Application for Further Review of Protest No. 4101-98-100034; applicability of partial duty exemption under HTSUS subheading 9802.00.50 to ceramic tile; silk-screening; NRYL 884248 revoked

W561914 July 24, 2001 CLA-2 RR:CR:SM W561914 MLR CATEGORY: Classiication TARIFF NO.: 9802.00.50 Port Director U.S. Customs Service 6747 Engle Road Middleburg Heights, OH 44130 RE: Application for Further Review of Protest No. 4101-98-100034; applicability of partial duty exemption under HTSUS subheading 9802.00.50 to ceramic tile; silk-screening; NRYL 884248 revoked Dear Director: This is in reference to the above-referenced protest and application for further review, iled by Deloitte & Touche, L.L.P., on behalf of United States Ceramic Tile, contesting the denial of subheading 9802.00.50, Harmonized Tarif Schedule of the United States (HTSUS), to ceramic tile. FACTS: Ceramic tiles were entered on April 28, 1997, under subheading 9802.00.50, HTSUS, indicating a repair/alteration. Information supplied by International Cargo Services, Inc. dated April 28, 1997, indicates that U.S. manufactured ceramic tile was exported to England on January 22, 1997, for processing and return. A letter from Deloitte & Touche indicates that wall tile is manufactured in the U.S. generally for use in bathrooms and kitchens, and that it is only produced in one shade of white and has undergone all inishing processes, such as glazing, such that it is in a form ready to be sold to consumers. In order to enhance the marketability of the tile, the tile is exported to England where patterns or motifs, consisting of items such as lowers, designs or animals, are s ilk-screened onto the tiles and the tiles are placed in a kiln where they are re-ired to solidify the silk -screening. The letter also states that a ruling was issued on May 22, 1997, indicating that the tiles were not eligible for subheading 9802.00.50, HTSUS, treatment. The entry was liquidated on March 13, 1998, and the protest was timely iled on June 11, 1998. 1 ISSUE: Whether ceramic tile exported abroad for silk-screening and re-iring is eligible for a partial duty exemption under subheading 9802.00.50, HTSUS. 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 repairs or alterations, provided the foreign operation does not destroy the identity of the exported articles or create new or commercially diferent articles through a process of manufacture. See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956), af’g C.D. 1752, 36 Cust. Ct. 46 (1956); Guardian Industries Corp. v. United States, 3 CIT 9 (1982). Accordingly, entitlement to this tarif treatment is precluded where the exported articles are incomplete for their intended purpose prior to the foreign processing and the foreign processing operation is a necessary step in the preparation or manufacture of inished articles. Dollif & Company, Inc. v. United States , 455 F. Supp. 618 (CIT 1978), af’d , 599 F.2d 1015 (Fed. Cir. 1979). Articles entitled to this partial duty exemption are dutiable only upon the cost or value of the foreign repairs or alterations when returned to the U.S., provided the documentary requirements of 19 CFR 10.8 are satisied. The protestant claims that the silk-screening operations in England are acceptable alterations under subheading 9802.00.50, HTSUS. In Amity Fabrics, Inc. v. United States, C.D. 2104, 43 Cust. Ct. 64, 305 F. Supp. 4 (1959), the court held that unmarketable, pumpkin colored cotton twill-back velveteen which was exported to be redyed rendered the fabric marketable and that this improvement in the exported fabric advanced its value and improved its condition commercially. As the parties had stipulated that the redyeing in no way changed the quality, texture, or character of the material, the court concluded that the identity of the goods was not lost or destroyed by the dying process; no new article was created; there was no change in the character, quality, texture, or use of the merchandise; it was merely changed in color; and that such change constituted an alteration under the statute and Customs Regulations. In Royal Bead Novelty Co. v. United States, C.D. 4353, 68 Cust. Ct. 154, 342 F. Supp. 1394 (1972), uncoated glass beads were exported so that they could be half-coated with an Aurora Borealis inish which imparted a rainbow -like luster to the half-coated beads. The court found that the identity of the beads was not lost or destroyed in the coating process and that no new article was created. Moreover, the court noted that there was no change in the beads' size, shape, or manner of use in the making of jewelry (as the plaintif testiied that both uncoated and half -coated beads were used interchangeably). The sole change was in the inish, which did not change the quality, texture, or character of the exported beads. Accordingly, the court concluded that application of the Aurora 2 Borealis inish constituted an alteration within the intendment of item 806.20, Tarif Schedules of the United States (TSUS) (the