Revocation of NY 284970; Subheading 9802.00.50, HTSUS; Automotive bumpers from the United States

HQ H288285 January 18, 2018 CLA-2 OT:RR:CTF:VS H288285 TP CATEGORY: CLASSIFICATION TARIFF NO.: 9802.00.50 Jasmine Moss Customs Coordinator A.G. Simpson USA Inc. 6640 Sterling Drive South Sterling Heights, MI 48312-5845 RE: Revocation of NY 284970; Subheading 9802.00.50, HTSUS; Automotive bumpers from the United States Dear Ms. Moss: This is in reference to New York Ruling Letter (“NY”) 284970, dated April 26, 2017. At issue was the applicability of subheading 9802.00.50, Harmonized Tariff Schedule of the United States (“HTSUS”), to automotive bumpers painted in Canada. In NY 284970, U.S. Customs and Border Protection (“CBP”) determined, in relevant part, that painting the automotive bumpers in Canada was a repair or alteration eligible for duty free treatment under subheading 9802.00.50, HTSUS. It is now our position that such painting of automotive bumpers is not a repair or alteration eligible for duty free treatment under subheading 9802.00.50, HTSUS. For the reasons described in this ruling, we hereby revoke NY 284970. On November 29, 2017, pursuant to section 625(c), Tariff Act of 1930 (19 U.S.C. § 1625(c)(1)), as amended by section 623 of Title VI (Customs Modernization) of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057), notice of the proposed action was published in the Customs Bulletin, Vol. 51, No. 48. No comments were received in response to this notice. FACTS: NY 284970 stated, in relevant part, that A.G. Simpson purchases steel blanks from U.S. steel processors and stamps these steel blanks into bumper shells in the United States. These bumper shells are then shipped to a sister plant in Canada where they are painted various colors. After the bumpers are painted, they are returned to the United States where they are assembled into finished bumpers by adding sensors, fog lights, fasteners, brackets, electrical harnesses, step pads and end caps. CBP held that the bumpers are eligible for duty-free treatment under subheading 9802.00.50, HTSUS, because the bumpers are complete articles upon exportation to Canada and the painting operation did not transform the bumpers in name, use, performance, characteristics or tariff classification. ISSUE: Whether the automotive bumpers exported to Canada for the described painting process will qualify for subheading 9802.00.50, HTSUS treatment? LAW AND ANALYSIS: Subheading 9802.00.50, HTSUS, provides a full or partial duty exemption for articles returned to the United States after having been exported to be 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 Canada, whether or not pursuant to warranty, may be eligible for duty free treatment, provided the documentary requirements of section 181.64, CBP Regulations, (19 C.F.R. § 181.64), are satisfied. Section 181.64(a) states, in pertinent part: ‘Repairs or alterations’ means restoration, addition, renovation, redyeing, cleaning, resterilizing, or other treatment which does not destroy the essential character of, or create a new and commercially different good from, the good exported from the United States. Section 181.64(b), CBP Regulations, (19 C.F.R. § 181.64(b)) states: Goods not eligible for duty-free or reduced-duty treatment after repair or alteration. The duty-free or reduced-duty treatment referred to in paragraph (a) of this section shall not apply to goods which, in their condition as exported from the United States to Canada or Mexico, are incomplete for their intended use and for which the processing operation performed in Canada or Mexico constitutes an operation that is performed as a matter of course in the preparation or manufacture of the finished goods. Classification under subheading 9802.00.50, HTSUS, is precluded where: (1) the exported articles are not complete for their intended use and the foreign processing operation is a necessary step in the preparation or manufacture of finished articles; or (2) the operations performed abroad destroy the identity of the exported articles or create new or commercially different articles through a process of manufacture. See Guardian Indus. Corp. v. United States, 3 Ct. Int’l Trade 9 (1982), and Dolliff & Co., Inc., v. United States, 81 Cust. Ct. 1, C.D. 4755, 455 F. Supp. 618 (1978), aff’d, 66 C.C.P.A. 77, C.A.D. 1225, 599 F.2d 1015 (1979). In Dolliff & Company, Inc., the issue presented was whether certain U.S.-origin Dacron polyester fabrics which were exported to Canada as greige goods for heat setting, chemical scouring, dyeing and treating with chemicals, were eligible for the partial duty exemption under item 806.20, TSUS, when returned to the United States. The court found that the processing steps performed on the exported greige goods were undertaken to produce finished fabric and could not be considered as alterations. The court stated that: …repairs or 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 manufacture of finished articles. Conversely, in Amity Fabrics, Inc. v. United States, C.D. 2104, 43 Cust. Ct. 64 (1959), "pumpkin" colored fabrics were exported to Italy to be redyed black since the pumpkin color had gone out of fashion and black was a consistently good seller. The court held that the identity of the goods was not lost or destroyed by the dyeing process, that no new article was created since there was no change in the character, quality, texture, or use of the merchandise; it was merely changed in color. The court found that such change constituted an alteration for purposes of a precursor provision to subheading 9802.00.50, HTSUS. As such, CBP has previously held that initial painting processes do not qualify for the duty exemption under subheading 9802.00.50, HTSUS. In H278563, dated November 23, 2016, aluminum coils were exported to Canada to undergo a paint coating process. The aluminum coils were then reimported into the United States to be further processed by cutting to size and flattening to create their end use as ceiling panels. CBP concluded that the painting process in Canada was a step in the production process of the coil. Therefore, the painting processing in Canada was a necessary step in the production of a finished good and the aluminum coils did not qualify for subheading 9802.00.50, HTSUS treatment. After reviewing the above-referenced cases, we find that painting the automotive bumpers in Canada does not constitute a repair or alteration under 9802.00.50, HTSUS. The painting process is an intermediate processing operation. See Dolliff & Company, Inc. v. United States, 599 F.2d 1015 (1979). This is not a repainting operation as contemplated by the redyeing in Amity Fabrics and as noted in 19 C.F.R. § 181.64(a), which permits redyeing but not dyeing. In the present case, painting the automotive bumpers is a continuation of the production process to be fit for its intended purpose. Furthermore, the operations performed in the United States are not relevant as to whether the painting, as performed in Amity Fabrics, is acceptable. The standard is not whether the bumpers were transformed in name, use, performance, characteristics or tariff classification in Canada, but rather whether the exported products are complete for their intended purpose. Here, painting the bumpers prevents them from rusting; therefore, the bumpers are not ready for their intended purpose upon exportation to Canada. As the painting procedure in Canada is not processing of a finished good, the automotive bumpers exported to Canada for painting do not qualify for subheading 9802.00.50, HTSUS, treatment. HOLDING: NY 284970 is revoked to reflect that the painting of automotive bumpers as described above does not constitute an alteration; therefore, the bumpers are not eligible for duty free treatment under subheading 9802.00.50, HTSUS. EFFECT ON OTHER RULINGS: NY 284970, dated April 26, 2017, is hereby REVOKED. In accordance with 19 U.S.C. § 1625(c), this ruling will become effective 60 days after publication in the Customs Bulletin. Sincerely, Myles B. Harmon, Director Commercial and Trade Facilitation Division