The tariff classification of labels from Mexico

N235248 December 7, 2012 CLA-2-39:OT:RR:NC:N4:421 CATEGORY: Classification TARIFF NO.: 3926.90.9980 Mr. John Paul Vyborny Capin Vyborny, LLC 949 West Bell Road Nogales, AZ 85621 RE: The tariff classification of labels from Mexico Dear Mr. Vyborny: In your letter dated November 2, 2012, on behalf of Penn Emblem Company, Pennsylvania, you requested a tariff classification ruling. Two samples were submitted with your letter and are being returned as requested. Sample A represents the product in the condition as imported. The sample consists of a roll of labels. The roll measures 3 ¼ inches in width. It has been cut and perforated to form individual labels measuring 3 ¼ inches in width and 1 inch in height with rounded corners. The perforations allow the labels to remain on the roll for ease of printing but to be easily separated from each other. The labels are not printed. They will be sold to end users who print the blank labels with information such as bar codes or brand names using their own printers. Sample B is a swatch from the master roll from which the labels will be made. The master roll material consists of woven polyester textile fabric heavily and visibly coated on both sides with plastics. This construction is considered to be of plastics for tariff purposes. Rolls measuring 56 inches in width are shipped to Mexico. The master roll is slit into narrow rolls. The narrow rolls are then cut and perforated to form the finished rolls of labels. You suggest classification in heading 3921, Harmonized Tariff Schedule of the United States (HTSUS), which provides for other plates, sheets, film, foil and strip, of plastics. Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRIs), taken in order. GRI 1 provides that classification shall be determined according to the terms of the headings of the tariff schedule and any relative section or chapter notes. Chapter 39 legal note 10 states, “In headings 3920 and 3921, the expression “plates, sheets, film, foil and strip” applies only to plates, sheets, film, foil and strip…and to blocks of regular geometric shape, whether or not printed or otherwise surface-worked, uncut or cut into rectangles (including squares) but not further worked.” The imported products have been cut so that each label has four rounded corners. Therefore, the imported product no longer meets the definition of sheet of heading 3921. The applicable subheading for the rolls of labels will be 3926.90.9980, HTSUS, which provides for other articles of plastics, other. The general rate of duty will be 5.3 percent ad valorem. You ask whether the perforated labels are eligible for treatment in subheading 9802.00.50 of the HTSUS. Subheading 9802.00.50, HTSUS, provides a 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 entitled to this partial duty exemption are dutiable only upon the cost or value of the foreign repairs or alterations, provided the documentary requirements of section 10.8, Customs Regulations (19 CFR 10.8), are satisfied. The application of this tariff provision 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 (1957) and Guardian Industries Corporation v. United States, 3 CIT 9 (1982). Treatment under subheading 9802.00.50, HTSUS, is also precluded where the exported articles are incomplete for their intended use and the foreign processing operation is a necessary step in the preparation or manufacture of the finished article. Alterations are made only to completed articles and do not include intermediate operations which are performed in the manufacture of finished articles. See Dolliff and Company, Inc. v. United States, 66 CCPA 77, C.A.D. 1225, 599 F.2d 1015 (1979). The Customs regulations which implement the North American Free Trade Agreement (NAFTA) are contained in title 19 C.F.R. Part 181. Section 181.64(a) defines "repairs or alterations" for purposes of NAFTA as “restoration, addition, renovation, redyeing, cleaning, resterilizing, or other treatment which does not destroy the essential characteristics of, or create a new or commercially different good from, the good exported from the United States. Cutting the lengths of sheeting to form shaped, perforated labels produces such changes in characteristics and use as to exceed an alteration. The processing in Mexico creates a new and commercially different article from the good exported from the United States. Moreover, the exported sheet is incomplete for its intended use and the cutting and perforation is a necessary step in the manufacture of the imported merchandise. Accordingly, the imported shaped, perforated labels are not eligible for tariff treatment under the provisions of subheading 9802.00.50, HTSUS, and would be subject to duty on the full value. Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on World Wide Web at http://www.usitc.gov/tata/hts/. 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 Joan Mazzola at (646) 733-3023. Sincerely, Thomas J. Russo Director National Commodity Specialist Division