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HQ 555577

June 19, 1990

CLA-2 CO:R:C:V 555577 KAC


TARIFF NO.: 9801.00.10

John N. Politis, Esq.
Politis, Pollack & Doram
680 Wilshire Place, Suite 404
Los Angeles, California 90005

RE: Applicability of duty exemption available under HTSUS subheading 9801.00.10 to U.S. chip capacitors inspected, printed and packaged abroad.Packaging;John V. Carr;C.S.D. 89-27(6)(554838);057553;052042;071449;555183

Dear Mr. Politis:

This is in response to your letters dated January 10, and June 6, 1990, on behalf of Kyocera Northwest, Inc., requesting a ruling concerning the applicability of subheading 9801.00.10, Harmonized Tariff Schedule of the United States (HTSUS), to chip capacitors imported from Mexico. Samples were submitted for examination.


Kyocera Northwest, Inc. plans on shipping U.S.-manufactured chip capacitors, and U.S.-origin packaging materials, including a reel, carrier tape and cover tape for packaging operations in Mexico. After their manufacture, the chip capacitors are stored in containers by their capacitance rating in picofarads and then exported to Mexico. In Mexico, the chips will be inspected under a microscope for visible physical defects, such as chips, cracks, scratches at termination points, dust which has permeated the capacitor, voids, and faulty solder points. If any of these defects are detected, the chips are rejected and scrapped. Those chips which pass the inspection will be marked with an alphanumeric color code to identify the capacitance in picofarads, placed into the slotted piece of paper tape, covered with a plastic film for protection, and then wound onto a plastic reel. Upon completion of these operations, the chip capacitors will be imported into the U.S.


Whether the chip capacitors are eligible for the duty exemption available under HTSUS subheading 9801.00.10 when imported into the U.S.


HTSUS subheading 9801.00.10 provides for the free entry of U.S. products that are exported and returned without having been advanced in value or improved in condition by any means while abroad, provided the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1), are met. In United States v. John V. Carr & Sons, Inc., 69 Cust.Ct. 78, C.D. 4377, 347 F.Supp. 1390 (1972), 61 CCPA 52, C.A.D. 1118, 496 F.2d 1225 (1974), the court stated that absent some alteration or change in the item itself, the mere repackaging of the item even for the purpose of resale to the ultimate consumer, is not sufficient to preclude the merchandise from being classified under item 800.00, Tariff Schedules of the United States (TSUS) (the precursor to subheading 9801.00.10, HTSUS).

In the instant case, we believe that the foreign operations performed in Mexico are simple packaging operations that do not advance in value or improve in condition the chip capacitors. Prior to export from the U.S. the chip capacitors are fully manufactured products, which have been sorted by their capacitance rating. We have previously held that testing/inspecting results in an advancement in value where the testing is required by law or regulation. See, C.S.D. 89-27(6), Headquarters Ruling Letter (HRL) 554838 dated October 31, 1988, which held that electronically testing condoms abroad advances their value by making an unmarketable product marketable. However, testing/inspecting merely as part of the manufacturer's internal quality control is not deemed to advance in value or improve in condition the product. See, HRL's 057553 dated November 1, 1979, and 052042 dated July 27, 1979. Therefore, since the inspection in this case is for the purpose of detecting physical defects resulting from the manufacturing process, we believe that it does not advance in value or improve the condition of the chip capacitors.

It has also been held that foreign stamping or printing of a product to identify the manufacturer and describe the product does not advance its value or improve its condition so as to preclude entry under item 800.00, TSUS. See, HRL 071449 dated October 17, 1983, which held that surgical drapes stamped in ink with the name of the company, size, and model number were not precluded from item 800.00, TSUS, treatment. See, also, HRL 555183 dated February 15, 1989 (printing on a dental floss dispenser the company name and a description of the floss type, flavor and length will not preclude 9801.00.10, HTSUS, treatment for the dispensers.) Color coding the chip capacitors to identify their capacitance rating is similar to stamping or printing such identification markings as size and model number. Therefore, color coding the chip capacitors will not preclude HTSUS subheading 9801.00.10 treatment.

After inspection and color coding, the chip capacitors are merely inserted into slotted paper, covered with plastic film and wound onto a reel. Accordingly, as no aspect of the foreign operations advances in value or improves in condition the chip capacitors, they will be eligible for the duty exemption under HTSUS subheading 9801.00.10.


On the basis of the information and samples submitted, as the chip capacitors will not be advanced in value or improved in condition abroad as a result of the foreign operations, they will qualify for the duty exemption under HTSUS subheading 9801.00.10, upon compliance with the documentary requirements of 19 CFR 10.1.


John Durant, Director
Commercial Rulings Division

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