HQ 555527: Applicability of duty exemption in HTSUS subheading 9802.00.80 or subheading 9801.00.10 to corrugated containers imported from Mexico

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 555527

                         March 19, 1990

CLA-2 CO:R:C:V  555527 KAC

CATEGORY:  CLASSIFICATION

TARIFF NO.: 9802.00.80 - 9801.00.10

Mr. K.W. Schaake
Gaylord Container Corporation
P.O. Box 2018
3323 E. Commerce
San Antonio, Texas  78297

RE:  Applicability of duty exemption in HTSUS subheading
     9802.00.80 or subheading 9801.00.10 to corrugated containers
     imported from Mexico

Dear Mr. Schaake:

     This is in response to your letter of November 2, 1989,
requesting a ruling on the applicability of subheading
9802.00.80, Harmonized Tariff Schedule of the United States
(HTSUS), to corrugated containers imported from Mexico.  Samples
and Gaylord's Fibre Box Handbook were submitted for examination.

FACTS:

     Your company will send U.S.-manufactured flat corrugated
sheets worth $5,000.00 per truckload to a plant in Nuevo Laredo,
Mexico.  In Mexico, the flat sheets will be scored, slotted, and
if required, a manufacturer's joint will be formed, after which
the sheets will be printed.  The flat corrugated container is
then formed into its three dimensional shape by gluing, taping or
stitching the edges of the container together.  At this time, the
origin of the glue, tape and stitch is unknown.  The finished
containers, now worth $7,500.00 per truckload, are then sold to
customers in Mexico where they are packed with goods and
returned to the U.S.  For purposes of this ruling, we are
assuming that the containers are packed with foreign goods.

ISSUE:

     Whether the foreign operations constitute an "assembly,"
thereby entitling the corrugated containers to the duty
exemption under HTSUS subheading 9802.00.80 or subheading
9801.00.10 when returned to the U.S.





LAW AND ANALYSIS:

     With respect to containers, General Rule of Interpretation
5(b), HTSUS, provides that "packing 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 a non-reusable
container 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.  However, we have held that upon submission of
satisfactory proof that a container is of U.S. origin and that it
is returned without having been advanced in value or improved in
condition while abroad, it is entitled to duty-free treatment
under subheading 9801.00.10, HTSUS.  The act of being filled with
its contents is not considered to constitute such an advancement
or improvement.  See, Headquarters Ruling Letter 731806 dated
November 18, 1988.

     Thus, HTSUS subheading 9802.00.80 which provides a partial
duty exemption for:

     [a]rticles assembled abroad in whole or in part of a
     fabricated components, the product of the United States,
     which (a) were exported in condition ready for assembly
     without further fabrication, (b) have not lost their
     physical identity in such articles by change in form, shape
     or otherwise, and (c) have not been advanced in value or
     improved in condition abroad except by being assembled and
     except by operations incidental to the assembly process such
     as cleaning, lubrication, and painting....

does not apply to this case.  See, Van Camp Sea Food Co, v.
United States, 73 Cust.Ct. 35, C.D. 4551 (1974), which held that
item 807.00, Tariff Schedules of the United States (TSUS) (now
known as subheading 9802.00.80, HTSUS), does not apply to the
importation of ordinary non-reusable containers of American
origin.

     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.  While some change in
the condition of the product while it is abroad is permissible,
operations which either advance the value or improve the
condition of the exported product render it ineligible for duty
free entry upon return to the U.S.  See, Border Brokerage Company
Inc. v. United States, 65 Cust.Ct. 50, C.D. 4052, 314 F.Supp. 788
(1970), appeal dismissed, 58 CCPA 165 (1970).

     In the instant case, we believe that the foreign operations
performed in Mexico advance in value and improve the condition
the exported product.  Flat corrugated sheets worth $5,000.00 per
truckload are sent to Mexico for various foreign operations,
including scoring, slotting, printing, cutting, gluing,
stitching, and taping.  Thereafter, completed corrugated
containers worth $7,500.00 per truckload are returned to the U.S.
containing goods.   Thus, there is an economic advancement in
value of $2,500.00 and a physical improvement in condition as
flat sheets are formed into square containers.

HOLDING:

     On the basis of the information and samples submitted, the
corrugated containers are not eligible for duty exemption under
HTSUS subheading 9802.00.80 because the subheading does not
apply to the importation of ordinary non-reusable containers of
American origin.  The U.S. flat corrugated sheets will also not
qualify for the duty exemption under HTSUS subheading 9801.00.10
upon their return to the U.S., because they will be advanced in
value and improved in condition as a result of the foreign
operations.  Therefore, the cost of the value of the corrugated
container will be dutiable as part of the value of its foreign
contents.

                              Sincerely,



                              John Durant, Director
                              Commercial Rulings Division

cc:  Asst. Area Dir., NIS
     846878