CLA-2 CO:R:C:S 556131 DSN
Mr. Jim McNamara
Rudolph Miles & Sons
P.O. Box 2489
Laredo, Texas 78044-2489
RE: Applicability of subheading 9801.00.10, HTSUS, to U.S.
ceramic multi-layered dielectric chip capacitors tested,
labelled and packaged abroad. Packaging; John V. Carr;
C.S.D. 89-27(6); 555577; 554838; 071449; 555183
Dear Mr. McNamara:
This is in response to your letter of June 28, 1991, on
behalf of Kemet Electronics Corporation, requesting a ruling on
the applicability of subheading 9801.00.10, Harmonized Tariff
Schedule of the United States (HTSUS), to U.S.-origin ceramic
multi-layered dielectric chip capacitors imported from Mexico.
Samples were submitted with your request.
Your client intends to export U.S.-manufactured ceramic
multi-layered dielectric chip capacitors, and U.S. and foreign
origin packaging materials to Mexico. You advised a member of my
staff by telephone that the reels used in packaging are of U.S.
origin while the cover tape is of Japanese origin.
In Mexico, the capacitor chips will be tested on an
automatic electric testing machine for electrical parameters.
The test determines capacitance, dissipation factor, dielectric
withstanding voltage, and insulation resistance, which are based
on customers' specifications. Those chips which do not conform
to a customer's order are either scrapped or sold to another
Approximately one-third of those chips which conform to
customers' specifications will be marked with a laser marking
machine. The laser beam labels each chip with a standard
industry code which identifies the capacitance and/or the
manufacturer's identity. The remaining chips will not be marked.
All chips are then either placed onto non-reusable reels or
packaged in non-reusable plastic bags and taped closed. Upon
completion of these operations, the chip capacitors will be
exported to the U.S.
Whether the chip capacitors are eligible for the duty
exemption available under subheading 9801.00.10, HTSUS, when
returned to the U.S.
LAW AND ANALYSIS:
Subheading 9801.00.10, HTSUS, provides for the free entry of
products of the U.S. that have been exported and returned without
having been advanced in value or improved in condition by any
process of manufacture or other means while abroad, provided the
documentary requirements of section 10.1, Customs Regulations (19
CFR 10.1), are met. In United States v. John V. Carr & Sons,
Inc., 69 Cust. Ct. 78, C.D. 4377, 347 F. Supp. 1390 (1972), 61
CCPA 52, C.A.D. 1118, 496 F.2d 1225 (1974), the court stated that
absent some alteration or change in the item itself, the mere
repackaging of the item even for the purpose of resale to the
ultimate consumer, is not sufficient to preclude the merchandise
from being classified under item 800.00, Tariff Schedules of the
United States (TSUS) (the precursor to subheading 9801.00.10,
In the instant case, we believe that the foreign operations
performed in Mexico do not advance in value or improve in
condition the chip capacitors. Prior to export from the U.S.,
the chip capacitors are finished products. We have previously
held that testing/inspecting results in an advancement in value
where the testing is required by law or regulation. See, C.S.D.
89-27(6), Headquarters Ruling Letter (HRL) 554838 of October 31,
1988, which held that electronically testing condoms abroad
advances their value by making an unmarketable product
marketable. However, testing/inspecting merely as part of the
manufacturer's internal quality control is not deemed to advance
in value or improve in condition the product. See, HRL 555577 of
June 19, 1990. We conclude that the testing performed on the
chip capacitors in order to determine whether they comply with
customer specifications is a form of internal quality control
which is necessary to assure that industry and customer standards
have been met.
We have also held that foreign stamping or printing of a
product to identify the manufacturer and describe the product
does not advance its value or improve its condition so as to
preclude entry under item 800.00, TSUS. See, HRL 071449 of
October 17, 1983, which held that surgical drapes stamped in ink
with the name of the company, size, and model number were not
precluded from item 800.00, TSUS, treatment. See, also, HRL
555183 of February 15, 1989 (printing on a dental floss dispenser
the company name and description of the floss type, flavor and
length will not preclude subheading 9801.00.10, HTSUS, treatment
for the dispensers.) Labelling the chip capacitors to identify
the capacitance rating and/or the manufacturer's identity is
similar to stamping or printing such identification markings as
size and model number. Thus, labelling the chip capacitors will
not preclude subheading 9801.00.10, HTSUS, treatment.
With respect to the packaging operations, after testing and
labelling, the chip capacitors are merely placed onto a reel or
packaged in a plastic bag and taped closed which does not advance
in value or improve in condition the product. The packaging
materials of U.S. and Japanese origin are also entitled to duty-
free treatment pursuant to General Rules of Interpretation 5,
On the basis of the information and samples submitted, as
the chip capacitors will not be advanced in value or improved in
condition abroad as a result of the foreign operations, they will
qualify for the duty exemption under subheading 9801.00.10,
HTSUS, upon compliance with the documentary requirements of 19
John Durant, Director
Commercial Rulings Division