The applicability of duty exemption to counterfeit money detector pens and markers that are made in the U.S., subsequently personalized in Mexico and then returned to the U.S.

N105955 June 16, 2010 CLA-2-98:OT:RR:NC:N4:422 CATEGORY: Classification TARIFF NO.: 9802.00.50 Mr. Michael Roll Pisani & Roll LLP 1875 Century Park East Suite 600 Los Angeles, CA 90067 RE: The applicability of duty exemption to counterfeit money detector pens and markers that are made in the U.S., subsequently personalized in Mexico and then returned to the U.S. Dear Mr. Roll: In your letter dated May 14, 2010, on behalf of DriMark Products, Inc., you requested a ruling on whether various items are eligible for duty exemption under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS). The subject merchandise consists of counterfeit money detector pens and markers that are made in the United States. These items will be sent to Mexico for personalization, according to your customer’s request. This process involves printing customer requested information onto these items, such as the customer name, logo or catch phrase. The items are then packaged for retail sale in either a plastic blister pack with paper backing or in a paper box. These items will then be returned to the United States. 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 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), which implements Article 307 of NAFTA, are satisfied. However, 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 pertinent legal notes of the HTSUS. For example, Section XXII, Chapter 98, Subchapter II, U.S. Note 1(b) states that heading 9802 HTSUS shall not apply to any article exported with 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. In prior rulings, Customs has held that marking or affixing a label to a product constitutes an alteration within the meaning of subheading 9802.00.50, HTSUS. Consequently, the personalization in Mexico of these counterfeit money detector pens and markers, in the manner so described, will qualify as alterations within the meaning of subheading 9802.00.50, HTSUS. Therefore 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. You have also asked for a determination as to the applicability of 9802.00.50 for a “set of 4 highlighters.” In the scenario that you illustrated, the articles of this item will be packaged in a clear plastic container in Mexico and the package, rather than the highlighters, will be personalized in that country. In addition, you asked for a determination as to the applicability of 9802.00.50 for a “combination pen highlighter.” In the scenario that you illustrated, the barrel of this item, which will be made in Italy, will be personalized in Mexico. Then a clip, which will be made in the U.S., will be assembled onto the barrel of the item in Mexico as well. In order to make a determination as to the applicability of 9802.00.50 for the “set of 4 highlighters.” and the “combination pen highlighter” we will need a sample of each specific item that is in question and a complete detailed description as to all processes performed on each item in each country into which it is imported. When the samples and the descriptions are available, you may wish to consider resubmission of your request. We are returning all submitted documents. If you decide to resubmit your request, please include all of the material that we have returned to you. 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 Gary Kalus at (646) 733-3055. Sincerely, Robert B. Swierupski Director National Commodity Specialist Division