Eligibility of a pigment quality quinacridone for a partial duty exemption under subheading 9802.00.50, HTSUS

HQ W557456 December 30, 1993 CLA-2 CO:R:C:S W557456 BLS CATEGORY: Classification TARIFF NO.: 9802.00.50 Ms. Eva M. Vary Ciba-Geigy Corporation Pigments Division 335 Water Street Newport, Delaware 19804-2434  RE: Eligibility of a pigment quality quinacridone for a partial duty exemption under subheading 9802.00.50, HTSUS Dear Ms. Vary: This is in reference to your letter dated June 10, 1993, and subsequent correspondence, requesting a ruling that U.S. manufactured quinacridone, sent to Mexico for further processing, will be eligible for the partial duty exemption under subheading 9802.00.50, Harmonized Tariff Schedule of the United States, (HTSUS), upon return to the U.S. FACTS: The exported material is dimethyl-dihydro-quinacridone ("DDQA"), an uncolored chemical of a non-pigment quality and large particle sizes, made in the U.S., which will be sent to Mexico for the purpose of changing it to a material with pigment quality. In Mexico, DDQA will be dissolved in a process solvent. A process aiding chemical and an antiflocculating agent will be added to the solution. DDQA will be oxidized and become dimethyl quinacridone ("DQA"). The DQA will be drowned (pumped into a non-solvent) and precipitated as small particle sized material (pigmentary particles). The slurry will be filtered, dried and micro­ pulverized. The dry pigment powder will be packaged and shipped back to the U.S. as Magenta RT-115-D. The process solvent will be recovered and reused many times. In an oral communication with this office, you have advised that the exported DDQA is not a completed product but must be further processed in order to be functional. ISSUE: Whether the imported pigment quality quinacridone will be eligible for the partial duty exemption under subheading  9802.00.50, HTSUS, upon return to the U.S. LAW AND ANALYSIS: 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, the application of this tariff provision is precluded where the operations performed abroad result in articles with new or different uses or characteristics, or where the foreign operations constitute a part of a manufacturing process begun in the U.S. See A.F. Burstrom v. United States. 44 CCPA 27, C.A.D. 631 (1956); Guardian Industries Corporation v. U.S., 3 C.I.T. 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 processing. Guardian. Congress did not intend to permit uncompleted articles to be exported abroad and there made into finished products and when returned to be subject to duties only on the cost of the so-called alterations. U.S. v. J.D. Richardson Co., 36 CCPA 15, C.A.D. 390 (1948). It is apparent from a description of the processing performed abroad, resulting in a small particle sized pigment-quality quinacridone, that the exported material, a large particle sized, non-pigment quality quinacridone, is not complete for its intended use as a pigment when exported to Mexico. The exported material also lacks certain significant characteristics of the imported product, primarily its pigment quality, and the identity of the returned product, DQA, in a powdered form, is clearly distinct from the exported DDQA. The operations to be performed in Mexico, which result in the completed DQA, constitute part of a manufacturing process commenced in the U.S. Accordingly, since the statute contemplates alterations or repairs only on articles that are complete for their use upon exportation, the imported DQA will not be eligible for the partial duty exemption under subheading 9802.00.50, HTSUS, upon its return to the U.S.  HOLDING: The imported pigment quality quinacriodone (dimethyl quinacridone) will not be eligible for the partial duty exemption under subheading 9802.00.50, HTSUS, upon return to the U.S. Sincerely, John Durant, Director Commercial Rulings Division