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HQ 562335




March 11, 2002

CLA-2 RR:CR:sm 562335 tjm

Category: SPECIAL CLASSIFICATION

Sharon M. Burns
Customs Specialist
AVX Corporation
801 17th Ave, South
Myrtle Beach SC 29577

RE: Repair or alteration abroad; 9802.00.50, HTSUS; electrode paste; AVX Corporation

Dear Ms. Burns:

This is in reply to your letter dated February 11, 2002, requesting a ruling on the applicability of subheading 9802.00.50, Harmonized Tariff Schedule of the United States (“HTSUS”), to the electrode paste your company imports from Northern Ireland. Please find our response below.

FACTS:

The product at issue, electrode paste (classifiable in heading 7115.90, HTSUS), is produced with certain ingredients that originate in the United States. You note that the U.S.-origin ingredients constitute almost all of the value of the final product and a majority of the weight of the final product.

Because you are using U.S.-origin material which is “altered” overseas and later imported, you request that the duty upon importation be based on the value of the alteration abroad, as provided under heading 9802.00.50, HTSUS.

In Northern Ireland, your company receives the raw materials. The materials are weighed and then added to a mixing solution. The mixture is then milled. The material is then filtered and homogenized. The mixture is further mixed and samples are taken out of the mixture to test for viscosity, particle size, etc. Then, binders, which increase the viscosity of the material, are added. Certain amount of solution is added to the mixture and further mixed. The resulting paste is then packaged in jars.

ISSUE:

Whether the electrode paste made abroad with U.S.-origin materials qualifies for a partial duty exemption under subheading 9802.00.50, HTSUS.

LAW AND ANALYSIS:

A. Duty Provision: 9802.00.50, HTSUS

Subheading 9802.00.50, HTSUS, (19 U.S.C. § 1202), provides for duty on the value of repairs or alterations made abroad:

Articles returned to the United States after having been exported to be advanced in value or improved in condition by any process of manufacture or other means: . . . .

Other

Furthermore, Note 3 of Subchapter II, Chapter 98, HTSUS, provides that:

Articles repaired, altered, processed or otherwise changed in condition abroad. – The following provision apply only to subheadings 9802.00.40 through 9802.00.60, inclusive: The value of repairs, alterations, processing or other change in condition outside the United States shall be: The cost to the importer of such change; or If no charge is made, the value of such change, As set out in the invoice and entry papers; except that, if the appraiser concludes that the amount so set out does not represent a reasonable cost or value, then the value of the change shall be determined in accordance with section 402 of the Tariff Act of 1930, as amended. No appraisement of the imported article in its changed condition shall be required unless necessary to a determination of the rate or rates of duty applicable to such article.

Articles exported from and returned to the U.S., after having been advanced in value or improved in condition by repairs or alterations, may qualify for a duty exemption under subheading 9802.00.50, HTSUS, provided the foreign operation does not 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 C.C.P.A. 27, C.A.D. 631 (1956), aff’d, C.D. 1752, 36 Cust. Ct. 46 (1956); Guardian Industries Corp. v. United States, 3 CIT 9 (1982). In addition, entitlement to this tariff treatment is precluded where the exported articles are incomplete for their intended purpose prior to the foreign processing. Guardian, Dolliff & Company, Inc. v. United States, 455 F. Supp. 618 (CIT 1978), aff’d, 599 F.2d 1015 (Fed. Cir. 1979). Articles are entitled to this duty exemption provided the documentary requirements of section 10.8, Customs Regulations, (19 CFR § 10.8), are met.

In Headquarters Ruling Letter (“HRL”) 557530, dated December 15, 1993, Customs ruled that the provision under heading 9802.00.50, HTSUS, applied in that case where U.S. photocopiers were sent to Mexico and then four gears, three chains, and a CPU board were changed to make the copier operate faster. The copiers were also cleaned, subassemblies were removed and given a unique number, worn parts were replaced, and lubrication was applied. Customs held that the reconditioning operations were acceptable alterations within the meaning of subheading 9802.00.50, HTSUS.

In HRL 55692, dated May 7, 1993, notebook computers with a monochrome video display were sent to Canada to be replaced with an active-matrix color video display. Customs held that the partial duty exemption provision provided under heading 9802.00.50, HTSUS, applied in that case. See also, HRL 557024, dated June 30, 1993;

In the instant case, unlike the cases in HRL 557530 and 55692, it does not appear that the exported U.S. materials maintain their commercial identity during the process that they undergo in Northern Ireland. Rather, the operations involved in producing the electrode paste constitute a process of manufacture which exceeds the scope of repairs or alterations as set forth in subheading 9802.00.50, HTSUS.

In addition, we are unaware of any other special tariff treatment provision or program that would apply to the imported electrode paste.

HOLDING:

Based on the facts provided, the processing of U.S. ingredients into electrode paste in Northern Ireland does not qualify as repair or alteration as set forth in subheading 9802.00.50, HTSUS. Therefore, upon importation, duty is not limited to the value of repair or alteration as provided under subheading 9802.00.50, HTSUS.

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

Sincerely,

John Durant
Director

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