Applicability of duty exemption available under HTSUSA subheading 9802.00.50 to halogen lightbulbs subjected to a bending operation in Mexico; alteration; Guardian v. United States, Dolliff v. United States, U.S. v. Richardson

HQ 555865 June 4, 1991 CLA-2 CO:R:C:S 555865 SER CATEGORY: Classification TARIFF NO.: 9802.00.50 Mr. Donald H. Huber Sr. Specialist- Customs General Electric Business Services P.O. Box 06500 Fort Meyers, FL 33906-6500 RE: Applicability of duty exemption available under HTSUSA subheading 9802.00.50 to halogen lightbulbs subjected to a bending operation in Mexico; alteration; Guardian v. United States, Dolliff v. United States, U.S. v. Richardson Dear Mr. Huber: This is in reference to your letter of January 23, 1991, requesting a ruling concerning the applicability of subheading 9802.00.50, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), to halogen lightbulbs. FACTS: Halogen bulbs, manufactured in the U.S., are sent to Mexico where, in one case, one of its four metal leads is bent to approximately a 90 degree angle, or in another where two leads are bent. Upon return to the U.S., the bulb is incorporated into a automobile headlamp. ISSUE: Whether the bulbs will be entitled to the partial duty exemption available under subheading 9802.00.50, HTSUSA, when imported into the U.S. LAW AND 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 HTSUSA subheading 9802.00.50 provided the foreign operation does not destroy the identity of the exported articles or create new or different articles through a process of manufacture. Accordingly, entitlement to this tariff treatment is precluded where the exported articles are incomplete for their intended purpose prior to the foreign processing. Dolliff & Company Inc., v. United States, 455 F.Supp. 618 (1978), 599 F.2d 1015 (1979). -2- Articles entitled to this partial duty exemption are dutiable only upon the cost or 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. In applying this provision, the courts, in several cases, have focused upon whether the exported article is incomplete or unsuitable for its intended use prior to the foreign processing, or whether the foreign processing creates a new and different article in comparison to the exported article. See e.g., Dolliff, and Guardian Industries Corp. v. United States, 3 CIT 9 (1982), United States v. J.D. Richardson Company, 36 CCPA 15, C.A.D. 390 (1948), cert. denied, 336 U.S. 936 (1949). In the Guardian case, annealed glass was sent to Canada for heat treatment, producing a tempered glass which was then returned to the U.S. The court concluded that the exported articles of raw annealed glass were not "completed articles" since they were entirely unsuitable for their intended use in the U.S. as sliding glass patio doors. Additionally, the court, in determining whether the articles were "complete", looked to see if the tempering of the annealed glass transformed the glass in name, use, performance characteristics and tariff classification. An examination of the court's holding can be applied to the halogen lightbulbs at issue in this ruling. The court in Guardian first determined whether there was a change in use and performance characteristics between the annealed glass sent to Canada and the tempered glass returned to the U.S. Annealed glass has significantly different characteristics than tempered glass. In the tempering process, the outside of the glass cools faster than the inside and this differential cooling rate ultimately results in a difference in the stresses in the core of the glass and those on the outside surface of the glass. The purpose of subjecting glass to an annealing operation is to reduce internal stresses in the glass. This allows annealed glass to be cut, drilled, ground and seamed, whereas the tempered glass cannot be subjected to these operations. As a result of these differences, the annealed glass, when broken, will break into large irregular pieces with sharp jagged edges, whereas tempered glass will shatter into many small and relatively harmless pieces of glass. The different characteristics of the annealed and tempered glasses also affect their uses. As stated above, only annealed glass can be cut, drilled, ground and seamed, and, therefore, adapted to a variety of uses. However, to be used as glass patio doors the glass must, by regulation and by standard practice, undergo a tempering process. Therefore, the annealed -3- glass is entirely unsuitable for its intended purpose when it is exported from the U.S., and upon its return as tempered glass it is a new and different article in comparison to the exported article. Applying the rationale utilized in Guardian, the use of the halogen lightbulbs does not change after the foreign processing. Upon exportation from the U.S. the bulbs are intended for use in automobiles headlights, and they are suitable for that use at the time of exportation. Upon return to the U.S. they have retained this sole use. In addition, the bending operation only slightly changes the connection configuration of the bulbs, but does not change their basic structural characteristics. The courts in Guardian and Richardson also looked to a change in tariff classification as an indication of whether the article exported from the U.S. was a complete article. In Guardian the tempered glass and annealed glass are provided for in separate provisions, as were the exported rims and returned flanged rims discussed in Richardson. After examining the sample halogen lightbulbs you submitted, we note that there would be no change in tariff classification from the bulbs exported from the U.S. and those which are returned after the bending operation in Mexico. This would support the conclusion that the halogen lightbulbs are complete articles upon exportation from the U.S., and that the operations in Mexico do not create a new article. The court in Guardian also stated that the two glass products are known by different names. The glass before it is tempered is described as annealed glass and is known in the trade as "float glass", whereas the tempered glass is known in the trade as "tempered glass" or "safety glass." Guardian at p. 15. The halogen bulbs at the time of importation into Mexico and upon return to the U.S. have no change in name, and no differentiation is recognized in the industry between the bulbs. In summary, the bending operation in Mexico does not transform the lightbulbs in name, use, performance characteristics or tariff classification. Consideration of all of these factors leads to the conclusion that the halogen bulbs are complete articles upon exportation to Mexico, and that the bending operation constitutes an alteration within the meaning of subheading 9802.00.50, HTSUSA. -4- HOLDING: Based on the information submitted, it is our opinion that the foreign bending operation performed on one or two of the metal leads of the halogen lightbulbs constitutes an alteration within the meaning of subheading 9802.00.50, HTSUSA. Therefore, the lightbulbs may be entered under this tariff provision with duty only on the cost or value of the bending operation in Mexico, upon compliance with the documentary requirements of 19 CFR 10.8. Sincerely, John Durant, Director Commercial Rulings Division