras or any other foreign country with U.S.-origin ink where they will be printed. The labels are affixed either to U.S.- origin plastic bags or J-boards. Based upon the sample, the label is printed with a bar code, content information, style designation, size, and the country of assembly of imported briefs.

ISSUE:

Whether certain U.S.-origin labels exported to Honduras or any other foreign country for printing with U.S.-origin ink, and affixed to either U.S.-origin plastic bags or J-boards are entitled to duty-free treatment under subheading 9801.00.10, HTSUS, or the partial duty exemption available under subheading 9802.00.80, HTSUS, when returned to the U.S.

LAW AND ANALYSIS:

Subheading 9801.00.10, HTSUS, provides for the free entry of products of the United States that have been exported and returned without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, provided the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1), are met. Some change in the condition of the product while it is abroad is permissible. However, 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 United States. Border Brokerage Company, Inc. v. United States, 314 F. Supp. 788 (1970), appeal dismissed, 58 CCPA 165 (1970).

We have held that foreign stamping or printing of a product to identify the manufacturer and describe the product does not advance its value or improve its condition so as to preclude entry under 9801.00.10, HTSUS. See Headquarters Ruling Letter (HRL) 071449 dated October 17, 1983 (surgical drapes stamped in ink with the name of the company, size, and model number, and packaged in plastic bags were not precluded from item 800.00, Tariff Schedules of the United States (TSUS) (now 9801.00.10, HTSUS), treatment); and HRL 555183 dated February 15, 1989, (printing dental floss dispensers with the company name and description of the floss type, flavor and length, and bulk- packaged in cardboard boxes did not preclude subheading 9801.00.10, HTSUS, treatment for the dispensers); and HRL 557071 dated April 2, 1993 (plastic bottles labeled by a silk screening process with a company name, identifying data of a product, instructions, and the bottle's capacity were eligible for subheading 9801.00.10, HTSUS, treatment).

In the instant case, printing the labels with U.S.-origin ink with a bar code, content information, style designation, size, and the country of assembly of imported briefs is analogous to the printing of the dental floss dispensers and plastic bottles. Therefore, printing the labels will not preclude subheading 9801.00.10, HTSUS, treatment. However, the printed labels will also be affixed to U.S.-origin plastic bags or J- boards which advances the value and improves the condition of the labels by an assembly process, thereby precluding 9801.00.10, HTSUS, treatment.

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 this tariff provision is subject to duty upon the full cost or value of the imported assembled article, less the cost or value of the U.S. components assembled therein, upon compliance with the documentary requirements of section 10.24, Customs Regulations (19 CFR 10.24).

Section 10.14(a), Customs Regulations {19 CFR 10.14(a)}, states in part that:

[t]he components must be in condition ready for assembly without further fabrication at the time of their exportation from the United States to qualify for the exemption. Components will not lose their entitlement to the exemption by being subjected to operations incidental to the assembly either before, during, or after their assembly with other components.

Section 10.16(a), Customs Regulations {19 CFR 10.16(a)}, provides that the assembly operation performed abroad may consist of any method used to join or fit together solid components, such as welding, soldering, riveting, force fitting, gluing, lamination, sewing, or the use of fasteners.

Operations incidental to the assembly process are not considered further fabrication operations, as they are of a minor nature and cannot always be provided for in advance of the assembly operations. See 19 CFR 10.16(a). However, any significant process, operation or treatment whose primary purpose is the fabrication, completion, physical or chemical improvement of a component precludes the application of the exemption under subheading 9802.00.80, HTSUS, to that component. See 19 CFR 10.16(c).

In this case, affixing the U.S.-origin labels to the U.S.- origin plastic bags or J-boards is considered an acceptable assembly operation pursuant to 19 CFR 10.16(a). Regarding the printing of the labels, in 19 CFR 10.16(b)(7), marking is specifically enumerated as an incidental operation. In C.S.D. 79-314, 13 Cust. Bull. 1468 (1979), Customs determined that printing which serves the purpose of "origin markings, trademark, polarity, color coding, part number identification, or instruction for use," would not preclude tariff treatment under item 807.00, TSUS. Consequently, the labels which are printed and affixed to plastic bags or J-boards will be entitled to 9802.00.80, HTSUS, treatment.

HOLDING:

On the basis of the information and sample submitted, it is our opinion that the U.S.-origin labels exported to Honduras or any other foreign country solely for printing are eligible for duty-free treatment under subheading 9801.00.10, HTSUS, when returned to the United States, provided the documentation requirements of 19 CFR 10.1 are satisfied, unless they are also affixed to plastic bags or J-boards because this constitutes an advancement in value or improvement in their condition. However, allowances in duty may be made under subheading 9802.00.80, HTSUS, for the cost or value of the U.S.-origin labels, plastic bags, or J-boards upon their return to the U.S., provided the documentary requirements of 19 CFR 10.24 are satisfied.

Sincerely,

John Durant, Director

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