Eligibility of wooden chairs for partial duty exemption under subheadings 9802.00.50, 9802.00.80, HTSUS

HQ 557605 January 13, 1994 CLA-2 CO:R:C:S 557605 BLS CATEGORY: Classification TARIFF NO.: 9802.00.50, 9802.00.80 Mr. Thomas N. Turpin Intercon 1811 W. Alexander Avenue Salt Lake City, UT 84119 RE: Eligibility of wooden chairs for partial duty exemption under subheadings 9802.00.50, 9802.00.80, HTSUS Dear Mr. Turpin: This is in reference to your letter dated August 18, 1993, requesting a ruling that certain knock-down wooden dining chairs imported from Slovenia are eligible for a partial duty exemption under the Harmonized Tariff Schedule of the United States (HTSUS). FACTS: Intercon, a manufacturer of wooden tables and chairs, contracts with a U.S. subcontractor to provide unfinished, unmilled seats of American oak. The subcontractor cuts the lumber to size and glues the "seats". In a telephonic communication on January 10, 1994, you advised that upon export from the U.S., the oak pieces are in a square shaped form. In Slovenia, the pieces are shaped and finish milled, and holes are bored for spindles and legs. The work is completed by finish sanding. Intercon also contracts with U.S. companies to provide surface S2S kiln-dried lumber, cut to thickness oak. This material is shipped from the U.S. to Slovenia to be finish milled into chair legs, backs, stretches, and spindles. The Slovenia company provides a completely knock-down chair from the materials they purchase from Intercon. Intercon assembles the returned components with epoxy resin, then stains, seals, and lacquers the completed chairs. Each chair is then placed in a box (if necessary) for shipment. ISSUE: Whether knock-down wooden dining chairs imported from Slovenia are eligible for a partial duty exemption under subheadings 9802.00.80 or 9802.00.50, HTSUS. - 2 - LAW AND ANALYSIS: Subheading 9802.00.80, HTSUS, provides a partial duty exemption for: (a)rticles assembled abroad in whole or in part of fabricated components, the product of the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape, or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process, such as cleaning, lubricating and painting. All three requirements of subheading 9802.00.80, HTSUS, must be satisfied before a component may receive a duty allowance. An article entered under this tariff provision is subject to duty upon the full cost or value of the imported assembled article, less the cost or value of the U.S. components assembled therein, upon compliance with the documentary requirements of section 10.24, Customs Regulations (19 CFR 10.24). This tariff provision contemplates first and foremost, an assembly abroad of fabricated components. In the described scenario, the parts sent to Slovenia are not assembled there, but are further processed for assembly upon return to the U.S. We would also note that the operations in Slovenia constitute further fabrication of the wooden parts, and accordingly such materials would not qualify as fabricated components under subheading 9802.00.80, HTSUS. (See 19 CFR 10.12(d) and 19 CFR 10.14(a).) Under the circumstances, the imported knock-down chairs will not qualify for the partial duty exemption under subheading 9802.00.80, HTSUS. Subheading 9802.00.50, HTSUS, provides a partial duty exemption for articles returned to the U.S. after having been exported to be advanced in value or improved in condition by means of repairs or alterations. Such articles are dutiable only upon the value of the foreign repairs or alterations, provided the documentary requirements of section 10.8, Customs Regulations (19 CFR 10.8), are satisfied. However, entitlement to this tariff treatment is precluded in circumstances where the operations performed abroad destroy the identity of the articles or create new or commercially different articles. See A.F.Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956); Guardian Industries Corp. v. United States, 3 CIT 9 (1982). Tariff treatment under subheading 9802.00.50, HTSUS, is also precluded where the exported articles are incomplete for their intended use prior to the foreign - 3 - processing. Guardian. As stated in Dolliff & Company, Inc. v. United States, 81 Cust. Ct. 1, C.D. 4755, 455 Fed. Supp. 618 (1978), aff'd, 66 CCPA 77, 82, C.A.D. 1225, 599 F.2d 1015, 1019 (1979), "repairs and alterations are made to completed articles and do not include intermediate processing operations which are performed as a matter of course in the preparation or the manufacture of finished articles." As the materials exported to Slovenia are not complete for their intended use prior to shipment abroad, but require further processing in Slovenia, the imported articles do not qualify for preferential tariff treatment under subheading 9802.00.50, HTSUS. HOLDING: Knock-down wooden dining chairs imported from Slovenia are not eligible for partial duty-free treatment under subheadings 9802.00.50 and 9802.00,80, HTSUS. Therefore, the chairs are dutiable on their full value when imported into the U.S. Sincerely, John Durant, Director Commercial Rulings Division