Applicability of subheading 9802.00.50, HTSUS, to wooden parts of furniture kits shipped to Mexico to be stained and lacquered

HQ 555093 April 26, 1989 CLA-2 CO:R:C:V 555093 DBI CATEGORY: Classification TARIFF NO.: 9802.00.50, HTSUS Mr. Mark D. Alcorn One Marlton Court Sacramento, California 95831 RE: Applicability of subheading 9802.00.50, HTSUS, to wooden parts of furniture kits shipped to Mexico to be stained and lacquered Dear Mr. Alcorn: This is in response to your letter of August 1, 1988, in which you request a ruling concerning the applicability of item 806.20, Tariff Schedules of the United States (TSUS), to certain wooden parts of furniture kits which will be shipped to Mexico to be stained, lacquered and packaged. FACTS: You advise that U.S. origin woods will be cut, shaped and sanded in the U.S. in preparation for the application of a wood finish. The wooden parts along with stains, lacquers, and prelabelled retail kit boxes will be shipped to Mexico. In Mexico, the wooden parts will be stained, lacquered and put into kits, and then returned to the U.S. for retail sale. You note that some articles are sold "unfinished" (without stain and lacquer) to some of the same retailers who purchase the finished kits. ISSUE: Whether the described wooden furniture parts, when returned to the U.S., will be eligible for the partial exemption from duty provided for in subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS) (806.20, TSUS). -2- LAW AND ANALYSIS: As you are probably aware, the HTSUS replaced the TSUS, on January 1, 1989. Item 806.20, TSUS, was carried over into the HTSUS as subheadings 9802.00.40 (repairs or alterations made pursuant to warranty) and 9802.00.50 (other repairs or alterations). A copy of the pertinent provisions is enclosed for your information. These provisions provide for the assessment of duty on the value of repairs or alterations performed on articles returned to the U.S. after having been exported for that purpose. However, the application of these tariff provisions is precluded in circumstances where the operations performed abroad destroy the identity of the articles or create new or commercially different articles. See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1957); Guardian Industries Corporation v. United States, 3 CIT 9, Slip-Op 82-4 (Jan. 5, 1982). Treatment under subheadings 9802.00.40 and 9802.00.50, HTSUS, also is precluded where the exported articles are incomplete for their intended use and the foreign processing operation is a necessary step in the preparation or manufacture of finished articles. Dolliff and Company, Inc. v. United States, 66 CCPA 77, C.A.D. 1225, 599 F.2d 1015 (1979). We have previously held in a ruling dated June 28, 1988 (HQ 555002), that item 806.20, TSUS, was precluded where door knobs and rosettes were sent to Mexico for electroplating through a liquid bath process and spray lacquering. As you will note from the enclosed copy, we reasoned that the exported articles were incomplete for their intended use and the electroplating and lacquering were a necessary step in the preparation of the finished product. In the present case, the wooden furniture parts will be incomplete when they are sent to Mexico for finishing operations, namely the staining and lacquering. That some of the same retailers who purchase the stained and lacquered furniture parts also buy furniture kits containing parts that have not been stained or lacquered, does not change the fact that these foreign processing operations are necessary to the preparation of the finished articles. Therefore, the staining and lacquering processes constitute operations that exceed an alteration based on the Dolliff decision. -3- HOLDING: On the basis of the information submitted, it is our opinion that the foreign staining and lacquering may not be considered an alteration as that term is used in subheading 9802.00.50, HTSUS, thereby precluding the returned wooden furniture parts from receiving the benefits of this tariff provision. Sincerely, John Durant Director, Commercial Rulings Division Enclosures