Applicability of duty exemption under HTSUS subheading 9802.00.50 to nylon sports-bags exported to Mexico for stuffing and packaging; GRI 5(b); Alteration; 19 CFR 10.8; 19 CFR 141.2

HQ 556496 April 9, 1992 CLA-2 CO:R:C:S 556496 RAH CATEGORY: Classification TARIFF NO.: 9802.00.50 Ms. Renee I. Abend Import Manager Davies, Turner & Company 90 Washington Street New York, New York 10006 RE: Applicability of duty exemption under HTSUS subheading 9802.00.50 to nylon sports-bags exported to Mexico for stuffing and packaging; GRI 5(b); Alteration; 19 CFR 10.8; 19 CFR 141.2 Dear Ms. Abend: This is in response to your letter of January 17, 1992, regarding the importation of nylon sports-bags from Mexico. FACTS: Full containers of flat packed nylon sports-bags from Thailand will be imported into the United States under subheading 4202.92.3030, Harmonized Tariff Schedule of the United States (HTSUS). You inquire whether, after clearing Customs, the bags can be shipped to Mexico to be stuffed and repackaged and then reimported into the United States for distribution. The packing materials in question are of Mexican origin. The importer would like to register the goods upon exportation to Mexico and reimport them under the same registration [a procedure under section 10.8, Customs Regulations (19 CFR 10.8) whereby a Certificate of Registration is filed before exporting articles which are subject on return to the United States to duty on the value of the repairs or alterations under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS)]. - 2 - ISSUE: Whether nylon sports-bags sent to Mexico to be stuffed and packaged are entitled to a partial duty exemption under sub- heading 9802.00.50, HTSUS, when returned to the United States. LAW AND ANALYSIS: Subheading 9802.00.50, HTSUS, provides a partial duty exemption for articles returned to the United States after having been exported to be advanced or improved in condition by means of repairs or alterations. Such articles are dutiable only upon the value of the foreign repairs or alterations, provided the documentary requirements of section 10.8, Customs Regulations (19 CFR 10.8), are satisfied. However, entitlement to this tariff treatment 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 (1956); Guardian Industries Corp. v. United States, 3 CIT 9 (1982). Tariff treatment under subheading 9802.00.50, HTSUS, is also precluded where the exported articles are incomplete for their intended use prior to the foreign processing. Guardian; Dolliff & Company, Inc. v. United States, 81 Cust. Ct. 1, C.D. 4755, 455 F. Supp. 618 (1978), aff'd, 66 CCPA 77, C.A.D. 1225, 82, 599 F.2d 1015, 119 (1979). We have held that foreign repacking of merchandise for retail sale will not, in and of itself, preclude tariff treatment under subheading 9802.00.50, HTSUS. Headquarters Ruling Letter (HRL) 555180 dated December 26, 1989. However, to qualify for a partial duty exemption under that subheading, the article itself must be advanced in value or improved in condition. In that regard, we have held that the mere repacking of an article does not advance its value or improve its condition. See, HRL 555806 dated January 14, 1991 (thin gauge plastic bags used as an alternative to paper stuffing often used in imported sport and handbags, are not advanced in value or improved in condition abroad as a result of the packing operation). Under the facts presented, the bags are exported to Mexico solely for stuffing and packaging. We find that the stuffing and repacking of the nylon sports-bags in Mexico does not constitute an alteration because the bags themselves are not advanced in value or improved in condition as a result of that process. Accordingly, we conclude that the bags are dutiable under subheading 4202.92.3030, HTSUS, when returned to the United States. The applicable duty rate is 20 percent ad valorem. - 3 - With respect to the dutiability of the packing materials, General Rule of Interpretation 5(b), HTSUS, provides that: [p]acking materials and packing containers entered with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provision does not apply when such packing materials or packing containers are clearly suitable for repetitive use. Therefore, the value of non-reusable packing materials or containers normally used for packing such goods is considered a part of the value of its contents and is dutiable at the rate of its contents. Since the packaging materials in the instant case are of Mexican origin, they will be dutiable at the same rate as the bags. HOLDING: Nylon sports-bags exported to Mexico solely for stuffing and packaging are not advanced in value or improved in condition abroad and, therefore, they are not entitled to the partial duty exemption under subheading 9802.00.50, HTSUS, when returned to the United States. Accordingly, the packaged bags are dutiable on their full value under subheading 4202.92.3030, HTSUS, at the rate of 20 percent ad valorem. The Mexican packing materials are dutiable at the same rate as the bags. Sincerely, John Durant, Director Commercial Rulings Division