OT:RR:CTF:VS H335651 AM
Heather Laverty
Trust Air Cargo
2206 Lively Blvd.
Elk Grove Village, IL 60007
RE: Subheading 9802.00.50, HTSUS, Wooden Flooring
Dear Ms. Laverty:
This is in response to your inquiry, dated October 13, 2023, requesting a binding ruling on behalf of your client, Artisan Wood Industry, Inc. (“Artisan Wood Industry”), with respect to the eligibility of wood flooring panels under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (“HTSUS”). Your request, submitted as an electronic ruling request, was forwarded to this office from the National Commodity Specialist Division for review.
FACTS:
You state that Artisan Wood Industry purchases wooden flooring from China that is made from U.S. origin material. In your request, you presented two scenarios whereby wood of U.S. origin will be exported to China for processing. The two scenarios are described in detail below.
Scenario #1
Trees are harvested in the United States.
The trees are trimmed and formed into long logs.
These logs are shipped to China for processing.
Once the logs arrive in China, they are taken to a sawmill and cut into planks of lumber for the flooring.
The lumber planks are then dried and milled to specifications in China.
The flooring is graded and finishing processes are applied in China (such as protective coatings, stains, etc.).
The flooring is then shipped to the United States where it is imported in its finished form as flooring.
Scenario #2
Trees are harvested in the United States.
The trees are trimmed and formed into long logs.
These logs are taken to a sawmill and cut into planks of lumber for flooring.
These planks are dried and graded.
The planks are then shipped to China for further processing.
Once the planks arrive in China, they undergo a milling process to be shaped into the specific dimensions required for the wood flooring.
The cargo is finished in China (with protective coatings, stains, etc.), packaged, and shipped to the United States to be imported in its finished form.
ISSUE:
Whether subheading 9802.00.50, HTSUS, will be applicable to U.S.-origin wood when imported into the United States from China.
LAW & ANALYSIS:
Subheading 9802.00.50, HTSUS, provides a full or 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. Duty is assessed only on the cost or value of the repair or alteration abroad, provided that the documentary requirements of 19 C.F.R. § 10.8 are met. Eligibility under subheading 9802.00.50, HTSUS, is precluded where: (1) the exported articles are not complete for their intended use and the foreign processing operation is a necessary step in the preparation or manufacture of finished articles; or (2) the operations performed abroad destroy the identity of the exported articles or create new or commercially different articles through a process of manufacture. See, e.g., Guardian Indus. Corp. v. United States, 3 Ct. Int'l Trade 9 (1982), and Dolliff & Co., Inc., v. United States, 81 Cust. Ct. 1, C.D. 4755, 455 F. Supp. 618 (1978), aff’d, 66 C.C.P.A. 77, C.A.D. 1225, 599 F.2d 1015 (1979).
In Guardian Industries v. United States, 3 CIT 9 (1982), the Court of International Trade stated that, in construing “the tariff provision for repairs and alterations performed abroad, the focus is upon whether the exported article is ‘incomplete’ or ‘unsuitable for its intended use’ prior to the foreign processing.” At issue in Guardian Industries was whether subjecting U.S.-produced annealed glass to a tempering process in Canada to create glass for sliding glass patio doors qualified as an “alteration” under item 806.20, Tariff Schedules of the United States (the precursor provision to subheading 9802.00.50, HTSUS). The court noted that glass must be tempered (i.e., strengthened) for practical safety use reasons and to conform to U.S. federal regulations before it may be marketed for use in sliding glass patio doors. In concluding that the tempering process was not an “alteration,” the court stated that “the exported articles of raw annealed glass were not ‘completed articles’ since they were entirely unsuitable for their intended use” as sliding glass patio doors and required a manufacturing process to make them complete. The court further concluded that, because the tempering of the annealed glass transformed the glass in name, use, performance characteristics and tariff classification, the operation created a new and different commercial article.
Similarly, in 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, 599 F.2d 1015 (1979), the issue presented was whether certain U.S.-origin Dacron polyester fabrics which were exported to Canada as griege goods for heat-setting, chemical-scouring, dyeing, and treating with chemicals, were eligible for the partial duty exemption available under item 806.20, TSUS, when returned to the United States. The U.S. Court of Customs and Patent Appeals found that the processing steps performed on the exported greige goods were undertaken to produce finished fabric and could not be considered as alterations. The court stated (66 CCPA at 82) that:
. . . repairs and alterations are made to completed articles and do not include intermediate processing operations, which are performed as a matter of course in the preparation or manufacture of finished articles. In the instant situation, the operations performed in Canada comprise further processing steps which are performed on unfinished goods and which lead to completed articles, i.e., the finished fabrics, and, therefore, the processing cannot be considered alterations.
On the basis of the information submitted, we find that under both scenarios, the U.S.-origin wood (logs or boards) exported to China are incomplete for their intended use as flooring. The processing which includes cutting into planks, milling into specification, grading, and finishing under the first scenario and milling to shape into specific dimensions and finishing under the second scenario exceeds an “alteration,” within the meaning of subheading 9802.00.50, HTSUS. The above-described processes constitute a series of finishing operations which are necessary to the manufacture of the finished flooring. Accordingly, the returned articles in either scenario do not qualify for subheading 9802.00.50, HTSUS, treatment.
HOLDING:
Based upon the information submitted, the wooden flooring, as described in both scenarios, will be eligible for preferential tariff treatment under subheading 9802.00.50, HTSUS, when imported into the United States.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a CBP field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy of this ruling, it should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Elif Eroglu, Acting Branch Chief
Valuation and Special Programs Branch