HQ 556773: Applicability of subheading 9802.00.50, HTSUS, to medical instruments exported to Mexico for packaging and sterilization

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 556773

                         January 7, 1993

CLA-2 CO:R:C:S 556773 RAH

CATEGORY:  Classification

TARIFF NO.:  9802.00.50

Mr. Rudy A. Pina
R.A. Pina & Associates, Inc.
P.O. Box 2496
Nogales, Arizona  85628

RE:  Applicability of subheading 9802.00.50, HTSUS, to medical
     instruments exported to Mexico for packaging and
     sterilization

Dear Mr. Pina:

     This is in response to your letter dated June 11, 1992,
requesting a ruling on whether certain medical instruments
exported to Mexico for packaging and sterilization are entitled
to a partial duty exemption under subheading 9802.00.50,
Harmonized Tariff Schedule of the United States (HTSUS).

FACTS:

     You state that your company is considering establishing a
maquiladora operation in Mexico.  You will send your Mexican
subsidiary medical instruments for packaging, after which the
instruments will be sterilized using ethylene oxide gas ("ETO"). 
The articles will then be returned to the United States for
distribution.

     Additional information was obtained from you on December 15,
1992, during a telephone conversation with a member of my staff. 
All the articles in question are manufactured in the United
States, after which they are warehoused until they are exported
to Mexico for sterilization.  The articles to be sterilized are
in an "EZ Prep Kit" containing cotton swabs, bandaids, gauge,
etc.

ISSUE:

     Whether medical instruments exported to Mexico for packaging
and sterilization are entitled to a partial duty exemption under
subheading 9802.00.50, HTSUS, upon return 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 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, 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).

     Effective November 9, 1992, Customs modified its position
regarding sterilization of surgical items under subheading
9802.00.50, HTSUS, to reflect that such articles, unsterilized,
are entirely unsuitable for their intended use in the United
States and are therefore not entitled to a partial duty exemption
under subheading 9802.00.50, HTSUS.  See, C.S.D. 92-35, Customs
Bulletin and Decisions Vol 26, No. 42 (October 14, 1992).   

     In the instant case, we find that the medical instruments
exported to Mexico for sterilization and returned to the United
States are not entitled to a partial duty exemption under
subheading 9802.00.50, HTSUS.  It is our opinion that exported,
unsterilized medical instruments are not completed articles when
exported because they are entirely unsuitable for their intended
use in the United States without the sterilization.  

     Additionally, it logically follows that an article must be
completed before it is repaired or altered under subheading
9802.00.50, HTSUS.  That is, the initial manufacturing process
must be completed.  In your case, the sterilization is part of
the initial preparation of the article for its intended use.  It
is an intermediate processing operations performed, as a matter
of course, in the production of the finished articles, i.e.
sterilized medical instruments. 
 

HOLDING:

     Medical instruments exported to Mexico for packaging and  
sterilization are not entitled to a partial duty exemption under
subheading 9802.00.50, HTSUS, when returned to the United States
because they are not completed articles when exported to Mexico. 


                                   Sincerely,



                                   John Durant, Director
                                   Commercial Rulings Division