The applicability of subheading 9801.00.20, HTSUS, to plastic fingernails from China and Korea, packaged in Mexico

NY L89361 February 15, 2006 CLA-2-39:RR:NC:N2:221 L89361 CATEGORY: Classification TARIFF NO.: 9801.00.20 Ms. Rachael Goding International Automated Brokers, Inc. 1655 St. Andrews Cove San Diego, CA 92154-8213 RE: The applicability of subheading 9801.00.20, HTSUS, to plastic fingernails from China and Korea, packaged in Mexico Dear Ms. Goding: In your letter dated January 6, 2006, on behalf of Pacific World Corporation (PWC) of Lake Forest, California, you requested a ruling on whether plastic fingernails were eligible for treatment in subheading 9801.00.20, Harmonized Tariff Schedule of the United States (HTSUS). The imported product consists of plastic fingernails. The fingernails are manufactured in China or Korea and imported in bulk by PWC, who pays the appropriate duties upon entry. Following importation, PWC will export the fingernails to a company in Mexico, Baja Fur, who will pack them in retail packaging. PWC will then reimport the packaged fingernails into the United States. You state that the legal relationship between PWC and Baja Fur is one of bailment. PWC pays Baja Fur for its services but never relinquishes ownership of the fingernails. Section 141.2 of the Customs Regulations (19 CFR 141.2) states that "Dutiable merchandise imported and afterwards exported even though duty thereon may have been paid on the first importation, is liable to duty on every subsequent importation into the Customs territory of the United States" unless specifically exempted therefrom under the Harmonized Tariff Schedule of the United States (HTSUS). Subheading 9801.00.20, HTSUS, provides for duty-free treatment for "articles previously imported, with respect to which the duty was paid upon such previous importation or which were previously free of duty pursuant to the Caribbean Basin Economic Recovery Act of Title V of the Trade Act of 1974 if (1) reimported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, after having been exported under lease or similar use agreements, and (2) reimported by or for the account of the same person who imported it into, and exported it from, the United States.” Customs does not consider the mere packaging of a good for retail sale as an advancement in value or improvement in condition. See John v. Carr & Sons, Inc., 69 Cust.Ct. 78, C.D. 4377 (1972), aff'd, 61 CCPA 52, C.A.D. 1118 (1974). See also Headquarters Ruling Letter (HRL) 555624, dated May 1, 1990, which ruled that perfumes packaged into sample pouches abroad were not advanced in value or improved in condition for purposes of subheading 9801.00.10, HTSUS, treatment. Section 10.108, Customs Regulations (19 CFR 10.108), provides, in relevant part, that free entry shall be accorded under subheading 9801.00.20, HTSUS , whenever it is established to the satisfaction of the district director that the article for which free entry is claimed was exported from the United States under a lease or similar use agreement. According to Black's Law Dictionary 179 (5th ed. 1979), a bailment is "a delivery of goods of personal property, by one person to another, in trust for the execution of a special object upon or in relation to such goods, beneficial to either the bailor or bailee or both, and upon a contract, express or implied, to perform the trust and carry out such object, and thereupon either to redeliver the goods to the bailor or otherwise dispose of the same in conformity with purpose of the trust.” Headquarters ruled, in HRL 560511, dated November 18, 1997, that "bailment" is a "similar use agreement" for the purposes of subheading 9801.00.20, HTSUS. You assert that your client’s transaction meets all the requirements for consideration of duty free entry under subheading 9801.00.20, HTSUS. Specifically, you indicate that the fingernails, being previously imported and duty paid where applicable, would be subject solely to packaging operations and would not be otherwise advanced in value or improved in condition by any process or manufacture while in Mexico. Further, the subject fingernails would be exported under conditions that would constitute exportation pursuant to a lease or similar use agreement and your client, PWC, would be the importer, exporter and reimporter of the merchandise. Based on the information submitted, the plastic fingernails that are manufactured in China and packaged in Mexico will be eligible for duty-free treatment under subheading 9801.00.20, HTSUS, when returned to the United States, provided that the district director at the port of entry is satisfied that PWC previously imported the bags and paid duty thereon; they are reimported by or for the account of PWC; PWC exported the bags from the U.S. under a lease or a similar use agreement; and the documentary requirements of section 10.108, Customs Regulations, are satisfied. This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177). A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Joan Mazzola at 646-733-3023. Sincerely, Robert B. Swierupski Director, National Commodity Specialist Division