Applicability of subheading 9801.00.10, HTSUS, to U.S. ceramic multi-layered dielectric chip capacitors tested, labelled and packaged abroad. Packaging; John V. Carr; C.S.D. 89-27(6); 555577; 554838; 071449; 555183

HQ 556131 October 28, 1991 CLA-2 CO:R:C:S 556131 DSN CATEGORY: Classification TARIFF NO.: 9801.00.10 Mr. Jim McNamara General Manager Rudolph Miles & Sons P.O. Box 2489 Laredo, Texas 78044-2489 RE: Applicability of subheading 9801.00.10, HTSUS, to U.S. ceramic multi-layered dielectric chip capacitors tested, labelled and packaged abroad. Packaging; John V. Carr; C.S.D. 89-27(6); 555577; 554838; 071449; 555183 Dear Mr. McNamara: This is in response to your letter of June 28, 1991, on behalf of Kemet Electronics Corporation, requesting a ruling on the applicability of subheading 9801.00.10, Harmonized Tariff Schedule of the United States (HTSUS), to U.S.-origin ceramic multi-layered dielectric chip capacitors imported from Mexico. Samples were submitted with your request. FACTS: Your client intends to export U.S.-manufactured ceramic multi-layered dielectric chip capacitors, and U.S. and foreign origin packaging materials to Mexico. You advised a member of my staff by telephone that the reels used in packaging are of U.S. origin while the cover tape is of Japanese origin. In Mexico, the capacitor chips will be tested on an automatic electric testing machine for electrical parameters. The test determines capacitance, dissipation factor, dielectric withstanding voltage, and insulation resistance, which are based on customers' specifications. Those chips which do not conform to a customer's order are either scrapped or sold to another purchaser. Approximately one-third of those chips which conform to customers' specifications will be marked with a laser marking machine. The laser beam labels each chip with a standard industry code which identifies the capacitance and/or the manufacturer's identity. The remaining chips will not be marked. All chips are then either placed onto non-reusable reels or packaged in non-reusable plastic bags and taped closed. Upon completion of these operations, the chip capacitors will be exported to the U.S. ISSUE: Whether the chip capacitors are eligible for the duty exemption available under subheading 9801.00.10, HTSUS, when returned to the U.S. LAW AND ANALYSIS: 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. In United States v. John V. Carr & Sons, Inc., 69 Cust. Ct. 78, C.D. 4377, 347 F. Supp. 1390 (1972), 61 CCPA 52, C.A.D. 1118, 496 F.2d 1225 (1974), the court stated that absent some alteration or change in the item itself, the mere repackaging of the item even for the purpose of resale to the ultimate consumer, is not sufficient to preclude the merchandise from being classified under item 800.00, Tariff Schedules of the United States (TSUS) (the precursor to subheading 9801.00.10, HTSUS. In the instant case, we believe that the foreign operations performed in Mexico do not advance in value or improve in condition the chip capacitors. Prior to export from the U.S., the chip capacitors are finished products. We have previously held that testing/inspecting results in an advancement in value where the testing is required by law or regulation. See, C.S.D. 89-27(6), Headquarters Ruling Letter (HRL) 554838 of October 31, 1988, which held that electronically testing condoms abroad advances their value by making an unmarketable product marketable. However, testing/inspecting merely as part of the manufacturer's internal quality control is not deemed to advance in value or improve in condition the product. See, HRL 555577 of June 19, 1990. We conclude that the testing performed on the chip capacitors in order to determine whether they comply with customer specifications is a form of internal quality control which is necessary to assure that industry and customer standards have been met. We have also held that foreign stamping or printing of a product to identify the manufacturer and describe the product does not advance its value or improve its condition so as to preclude entry under item 800.00, TSUS. See, HRL 071449 of October 17, 1983, which held that surgical drapes stamped in ink with the name of the company, size, and model number were not precluded from item 800.00, TSUS, treatment. See, also, HRL 555183 of February 15, 1989 (printing on a dental floss dispenser the company name and description of the floss type, flavor and length will not preclude subheading 9801.00.10, HTSUS, treatment for the dispensers.) Labelling the chip capacitors to identify the capacitance rating and/or the manufacturer's identity is similar to stamping or printing such identification markings as size and model number. Thus, labelling the chip capacitors will not preclude subheading 9801.00.10, HTSUS, treatment. With respect to the packaging operations, after testing and labelling, the chip capacitors are merely placed onto a reel or packaged in a plastic bag and taped closed which does not advance in value or improve in condition the product. The packaging materials of U.S. and Japanese origin are also entitled to duty- free treatment pursuant to General Rules of Interpretation 5, HTSUS. HOLDING: On the basis of the information and samples submitted, as the chip capacitors will not be advanced in value or improved in condition abroad as a result of the foreign operations, they will qualify for the duty exemption under subheading 9801.00.10, HTSUS, upon compliance with the documentary requirements of 19 CFR 10.1. Sincerely, John Durant, Director Commercial Rulings Division