Applicability of duty exemption under HTSUS subheading 9802.00.50 to various books and periodicals sent to Canada for binding or rebinding; country of origin marking

HQ 557295 October 18, 1993 CLA-2 CO:R:C:S 557295 MLR CATEGORY: Classification TARIFF NO.: 9802.00.50 Mr. Clarence Dykhouse Wallaceburg Bookbinding & Mfg. Co. Ltd. 95 Arnold Street P.O. Box 104 Wallaceburg, Ontario N8A 4L5 Canada RE: Applicability of duty exemption under HTSUS subheading 9802.00.50 to various books and periodicals sent to Canada for binding or rebinding; country of origin marking Dear Mr. Dykhouse: This is in reference to your letter dated April 22, 1993, requesting a ruling regarding the applicability of subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), to various books and magazines sent to Canada for binding or rebinding. FACTS: Wallaceburg Bookbinding & Mfg. Co. Ltd. plans to pickup various items such as worn-out library monographs, textbooks, song books, bibles, theses, reports, and periodical issues from colleges, universities, medical, public and private libraries in the U.S., and send them to Canada for hardcover binding. Either the items will be rebound if the original binding is worn, or in the case of periodicals, loose copies will be bound into one hard cover and be labeled. It is stated that periodical binding represents the largest category of items sent for binding. The shipments may vary from ten to five hundred items. After the items are bound or rebound, they will be returned to their owners in the U.S. In a telephone conversation with a member of my staff, you indicated that your main concern is that the documentary requirements be kept to a minimum. ISSUES: I. Whether the binding operations performed on books and periodicals in Canada constitutes an alteration or repair, thereby entitling them to the partial duty exemption available under subheading 9802.00.50, HTSUS, when returned to the U.S. II. Whether the books and periodicals are required to be marked with their country of origin upon their return to the U.S. LAW AND ANALYSIS: All books are duty-free under the HTSUS. If the books are in single sheets, whether or not folded, they are classified in subheading 4901.10.00, HTSUS. If they are dictionaries and encyclopedias, and serial installments thereof, they are classified in subheading 4901.91.00, HTSUS. If they are textbooks, bound newspapers, journals and periodicals, or bibles, they are classified in subheading 4901.99.00, HTSUS. If they are children's picture, drawing, or coloring books, they are classified in subheading 4903.00.00, HTSUS. If it is music, printed or in manuscript, whether or not bound or illustrated, it is classified in subheading 4904.00.00, HTSUS. If they are books other than the types already mentioned, they are classified in subheading 4901.99.00, HTSUS. See HRL 084664 dated September 7, 1989. [Enclosed, please find a copy of Chapter 49, HTSUS, which provides the classification for printed books, newspapers, pictures and other products of the printing industry; manuscripts, typescripts and plans.] If the items at issue are entered under one of the applicable subheadings of Chapter 49, you will be required to pay a merchandise processing fee in the amount of 17 percent of the full value of the returned items. However, articles properly entered under subheading 9802.00.50, HTSUS, are exempt from this fee. 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 subheading 9802.00.50, HTSUS, provided the foreign operation does not destroy the identity of the exported articles or create new or commercially different articles through a process of manufacture. See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956), aff'g C.D. 1752, 36 Cust. Ct. 46 (1956); Guardian Industries Corp. v. United States, 3 CIT 9 (1982). Accordingly, entitlement to this tariff treatment is precluded where the exported articles are incomplete for their intended purpose prior to the foreign processing and the foreign processing operation is a necessary step in the preparation or manufacture of finished articles. Dolliff & Company, Inc. v. United States, 455 F. Supp. 618 (CIT 1978), aff'd, 599 F.2d 1015 (Fed. Cir. 1979). 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 documentation requirements of section 10.8, Customs Regulations (19 CFR 10.8), are satisfied. In regard to the rebinding operations which restore the books to their original condition, we find that this constitutes an acceptable repair within the meaning of subheading 9802.00.50, HTSUS. The books are complete articles when they are exported to Canada, and the binding operations do not create new or different articles, but merely render the books useful again. With regard to the facts presented and consistent with the cases above, we are of the opinion that rebinding the books constitutes an acceptable repair within the meaning of subheading 9802.00.50, HTSUS. In regard to binding loose periodicals together into hardcover volumes and labeling them, these articles are not being repaired; however, we find that this constitutes an acceptable alteration. In Headquarters Ruling Letter (HRL) 555708 dated September 21, 1990, we held that thread and yarn wound on "dye tubes" and sent to Taiwan to be despooled and rewound onto smaller plastic spools constituted an alteration. Furthermore, in HRL 555865 dated June 4, 1991, halogen bulbs were sent to Mexico, where one of the four metal leads were bent in an angle, and upon their return to the U.S. the bulbs were incorporated into automobile headlights. It was stated that the bulbs upon their exportation to Mexico were intended for use in automobiles headlights, and after the foreign processing still retained this sole use. The basic structural characteristics of the bulbs remained the same. Consequently, as in HRL 555708 and HRL 555865, we find that the periodicals are complete articles upon exportation from the U.S., and the binding operations in