HQ 556496: Applicability of duty exemption under HTSUS subheading 9802.00.50 to nylon sports-bags exported to Mexico for stuffing and packaging; GRI 5(b); Alteration; 19 CFR 10.8; 19 CFR 141.2

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 556496

                          April 9, 1992

CLA-2 CO:R:C:S 556496 RAH

CATEGORY:  Classification

TARIFF NO.: 9802.00.50  

Ms. Renee I. Abend
Import Manager
Davies, Turner & Company
90 Washington Street
New York, New York  10006

RE:  Applicability of duty exemption under HTSUS subheading
     9802.00.50 to nylon sports-bags exported to Mexico for
     stuffing and packaging; GRI 5(b); Alteration; 19 CFR 10.8;
     19 CFR 141.2

Dear Ms. Abend:

     This is in response to your letter of January 17, 1992,
regarding the importation of nylon sports-bags from Mexico.

FACTS:

     Full containers of flat packed nylon sports-bags from
Thailand will be imported into the United States under subheading
4202.92.3030, Harmonized Tariff Schedule of the United States
(HTSUS).  You inquire whether, after clearing Customs, the bags
can be shipped to Mexico to be stuffed and repackaged and then
reimported into the United States for distribution.  The packing
materials in question are of Mexican origin.  

     The importer would like to register the goods upon
exportation to Mexico and reimport them under the same
registration [a procedure under section 10.8, Customs Regulations
(19 CFR 10.8) whereby a Certificate of Registration is filed
before exporting articles which are subject on return to the
United States to duty on the value of the repairs or alterations
under subheading 9802.00.50, Harmonized Tariff Schedule of the
United States (HTSUS)].  
                            - 2 -  

ISSUE:

     Whether nylon sports-bags sent to Mexico to be stuffed and
packaged are entitled to a partial duty exemption under sub-
heading 9802.00.50, HTSUS, when returned to the United States.

LAW AND ANALYSIS:
     
     Subheading 9802.00.50, HTSUS, provides a partial duty
exemption for articles returned to the United States after having
been exported to be advanced 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, entitlement to this tariff treatment 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); Guardian Industries Corp. v. United
States, 3 CIT 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; 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, 82, 599 F.2d 1015, 119 (1979).

     We have held that foreign repacking of merchandise for
retail sale will not, in and of itself, preclude tariff treatment
under subheading 9802.00.50, HTSUS.  Headquarters Ruling Letter
(HRL) 555180 dated December 26, 1989.  However, to qualify for a
partial duty exemption under that subheading, the article itself
must be advanced in value or improved in condition.  In that
regard, we have held that the mere repacking of an article does
not advance its value or improve its condition.  See, HRL 555806
dated January 14, 1991 (thin gauge plastic bags used as an
alternative to paper stuffing often used in imported sport and
handbags, are not advanced in value or improved in condition
abroad as a result of the packing operation).  
 
     Under the facts presented, the bags are exported to Mexico
solely for stuffing and packaging.  We find that the stuffing and
repacking of the nylon sports-bags in Mexico does not constitute
an alteration because the bags themselves are not advanced in
value or improved in condition as a result of that process.  
Accordingly, we conclude that the bags are dutiable under
subheading 4202.92.3030, HTSUS, when returned to the United
States.  The applicable duty rate is 20 percent ad valorem.  







                             - 3 -  

     With respect to the dutiability of the packing materials,
General Rule of Interpretation 5(b), HTSUS, provides that:

     [p]acking materials and packing containers entered with
     the goods therein shall be classified with the goods if
     they are of a kind normally used for packing such
     goods.  However, this provision does not apply when
     such packing materials or packing containers are
     clearly suitable for repetitive use.

Therefore, the value of non-reusable packing materials or 
containers normally used for packing such goods is considered a
part of the value of its contents and is dutiable at the rate of
its contents.  Since the packaging materials in the instant case
are of Mexican origin, they will be dutiable at the same rate as
the bags.  

HOLDING:             

     Nylon sports-bags exported to Mexico solely for stuffing and
packaging are not advanced in value or improved in condition
abroad and, therefore, they are not entitled to the partial duty
exemption under subheading 9802.00.50, HTSUS, when returned to
the United States.  Accordingly, the packaged bags are dutiable
on their full value under subheading 4202.92.3030, HTSUS, at the
rate of 20 percent ad valorem.  The Mexican packing materials are
dutiable at the same rate as the bags. 

                                   Sincerely,



                                   John Durant, Director
                                   Commercial Rulings Division