precursor tarif provision to subheading 9802.00.50, HTSUS). In New York Ruling Letter (NYRL) B84285 dated May 22, 1997, issued to protestant, the opinion was that silk screening and iring the tiles in England were necessary manufacturing steps to inish the tiles for their intended use as decorated tiles, and, therefore, not eligible as an alternation under subheading 9802.00.50, HTSUS. Protestant cites Headquarters Ruling Letter 555124 dated November 11, 1988, where Customs held that fabric in a condition ready for assembly into raincoats was exported for a wire brush operation which changed its physical appearance from a more shiny look, was eligible for subheading 9802.00.50, HTSUS, treatment. Customs issued a revocation/modiication of ruling letters and treatment relating to the eligibility of articles which were exported for decorating operations and returned under subheading 9802.00.50, HTSUS. See 34 Cust. Bull. 40 (October 4, 2000). As stated in the notice, the revocations and modiications cover any rulings involving substantially identical transactions which may exist but which were not speciically identiied. In the proposed revocations/modiications, a discussion of Headquarters Ruling Letter (HRL) 557770 dated February 24, 1994, and HRL 560168 dated February 27, 1997, was included. HRL 557770 (revoked by HRL 561783 dated September 19, 2000) pertained to solid color plastic imitation ingernails of U.S. origin which were exported for painting with decorative designs. In HRL 560168 (revoked by HRL 561770 dated September 19, 2000), blank dinnerware was exported for a decorating process, consisting of the application of decorative decals and, in some cases, painted bands, followed by kiln iring. Customs had found that the foreign decorating process exceeded the scope of a repair or alteration under subheading 9802.00.50, HTSUS. In reconsidering this position and determining that the returned articles are eligible for subheading 9802.00.50, HTSUS, treatment, it was found that both the decorated and undecorated articles were marketed to consumers for the same use. Therefore, Customs held that the exported articles were complete for their intended use and the foreign processing was not a necessary step in the production or manufacture of the inished articles. While the added decoration added new characteristics, it was determined that the enhanced appearance did not result in the loss of the goods' identity or the creation of new articles with a diferent commercial use. The foreign processing also did not signiicantly change the quality, character or performance characteristics of the exported articles. Reference was also made to HRL 560325 dated January 27, 1998, which concerned glass stemware exported abroad for a silk screening process with a pictorial winter scene abroad. As the stemware was ofered for sale both in its decorated and undecorated state, Customs found that the process constituted an alteration. Similarly, in this case, the exported tile had undergone all inishing processes, such as glazing, and was in a form ready to be sold to consumers for use in bathrooms and kitchens. We also ind that the silk -screened and re-ired tile would be used for 3 bathrooms and kitchens, and that it is common to use plain and decorated accent tiles in bathroom and kitchen wall designs. The processing in England also did not change the character and was not a necessary step in the production of the inished tile. The processing only imparted new decorative characteristics as in the rulings discussed above, and the imported product remained ceramic tile. Therefore, we ind that the imported ceramic tile is eligible for subheading 9802.00.50, HTSUS, treatment. While the revocations/modiications became efective on November 19, 2001, we note that the rulings discussed concerned dates that were prior to the dates of the entries at issue. Therefore, the protest should be granted. In accordance with the revocations/modiications, which applies to any rulings involving substantially identical transactions, NYRL B84285 dated May 22, 1997, is hereby revoked. HOLDING: Based on the information submitted, the silk-screening and re-iring processes performed in England to impart decorative patterns on the exported blank ceramic tiles constitute alterations under subheading 9802.00.50, HTSUS. Therefore, the protest should be granted. New York Ruling Letter B84285 is hereby revoked. In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, you are to mail this decision, together with the Customs Form 19, to the Protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision. Sixty days from the date of this decision the Ofice of Regulations and Rulings will take steps to ·make this decision available to Customs personnel, and to the general public on the Customs Home Page on the World Wide Web at www.customs.gov, by means of the Freedom of Information Act and other public access channels. Sincerely, John Durant, Director Commercial Rulings Division 4