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HQ 557161

June 28, 1993

CLA-2 CO:R:C:S 557161 BLS


Scott E. Rosenow, Esq.
S. Richard Shostak
Stein Shostak Shostak & O'Hara
1620 L Street, N.W.
Washington, D.C. 20036-5605

RE: Applicability of subheading 9802.00.50, HTSUS, to wooden shutters sent to Mexico for painting; Royal Bead; Amity; Modification of HRL 555093; Reconsideration and Modification of NY 873889


This is in reference to a request for reconsideration dated February 22, 1993, on behalf of Ohline Corporation, of NY 873889, dated May 26, 1992. You request that wooden interior window shutters sent to Mexico for painting or staining be granted the partial duty exemption under subheading 9802.00.50, HTSUS.


Ohline manufactures wooden shutters wholly for use in interior settings, such as in homes or offices. Generally these shutters are custom-made to the purchaser's specifications and requirements. When an order is received for shutters which are to be painted or stained a specific color, the completed shutters are exported to Mexico. In Mexico, the shutters undergo a process of inspection, preparation and application of several coats of paint or stain (hereinafter "paint"). This process includes light sanding and repairing between applications of paint. Following these operations, the shutters are returned to the U.S. where the necessary hardware will be attached. The shutters are then packaged and shipped to the purchaser.

Ohline also sells shutters unpainted, in an "unfinished" condition. While painted shutters constitute the majority of the interior shutters sold in the U.S., counsel notes that the unfinished market constitutes a significant portion of overall sales.


Whether the interior wooden shutters will be eligible for the partial duty exemption under subheading 9802.00.50, HTSUS, when imported into the U.S.


Subheading 9802.00.50, HTSUS, provides for the assessment of duty on the value of repairs or alterations performed on articles sent abroad for that purpose. However, 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 (1956), aff'd, C.D. 1752, 36 Cust. Ct. 46 (1956); Guardian Industries Corporation v. United States, 3 CIT 9 (1982), Slip Op. 82-4 (Jan. 5, 1982). Subheading 9802.00.50, HTSUS, treatment 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 finished articles. Dolliff & Company, Inc. v. United States, 81 Cust. Ct. 1, C.D. 4755, 455 F. Supp. 618 (1978), aff'd, 66 CCPA 77, C.A.D. 1225, 599 F.2d 1015 (1979).

In the instant case, you argue that the shutters are complete for their intended use before being exported to Mexico to be painted, and that the processing in Mexico neither destroys the identity of the article nor creates a new or different article of commerce. Specifically, you point out that at the time of exportation, the shutters are ready to perform their function of providing privacy and controlling light and ventillation. You note that painting serves only a decorative purpose, and has no effect upon these uses. Accordingly, you contend that unfinished shutters are completed articles of commerce, and that their identity as interior shutters of wood is unaffected by the processing in Mexico.

In Headquarters Ruling Letter (HRL) 555093, dated April 26, 1989, wooden parts of furniture kits were to be sent to Mexico to be stained, lacquered and packaged, and then returned to the U.S. for retail sale. Some of the kits were sold "unfinished" (without stain or lacquer) to some of the same retailers who purchased the finished kits. We held in that case that the articles were incomplete for their intended use when sent to Mexico for processing.

In Amity Fabrics v. United States, Inc., 43 Cust. Ct. 64, C.D. 2104 (1959), "pumpkin" colored velveteen fabric was sent abroad for redyeing it black since "pumpkin" was not in fashion. The redyeing did not change the use of the fabric and it was offered for sale to the same trade. In that case, the court held that the redyeing constituted an alteration under par. 1615(g) of the Tariff Act of 1930 (the precursor to item 806.20, TSUS, which, in turn, is the precursor of subheading 9802.00.50, HTSUS).

In Royal Bead Novelty Co. Inc. v. United States, C.D. 4353, 68 Cust. Ct. 154, 342 F. Supp. 1394 (1972), glass beads were sent abroad for a coating process which imparted an "Aurora Borealis" finish. Both the coated and uncoated beads were used interchangeably in making costume jewelry, however, this "rainbow" finish was currently in fashion while there was a lack of demand for the uncoated beads. The coated beads sold for a price approximately 20 percent higher than the uncoated version.

In relying on the rationale in Amity Fabrics, the court stated as follows:

"...the identity of the articles in question was not lost or destroyed in the coating process and no new articles were created; beads came out and beads came back. Moreover, there was no change in the size, shape, or manner of use in making articles of jewelry. The sole change was in the finish in that the imported beads now possessed a rainbow-like luster. This did not change their quality, texture, or character."

Accordingly, the court held that the processing abroad constituted an alteration under Item 806.20, TSUS.

Applying the court's reasoning in Royal Bead, we find in the instant case that the processing in Mexico constitutes an alteration within the meaning of subheading 9802.00.50, HTSUS. Initially, we note that the use of the shutters, to provide privacy, light and ventillation, is unchanged whether the articles are painted, or remain unfinished. Thus, the articles are complete for their intended use when exported to Mexico. As in Royal Bead, the processing abroad results only in a change in appearance of the shutters, but not in function, character, or identity. What is sent abroad are wood interior window shutters, marketable in the condition as exported, and what is returned are the same articles, available to the same class of customers, albeit enhanced in appearance, and priced accordingly. It is noted that, both in Amity and in Royal Bead, the court relied upon the fact, as in this case, that the exported article was also sold in its condition as exported.

As a result of our determination, the wooden furniture parts in HRL 555093 which are exported for staining, lacquering, and packaging, and are also sold in an unfinished condition, are considered completed articles of commerce at the time of exportation. Accordingly, we now find that the stained and lacquered furniture parts are entitled to the partial duty exemption under subheading 9802.00.50, HTSUS upon importation. HRL 555093 is modified accordingly.


Interior wood shutters sent to Mexico for staining or painting and also sold in an "unfinished" condition are eligible for the partial duty exemption under subheading 9802.00.50, HTSUS, upon return to the U.S. This assumes compliance with the documentation requirements of section 10.8, Customs Regulations (19 CFR 10.8). HRL 555093, dated April 26, 1989, is modified to the extent that it disallowed Item 806.20, TSUS (precursor of subheading 9802.00.50, HTSUS) treatment to wooden furniture parts also sold in an "unfinished" condition and sent abroad for staining and lacquering.


John Durant, Director
Commercial Rulings Division

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