Eligibility of polyester film for a partial duty exemption under subheading 9802.00.50, HTSUS

HQ 557388 November 18, 1993 CLA-2 CO:R:C:S 557388 BLS CATEGORY: Classification TARIFF NO.: 9802.00.50 Abigail Dickie Contra Vision 1100 Circle 75 Parkway Atlanta, Georgia 30339 RE: Eligibility of polyester film for a partial duty exemption under subheading 9802.00.50, HTSUS Dear Ms. Dickie: This is in reference to your letter dated May 20, 1993, requesting a ruling with respect to the tariff consequences in connection with the importation of certain pressure-sensitive polyester film. FACTS: Pressure-sensitive polyester (non-photographic) film, of U.S. origin, is exported to a European distribution company in the Netherlands, and is then sold to a printer in Belgium, where it is subjected to a printing operation. The film is then returned to the U.S. for further processing, which may include either printing or another imaging process. You have orally advised a member of my staff that the product is incomplete for its intended use upon exportation from the U.S. A sample of the imported film is included with your submission. ISSUES: 1) Whether, upon return from abroad, the film is eligible for the partial duty exemption under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS). 2) If the returned film does not qualify for the benefits of subheading 9802.00.50, HTSUS, what will be the tariff consequences? 3) Whether duty is payable on the packaging and/or transportation cost elements. - 2 - LAW AND ANALYSIS: 1) Subheading 9802.00.50, HTSUS Subheading 9802.00.50, HTSUS, provides a partial duty exemption for articles returned to the U.S. after having been exported to be in advanced in value 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. As stated in Dolliff & Company, Inc. v. United States, 81 Cust. Ct. 1, C.D. 4755, 455 Fed. Supp. 618 (1978), aff'd, 66 CCPA 77, 82, C.A.D. 1225, 599 F.2d 1015, 1019 (1979), "repairs and alterations are made to completed articles and do not include intermediate processing operations which are performed as a matter of course in the preparation or the manufacture of finished articles." It is apparent that the polyester film is not a finished product when exported from the U.S., but undergoes additional processing abroad and upon return to the U.S. before its completion as an article of commerce. Therefore, the polyester film will not qualify for the benefits of subheading 9802.00.50, HTSUS, upon return from abroad. 2) Packaging If of U.S. origin, packaging materials will be entitled to duty-free treatment under subheading 9801.00.10, HTSUS, which 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 or manufacture or other means while abroad, provided the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1) are met. However, if the packing materials are of foreign origin, their cost or value will be included as part of the dutiable value of the imported polyester film pursuant to General Rule of Interpretation 5(b), HTSUS. 3) Transportation Charges The transaction value of imported merchandise is generally - 3 - defined as the price actually paid or payable for the merchandise when sold for exportation to the United States, plus packing costs incurred by the buyer and certain other additions (not here pertinent) if not included in the price. Assuming the basis of appraisement of the imported goods is transaction value, the price actually paid or payable for such goods (and subject to duty) shall not include any costs, charges or expenses incurred for transportation, insurance, and related services incident to the international shipment of the merchandise from the country of exportation to the place of importation in the United States. (19 U.S.C. 1401a(b)(4)(A)). By regulation, Customs has determined that with respect to ex- factory sales, if the price actually paid or payable for merchandise imported into the U.S. does not include a charge for foreign inland freight, those charges will not be added to the price. (19 CFR 152.103(a)(5)(i)). For those sales other than ex- factory sales, as a general rule, where the price actually paid or payable includes a charge for foreign inland freight, that charge will be a part of the transaction value to the extent included in the price. Such charges may be considered incident to the international shipment of the merchandise within the meaning of 19 CFR 152.102(f) if they are identified separately and they occur after the merchandise has been sold for export to the U.S. and placed with a carrier for through shipment to the U.S. (19 CFR 152.103(a)(5)(ii)). Also see, 19 CFR 152.103(a)5)(iii) regarding evidentiary requirements. Additionally, the transaction value of imported goods will not include transportation costs for the merchandise after its importation into the U.S., if identified separately from the price actually paid or payable and from any cost or other item referred to in 19 CFR 152.103(b). It is important to note, however, that any decrease in the price actually paid or payable effected between the buyer and seller after the date of importation of the merchandise into the U.S. shall be disregarded in determining the transaction value. (19 U.S.C. 1401a(b)(4)(B). HOLDING: 1) The polyester film will not be eligible for the partial duty exemption under subheading 9802.00.50, HTSUS, upon return from abroad. 2) If the packaging materials are of U.S. origin, they will be entitled to duty-free treatment under subheading 9801.00.10, HTSUS. If of foreign origin, the cost or value of the packaging materials will be part of the dutiable value of the imported polyester film pursuant to General Rule of Interpretation 5(b). 3) Assuming the basis of appraisement of the imported - 4 - merchandise is transaction value, the following is applicable: A) The price actually paid or payable for such goods shall not include any costs, charges or expenses incurred for transportation, insurance, and related services incident to the international shipment of the merchandise from the country of exportation to the place of importation in the U.S. B) If the sale is made on an ex-factory basis, and the price does not include a charge for foreign inland freight, those charges will not be added to the price, for purposes of determining transaction value. For those sales other than ex-factory sales, as a general rule, where the price actually paid or payable includes a charge for foreign inland freight, that charge will be part of the transaction value to the extent included in the price. However, such charges may be considered incident to the international shipment of the merchandise if they are identified separately and they occur after the merchandise has been sold for export to the U.S. and placed with a carrier for through shipment to the U.S. C) The transaction value of imported goods will not include transportation costs for the merchandise after its importation into the U.S., if identified separately from the price actually paid or payable and from any cost or other item referred to in section 152.103(b), Customs Regulations (19 CFR 152.103(b)). Any decrease in the price actually paid or payable effected between the buyer and seller after the date of importation of the merchandise shall be disregarded in determining the transaction value. The rate of duty to be charged against the imported merchandise will depend upon how the merchandise is classified. In connection with this issue, we are sending the file to our Food & Chemicals Branch upon issuance of this decision for their review and response. Additional information regarding the nature of the imported merchandise may be required by that office in responding to your inquiry. If you need additional assistance in this matter, you may contact the Food & Chemicals Branch at 202-482-7020. Sincerely, John Durant, Director Commercial Rulings Division