Classification under subheading 9802.00.50, HTSUS, of multistrike film slit abroad into ribbon material

HQ 555343 May 30, 1989 CLA-2-CO:R:C 555343 RA CATEGORY: Classification TARIFF NO.: 9802.00.50, HTSUS Mr. Brian C. Hoyle President MSR Ribbon Technology 5805 Bessette Ville St-Laurent Quebec, Canada H4S 1P1 RE: Classification under subheading 9802.00.50, HTSUS, of multistrike film slit abroad into ribbon material Dear Mr. Hoyle: This is in response to your letter of March 20, 1989, regarding the applicability of subheading 9802.00.50, Harmonized Tariff Schedule of the U.S. (HTSUS), to data processing ribbon material which is produced in Canada by slitting jumbo rolls of U.S.-made film. FACTS: Jumbo rolls of multistrike coated film 34 inches in width and 20,000 feet long of U.S. manufacture are processed in Canada by slitting the 34-inch material into ribbon material for data processing machines which will be returned to the U.S. for finishing into computer ribbons in plastic cartridges. You state that your sole task is to slit the wide U.S.-made film to ribbon width according to specification from the U.S. tape manufacturers who supply you with plastic core material, leader material in 18-inch width and various size rolls of adhesive tape. These components are placed in a micro processed slitter and slit to the customer's required size for finishing into ribbons used in data processing tape cartridges. ISSUE: Does the Canadian processing qualify as an alteration under the provisions of subheading 9802.00.50, HTSUS, with duty only on the cost of processing? - 2 - LAW AND ANALYSIS: Subheading 9802.00.50, HTSUS, provides for a duty based only on the cost of the processing abroad when articles are exported for alterations and returned after processing which qualifies as an alteration. However, the duty allowance is applicable only when the exported articles are in a finished condition. As stated by the appellate court in Dolliff & Company Inc. v. U.S., 66 CCPA 77, C.A.D. 1225 (1979), alterations are made only to completed articles and do not include intermediate operations which are performed in the manufacture of finished articles. If the foreign processing is a step in the work needed to finish the article for its intended use, the statutory provisions for alterations will not be applicable. Guardian Industries Corporation v. U.S., 3 CIT 9 (1982) and U.S. v. J.D. Richardson Co., 36 CCPA 15, C.A.D. 390 (1948). The slitting of the wide film in issue here constitutes an intermediate step in the manufacture of the computer tape which is essential to render it suitable for its intended use. The cutting of material to width or pattern to achieve a narrower or differently shaped product has consistently been held to amount to more than a mere alteration. In our ruling of October 24, 1988 (554830), we held that the slitting of polyester fabric into smaller product widths exceeded an alteration. Also, in a ruling dated November 10, 1980 (065398), we stated that the slitting of laminated paper into narrower sheets constituted more than an alteration. In a ruling dated November 22, 1977 (053914), the cutting of adhesive tape 45 inches wide into tape 1 1/2 inches wide was held to be a finishing process and beyond a mere alteration. HOLDING: The slitting of wide rolls of coated film into narrow widths of ribbon material for use in computer tape manufacture amounts to a step in the work necessary to finish the final product and constitutes a processing which exceeds an alteration within the scope of subheading 9802.00.50, HTSUS. Sincerely, John Durant, Director Commercial Rulings Division