Canada do not create new articles. The periodicals are only returned in a different form that make them easier to use. Section 10.8, Customs Regulations (19 CFR 10.8) (copy enclosed), indicates which documents are required to obtain subheading 9802.00.50, HTSUS, treatment. Basically, what is required is the filing of a Certificate of Registration (top portion of Customs Form 4455) before the articles are exported; a declaration by the person who performed the repairs or alterations when the articles are imported; and a declaration by the owner, importer, consignee, or agent having knowledge of the facts that the articles entered in their repaired or altered condition are the same articles covered by the Certificate of Registration. The declaration by the person who performed the operations abroad asks for the value of the repairs or alterations and for the total value of the articles after the repairs or alterations have been made. You indicated that you are unsure of these values. U.S. Note 3 of Subchapter II, Chapter 98, states that: (a) the value of repairs, alterations ... shall be: (i) the cost to the importer for such change; ... as set our in the invoice and entry papers.... (b) No appraisement of the imported article in its changed condition shall be required unless necessary to a determination of the rate or rates of duty applicable to such article. (c) The duty upon the value of the change in condition shall be at the rate which would apply to the article itself.... Therefore, for purposes of this case, the value of the repairs or alterations is the cost to the library for the binding and rebinding operations; and because books and periodicals may be entered duty-free no appraisement of their value after the repairs or alterations is required. Furthermore, since there is no duty upon books and periodicals, no duty is collectable on the value of the binding or rebinding operations performed in Canada. You also indicated that it would not be feasible to indicate on the entry form the country of origin of each of the items being returned to the U.S. The marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304) provides that, unless excepted, every article of foreign origin (or its container) imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Section 134.1(b), Customs Regulations (19 CFR 134.1(b)), defines the country of origin of an article as the country of manufacture, production, or growth of any article of foreign origin entering the U.S. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the country of origin for country of origin marking purposes. A substantial transformation occurs when articles lose their identity and become new articles having a new name, character or use. United States v. Gibson-Thomsen Co., 27 CCPA 267, 270 (1940). Several rulings have addressed the country of origin marking requirements for used articles. In HRL 732258 dated March 28, 1990, automotive alternators, taken out of used cars that were scrapped in the U.S., were exported to Mexico for repair. It was determined that the rebuilt alternators did not have a new name, character or use; rather, the alternators were rebuilt so that they could function in their intended use. Therefore, since the rebuilding of the alternators in Mexico was not a substantial transformation, pursuant to 19 CFR 134.1(b), Mexico was not the country of origin for these articles. The country of origin of the rebuilt alternators was rather the country where the alternators were originally built. Customs also determined that those alternators which were installed and used in automobiles in the U.S., and which were not already marked with a foreign country of origin and for which it was impossible to trace the original country of manufacture, were considered to be of U.S. origin, and, therefore, were excepted from marking pursuant to section 134.32(m), Customs Regulations (19 CFR 134.32(m)), which excepts products of the U.S. exported and returned to the U.S. from marking. Those alternators which were already marked with a foreign country of origin were considered properly marked pursuant to 19 CFR 134.1(b) and required no further marking. In HRL 732409 dated September 25, 1989, it was held that the country of origin for marking purposes for used clothing worn in Canada was Canada. The used clothing was regarded to be of U.S. origin because it was purchased from the Salvation Army, Goodwill Industries stores, and similar organizations within the U.S., and, therefore, presumed to have been worn and used in the U.S. This eliminated the need to sort the clothing by original country of origin, and also eliminated the problem of not knowing the original country of origin of every single garment. As in HRL 732409 and HRL 730174, the books and periodicals in this case are presumed to have been used in various libraries within the U.S. Consequently, for marking purposes, we find that they are of U.S. origin, and, therefore, are not required to be marked upon their return to the U.S. The binding operations performed in Canada do not substantially transform them into products of Canada. HOLDING: I. On the basis of the information submitted, the articles may be entered under one of the applicable subheadings of Chapter 49. We also find that the binding and rebinding operations in Canada, which restore the books or gather the periodicals into one volume, constitute an alteration or repair within the meaning of subheading 9802.00.50, HTSUS. Therefore, the books and periodicals are entitled to classification under this tariff provision, which is exempt from the merchandise processing fee, upon compliance with the documentary requirements of 19 CFR 10.8. II. The books and periodicals are not required to be marked because they are considered to be of U.S.-origin. For further information on entry requirements, please contact the port of entry. Sincerely, John Durant, Director Commercial Rulings Division Enclosure