CLA-2 CO:R:C:V 555640 KAC
Rebekah J. Poston, Esq.
Fine Jacobson Schwartz Nash Block & England
One CenTrust Financial Center
100 Southeast 2nd Street
Miami, Florida 33131-2112
RE: Applicability of partial duty exemption under HTSUS
9802.00.50 to gold jewelry.Alteration;polishing;diamond
cutting;071523;Royal Bead;C.S.D. 89-49(9);C.S.D. 89-9(4)
Dear Ms. Poston:
This is in response to your letter of April 10, 1990, on
behalf of Auracast, Inc., requesting a ruling on the
applicability of subheading 9802.00.50, Harmonized Tariff
Schedule of the United States (HTSUS), to gold jewelry exported
to Mexico for polishing and diamond cutting operations and then
imported into the U.S. Samples of various pieces of gold jewelry
were submitted for examination.
FACTS:
Auracast manufactures gold jewelry in the U.S. using a six
stage manufacturing process. The six stages of the manufacturing
process are alloying, wax preparation, casting, cutting, grinding
and tumbling. Upon completion of the U.S. manufacturing process,
the gold jewelry with a tumbled lustre is complete and ready for
sale. Auracast customers can purchase the jewelry with the
tumbled lustre, or they can order the jewelry with an additional
lustre, such as a polish or diamond cut. The polished and
diamond cut lustre are added to the jewelry in Mexico. The
polishing process employs the use of pastes and a rotating
polishing wheel to produce a high gloss lustre, different in
appearance from the tumbled lustre. The diamond cutting process
involves making many small cuts on the jewelry by using a special
diamond bit tool which moves in a rotating or vibrating fashion.
Both the polishing and diamond cutting processes cause a minor
reduction in the weight of the gold jewelry, and therefore, the
resulting jewelry is sold at a slightly lower unit price than the
tumbled jewelry. After these operations are complete, the
jewelry is imported into the U.S.
ISSUE:
Whether the gold jewelry will be entitled to the partial
duty exemption under HTSUS subheading 9802.00.50 when imported
into the U.S.
LAW AND ANALYSIS:
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 preformed abroad destroy the identity of the articles
or create new or commercially different articles. See, A.F.
Burstrom v. United States, 44 CPU 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 Os. 82-4 (Jan. 5, 1982).
We have previously held in Headquarters Ruling Letter (HRL)
071523 dated December 1, 1983, that polishing drilled pearls
qualifies as an alteration under item 806.20, Tariff Schedules of
the United States (TSUS) (the precursor to HTSUS subheading
9802.00.50). Therefore, the gold jewelry exported to Mexico
solely for polishing will qualify for the duty exemption
available under HTSUS subheading 9802.00.50.
However, we are of the opinion that the diamond cutting
operation exceeds an alteration within the meaning of this tariff
provision. In Royal Bead Novelty Co. v. United States, 68
Cust.Cut. 154, C.D. 4353 (1972), it was held that glass beads
which were exported for the application of a half coating of
"Aurora Borealis" to impart a luster effect were entitled to item
806.20, TSUS, treatment. The Court stated that the application
of the coating did not change the "quality, texture, or
character" of the beads.
In the present case, the quality, texture and character of
the gold jewelry has been changed. The diamond cut imparts a new
and different texture to the jewelry. Upon examination of the
jewelry's texture, it is difficult to distinguish the tumbled
lustre from the polished lustre. However, one can readily
distinguish the diamond cut jewelry, as the change in lustre is
more dramatic than the tumbled and polished lustre. The diamond
cut jewelry's different texture affects the character and quality
of the jewelry. The diamond cut texture enhances the jewelry's
characteristic by giving it a "diamond-like sparkle."
Therefore, the diamond cutting operation results in a
commercially different article, thereby precluding the
application of subheading 9802.00.50, HTSUS, to the diamond cut
jewelry. This conclusion is consistent with a previous ruling
in which we held that etching glass mugs exceeds an alteration,
as the operation creates a commercially different product with
new characteristics and an enhanced appearance. See, C.S.D. 89-
49(9), 23 Cust.Bull. (1989) (HRL 555250 dated March 13,
1989). See also, C.S.D. 89-9(4), 23 Cust.Bull. (1989) (HRL
555105 dated October 31, 1988), which held that pewter figurines
that undergo a diamond cutting operation, which impacts on the
metal and imparts new and different characteristics to the
articles, are deemed to have been "further processed" pursuant to
subheading 9802.00.60, HTSUS.
HOLDING:
On the basis of the information and samples submitted, we
find that the diamond cutting operation exceeds an alteration,
and, therefore, the jewelry subjected to this process is not
entitled to the duty exemption available under HTSUS subheading
9802.00.50. However, the polishing operation performed in Mexico
constitutes an alteration within the meaning of HTSUS subheading
9802.00.50. Therefore, the polished gold jewelry will be
entitled to the partial duty exemption available under this
tariff provision, upon compliance with the documentary
requirements of section 10.8, Customs Regulations (19 CFR 10.8).
Sincerely,
John Durant, Director
Commercial Rulings Division