Applicability of partial duty exemption under HTSUS subhead- ing 9802.00.50 to previously imported merchandise exported for conformity country of origin marking and reimported

HQ 555202 July 3, 1989 CLA-2 CO:R:C:V 555202 GRV CATEGORY: CLASSIFICATION TARIFF NO.: 9802.00.50 Mr. Richard G. Seley Rudolph Miles & Sons, Inc. Customhouse Brokers 4950 Gateway East P.O. Box 144 El Paso, Texas 79942 RE: Applicability of partial duty exemption under HTSUS subhead- ing 9802.00.50 to previously imported merchandise exported for conformity country of origin marking and reimported Dear Mr. Seley: This is in response to your letters of November 15, 1988, and March 17, 1989, on behalf of Hallmark Marketing Corporation, requesting a ruling on the applicability of subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), to previously imported merchandise which is exported for country of origin conformity marking operations and reimported from Mexico. FACTS: You state that various merchandise, imported from different countries, is entered into the U.S. and duty is paid. However, occasionally the merchandise does not conform to the country of origin marking requirements of section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304) and Part 134, Customs Regulations (19 CFR Part 134). The example given is a small stuffed animal, which is marked with both a sewn-on tag, which meets all the marking requirements, and a hang tag that states "HALLMARK, KANSAS CITY, MISSOURI," which you state violates 19 CFR 134.46. Accordingly, a Notice of Redelivery/Marking (Customs Form 4647) is issued, pursuant to 19 CFR 141.113, on such merchandise as is determined by the district director to be not legally marked. When this occurs, your client would like to export the merchan- dise to its facility in Mexico for purposes of performing country of origin conformity marking operations, either by additional printing on the same hang tag or by adding a gummed label to the hang tag. Although you agree that this operation merely puts the merchandise in the condition it should have been in at the time of original entry, you state that this conformity marking operation constitutes an alteration to the exported article, as previously unmarketable merchandise, i.e., illegally marked merchandise, is worthless in its condition as originally imported. Therefore, the marking operation renders the articles marketable and is tantamount to an advancement in value of the returned merchandise. You reference C.I.E. N-36/75, dated April 16, 1981 (067208), and Headquarters Ruling Letter 039872 (May 6, 1975) in support of this position. ISSUE: Whether the foreign country of origin conformity marking operation constitutes an acceptable "alteration," for purposes of HTSUS subheading 9802.00.50. LAW & ANALYSIS: Articles returned to the U.S. after having been exported to be advanced in value or improved in condition by repairs or alterations may qualify for the partial duty exemption under HTSUS subheading 9802.00.50 (formerly item 806.20, Tariff Schedules of the United States (TSUS)), provided the foreign operation does not destroy the identity of the exported articles or create new or different articles. Such articles are dutiable only upon the value of the foreign repairs or alterations when returned to the U.S., provided the documentary requirements of section 10.8, Customs Regulations (19 CFR 10.8), are satisfied. The referenced C.I.E. N-36/75, involved defective retail packaging of "ten pack" magnetic tape cassettes. Blank magnetic tape cassettes were entered under TSUS item 807.00, but the car- tons containing the cassettes were found to be damaged. Thus, the merchandise was not considered to be in a marketable condi- tion. The merchandise was exported for repackaging operations utilizing American-made packaging materials, which included shrink wrapping for added protection. We stated that the appropriate tariff provision for articles exported for repairing damage or defects in material or workmanship was TSUS item 806.20, and held that the repackaged merchandise, as an entirety, appeared to be eligible for this tariff treatment when returned. Regarding Headquarters Ruling Letter 039872 (May 6, 1975), the regulatory definition of "repairs and alterations" cited (19 CFR 10.8) was deleted from the Customs Regulations on May 2, 1972, by T.D. 72-119 (6 Cust. Bull. 209). In Headquarter Ruling Letter 071159 (March 2, 1983), Customs held that diodes exported for marking or branding, and packaging operations abroad may be entered under the alterations provision of TSUS item 806.20. Although we noted that TSUS item 806.20 was generally inapplicable to most printing operations, we found that merely printing a part number on the diode had no more significance than a label for identification purposes. Further, in Headquarters Ruling Letter 554996 (June 30, 1988), we held that sunglasses, exported for inspection, temple adjustment and retagging operations, were entitled to tariff treatment under TSUS item 806.20, as the foreign operations would not destroy the identity of the sunglasses, create a new or commercially differ- ent article, or constitute a necessary step in the manufacture of finished sunglasses. In this case, various merchandise is entered and duty is paid. However, it cannot be sold in the U.S. in its imported condition. When the district director issues a Notice of Rede- livery/Marking (Customs Form 4647) because he has determined that the merchandise is not legally marked, the importer would like to export the merchandise to be remarked to bring it into conformity with the marking law and regulations and return the merchandise to the U.S. Consistant with our prior rulings in this regard, we find that the foreign country of origin conformity marking opera- tion does not destroy the identity of the exported merchandise or create a new or different article. Further, the article to be exported is a finished, complete article, and the foreign con- formity marking operation improves in condition the merchandise exported by rendering it fully admissible into the stream of U.S. commerce. Accordingly, the merchandise to be returned will be eligible for the partial duty exemption under HTSUS subheading 9802.00.50, as the foreign conformity marking operation consti- tutes a mere alteration of the exported article. We wish to make it clear that this ruling is specifically limited to the fact situation presented to us, i.e., where merchandise imported by your client occasionally is found to be incorrectly marked for country of origin marking purposes and is exported to be remarked to bring it into conformity with the marking law and regulations. HOLDING: On the basis of the information presented, as the foreign conformity marking operation does not destroy the identity of the complete articles exported or create new or different articles, but, rather, merely alters the articles, the merchandise to be returned to the U.S. will be eligible for the partial duty exemption available under HTSUS subheading 9802.00.50, upon compliance with the documentary requirements of 19 CFR 10.8. Sincerely, John Durant, Director Commercial Rulings Division