Alteration; ceramic dinnerware; HRL 557770; HRL 554371; HRL555021

HQ 560168 February 28, 1997 CLA-2-05 RR:TC:SM 560168 DEC CATEGORY: Classification TARIFF NO.: 9802.00.50 Mr. Douglas Davidson Joliette Porcelain, Incorporated 516 rue Cartier Joliette, Quebec J6E 4T7 RE: Alteration; ceramic dinnerware; HRL 557770; HRL 554371; HRL 555021 Dear Mr. Davidson: This is in response to your letters dated October 18 and October 30, 1996, requesting a ruling concerning the applicability of subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), to the decoration of ceramic dinnerware. Samples of the dinnerware before and after the decorating process were submitted for examination. FACTS: Joliette Porcelain, Incorporated (Joliette), currently exports blank dinnerware products from the U.S. to Canada where ceramic decals, and in some cases painting bands will be applied to the articles in Canada. After the decorating process, the dinnerware will be kiln fired and returned to the U.S. You state that undecorated dinnerware, which is produced by the Pfaltzgraf Company, is currently being sold in the U.S. marketplace. The decorating processes may include an over-the-glaze application of decals and/or painted bands. In addition, the processes may also include direct printing, tampographie, or spray decoration. ISSUE: Whether the "decorating" operation described above qualifies as a repair or alteration under subheading 9802.00.50, HTSUS. 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 subheading 9802.00.50, HTSUS, provided the foreign operation does not destroy the identity of the exported articles or create new or different articles through a process of manufacture. However, entitlement to this tariff treatment is precluded where the exported articles are incomplete for their intended use prior to the foreign processing, Guardian Industries Corp. v. United States, 3 CIT 9 (1982), or where the foreign operation constitutes an intermediate processing operation, which is performed as a matter of course in the preparation or the manufacture of finished articles. Dolliff & Company, Inc. v. United States, C.D. 4755, 81 Cust. Ct. 1, 455 F. Supp. 618 (1978), aff'd, C.A.D. 1225, 66 CCPA 77, 599 F.2d 1015 (1979). Articles returned from Canada which are 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 19 CFR 181.64 are satisfied. In Headquarters Ruling Letter (HRL) 557770, dated February 24, 1994, we held that plastic fingernails, which were sold as a wearable accessory, produced in the U.S. and then sent abroad to be painted with decorative designs were not entitled to classification under subheading 9802.00.50, HTSUS. We stated that the foreign decorative painting constituted an operation that exceeds an alteration under subheading 9802.00.50, HTSUS. The design painting operations imparted substantially new and different characteristics to the fingernails. Although the plastic nails may be worn whether a design is painted or not, the application of a particular design on the fingernails gives them a unique and specialized appeal, and is a prerequisite to marketing and selling these fingernails in the U.S. Thus, we viewed the exported fingernails as incomplete for their intended use and the foreign painting operations as a necessary step in the production of the final article - decorative painted fingernails. In HRL 554371, dated December 10, 1986, we held that the process of hand-painting sweatshirts abroad is not considered a proper repair or alteration under item 806.20, Tariff Schedules of the United States (TSUS) [the precursor to subheading 9802.00.50, HTSUS]. In HRL 554371, we held that the hand-painting operations constituted a finishing of the garment performed in the course of manufacture - the last step in the total process of producing hand-painted sweatshirts. We further noted that, depending upon customer needs, the garments were not considered finished until they had undergone the final design painting and had become ready for marketing and sale. In another case, we held that silk screening U.S.-origin socks in Taiwan constituted an operation that exceeded an alteration. See HRL 555021 dated July 1, 1988. In HRL 555021, we stated that although the garments can be worn whether a design is imprinted by silk screening or not, silk screening, like printing and hand-painting, is considered neither a repair nor an alteration under the provisions of item 806.20, TSUS. We further stated in HRL 555021 that socks which have a design as a result of a silk screening process are different from socks without such a design, and, as such, the foreign silk screening process has created a new and different article of commerce. We believe that our holdings in the above-described rulings are controlling with respect to the applicability of subheading 9802.00.50, HTSUS, to the various decorated dinnerware articles to be imported by Joliette. The application of ceramic decals or painting bands on blank dinnerware products, followed by kiln firing, the use of an over-the-glaze process to apply decals and/or painted bands, direct printing, tampographie, or spray decoration on blank dinnerware products which produce results similar to the samples submitted with your ruling request constitute operations that exceed an alteration under subheading 9802.00.50, HTSUS. The design painting operations to be performed in Canada on the exported blank dinnerware clearly will impart substantially new and different characteristics to the dinnerware. Although the dinnerware may be used whether a design is applied to it or not, as in the printing and silk screening operations described in the above cases, the application of a particular design on the dinnerware gives them a unique and specialized appeal, and is a prerequisite to marketing and selling these dinnerware items in the U.S. Thus, we view the exported dinnerware as incomplete for its intended use and the foreign painting operations as a necessary step in the production of the final article - - decorative dinnerware. HOLDING: On the basis of the information submitted, it is our opinion that the foreign decoration processes are not considered proper alterations within the meaning of subheading 9802.00.50, HTSUS. Therefore, upon return to the U.S., the decorated dinnerware as described above will not be entitled to the partial duty exemption available under this tariff provision, but will be dutiable upon their full value. A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer. Sincerely, John Durant, Director Tariff Classification Appeals Division