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HQ 560099



December 30, 1996
CLA-2 RR:TC:SM 560099 BLS

CATEGORY: CLASSIFICATION

TARIFF NO.: 9801.00.10

Mr. Reginald Williams
A.N. Deringer, Inc.
RR 3 Box 5400
Houlton ME 04730-0337

RE: Eligibility of certain steel wire and wooden spools for duty-free treatment under subheading 9801.00.10, HTSUS

Dear Mr. Williams:

This is in reference to your letter dated August 13, 1996, requesting a ruling concerning the eligibility for duty-free treatment under subheading 9801.00.10, Harmonized Tariff Schedule of the United States (HTSUS), of certain steel wire and wooden spools imported from Canada. You also request the classification of the wire. Samples of the articles have been submitted.

In a letter dated September 13, 1996 (NY A86884), the Director, National Commodity Specialist Division, ruled that the wire was properly classifiable under subheading 7217.10.4030, HTSUS. Your inquiry pertaining to the applicability of subheading 9801.00.10, HTSUS, has been sent to this office for a decision.

FACTS:

Iron or nonalloy steel wire in three diameters to be used in the manufacture of wreaths are exported from the U.S. to Canada on 1,000 pound carriers along with empty wooden spools. The wire and spools are of U.S.-origin. In Canada, the wire is wrapped onto the wooden spools and cut to equal weights of 1/2 pound. The product is then returned to the U.S.

ISSUE:

Whether the wire and spools will be eligible for duty-free treatment under subheading 9801.00.10, HTSUS, upon return from Canada.

LAW AND ANALYSIS:

Subheading 9801.00.10

Subheading 9801.00.10, HTSUS, provides for the free entry of products of the U.S. 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. 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. Border Brokerage Company, Inc. V. United States, 314 F. Supp. 788 (1970), appeal dismissed, 58 CCPA 165 (1970).

Customs has previously ruled that cutting exported merchandise to length generally advances its value or improves its condition. See Headquarters Ruling Letter (HRL) 555174 dated April 25, 1989 (decorative banners cut to shorter lengths for retail sale were more marketable than rolls of banners in 140-foot lengths; consequently, this change in the banners' marketability constituted an improvement in the merchandise's condition, thereby precluding the duty exemption available under HTSUS subheading 9801.00.10). See also HRL 554179 dated September 10, 1986 (ribbon exported to Mexico to be cut to length, rewound onto spools and wrapped in plastic packaging was not eligible for item 800.00, Tariff Schedules of the United States (TSUS) (now subheading 9801.00.10, HTSUS), treatment as the cutting to shorter lengths improved the condition of the ribbon by making it ready for sale upon return to the U.S.

Similarly, in this case, we find that cutting the iron or steel wire to length improves its condition. Therefore, the wire will not qualify for subheading 9801.00.10, HTSUS, treatment when it is returned to the U.S. However, the wooden spools are considered packaging materials and are neither advanced in value nor improved in condition as a result of the operations performed in Canada. (See, e.g., HRL 556069 dated August 13, 1991.) Therefore, the spools will be entitled to
duty-free treatment under subheading 9801.00.10, HTSUS, upon return from Canada, provided the documentation requirements of 19 CFR 10.1 are met.

Subheading 9802.00.50

Subheading 9802.00.50, HTSUS, provides a partial or complete duty exemption for articles exported from and returned to the U.S. from Canada, after having been advanced in value or improved in condition by repairs or alterations, provided the documentary requirements of section 181.64, Customs Regulations (19 CFR 181.64), are satisfied. However, entitlement to this tariff treatment is precluded in circumstances where the operations performed abroad destroy the identity of the exported articles or create new or commercially different articles through a process of manufacture. See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956), aff'g C.D. 1752, 36 Cust. Ct. 46 (1956); Guardian Industries Corp. v. United States, 3 CIT 9 (1982).

Section 181.64, Customs Regulations (19 CFR 181.64), which implements Article 307 of the North American Free Trade Agreement (NAFTA), provides that goods returned after having been repaired or altered in Canada pursuant to a warranty (subheading 9802.00.40, HTSUS), are eligible for duty-free treatment, provided that the requirements of this section are met. However, goods returned after having been repaired or altered in Canada other than pursuant to a warranty (subheading 9802.00.50, HTSUS) are subject to duty upon the value of the repairs or alterations, provided that the documentation and other requirements of this section are met.

We have previously ruled that, under certain circumstances, the cutting of merchandise from a long material length to a shorter material length, without manufacturing a finished good, can be considered an alteration within the meaning of subheading 9802.00.50, HTSUS. See HRL 555411 dated August 11, 1989 (cutting exported wire into shorter lengths and winding it onto spools or tying it into coils constituted an alteration under subheading 9802.00.50, HTSUS; and HRL 555782 dated April 22, 1991, (U.S.-manufactured fabric shipped to Canada in rolls, where it was cut into shorter lengths and re-rolled constituted an acceptable alteration).

These cases are directly in point. The iron and/or steel wire remains wire; it is only cut to shorter lengths. Consequently, it is our opinion that the cutting operation performed in Canada constitutes an acceptable alteration within the
meaning of subheading 9802.00.50, HTSUS.

HOLDING:

1) U.S.-origin iron or nonalloy steel wire sent to Canada in 1,000 pound weights to be cut to lengths equaling 1/2 pound and wound onto wooden spools will not be entitled to duty-free treatment under subheading 9801.00.10, HTSUS, upon return to the U.S. However, the U.S.-origin wooden spools will be entitled to duty-free treatment under this provision, upon compliance with the documentary requirements of 19 CFR 10.1.

2) The exported wire cut to length will be entitled to the partial duty exemption under subheading 9802.00.50, HTSUS, when returned to the U.S., upon compliance with the documentary requirements of 19 CFR 181.64.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

John Durant,

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