The applicability of Harmonized Tariff Schedule of the United States (HTSUS) subheading 9802.00.50 to various ad-specialty promotional items.

N095288 March 2, 2010 CLA-2-98:OT:RR:NC:N1:118 CATEGORY: Classification TARIFF NO.: 9802.00.50 Mr. Ray Reel National Pen Tennessee LLC 342 Shelbyville Mills Road Shelbyville, TN 37160 RE: The applicability of Harmonized Tariff Schedule of the United States (HTSUS) subheading 9802.00.50 to various ad-specialty promotional items. Dear Mr. Reel: In your letter dated February 22, 2010, you requested a ruling regarding the applicability of subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), to items such as pocket knives, flashlights, laser pointers, paper knives, staplers and other ad-specialty promotional items from China. Subsequent to importation, the merchandise will be sent to Mexico for personalization according to your customer’s specific requirement. This process involves applying the customer’s name and address and sometimes a company logo or catch phrase to the item by means of silk screening, pad printing, hot stamping, laser engraving or similar methods. These items will then be returned to the United States to be sold as promotional items in the United States, Canada, Europe, Australia and New Zealand. Subheading 9802.00.50, HTSUS, provides a partial or complete duty exemption for articles exported from and returned to the United States after having been advanced in value or improved in condition by means of repairs or alterations. Articles returned to the United States after having been repaired or altered in Mexico, whether or not pursuant to a warranty, may be eligible for duty-free treatment provided that the documentary requirements of Section 181.64, Customs Regulations (19 C.F.R. § 181.64), are satisfied. A definition for repairs or alterations can be found within 19 C.F.R. § 181.64(a) and it is stated to mean “restoration, addition, renovation, redyeing, cleaning, resterilization or other treatment which does not destroy the essential characteristics of, or create a new and commercially different good from the good exported from the United States.” Entitlement to the special tariff treatment of subheading 9802.00.50, HTSUS, is precluded in circumstances where the operations performed abroad destroy the identity of the exported articles or create new or commercially different articles through a process of manufacture. Entitlement to this special tariff treatment is also precluded when the exported articles are incomplete for their intended use and the foreign processing operation is a necessary step in the preparation or manufacture of finished articles. Furthermore, the merchandise must be in compliance with the legal notes. For example, Section XXII, Chapter 98, Subchapter II, U.S. Note 1(b) states that subheading 9802.00.50, HTSUS, would not be applicable to any article exported with the benefit of drawback (other than NAFTA drawback). In this instance, the subject articles are complete for their intended use prior to being exported to Mexico. The merchandise, in its condition as exported from the United States without the benefit of drawback and as returned from Mexico, can be marketed and sold to consumers for the same use. The operations performed in Mexico do not create new or commercially different articles. The personalization in Mexico of these items, in the manner so described, will qualify as alterations within the meaning of subheading 9802.00.50, HTSUS. These items, as described, will be entitled to duty-free treatment as per U.S. Note 3(d) of Section XXII, Chapter 98, Subchapter II when returned to the United States, provided that the documentary requirements of 19 C.F.R. § 181.64 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 Kathy Campanelli at (646) 733-3021. Sincerely, Robert B. Swierupski Director National Commodity Specialist Division