CLA-2 CO:R:C:S W557348 BLS
Richard G. Seley Rudolph Miles & Sons Customhouse Brokers
P.O. Box 11057
El Paso, Texas 79983
RE: Applicability of subheading 9801.00.10, HTSUS, to U .S. origin scrap
Dear Mr. Seley:
This is in reference to your letter dated May 5, 1993, on behalf of MFI International, Inc. ("MFI'), requesting a ruling as to whether certain scrap material imported from Mexico qualifies for duty-free treatment under subheading 9801.00.10, Harmonized Tariff Schedule of the United States (HTSUS).
FACTS:
MFI intends to send U .S. origin bolts of 100% woven polyester fabric with a 1/2 inch thick polyethylene backing to their Mexican subsidiary in Juarez, Mexico. In Mexico, the material will be cut to create pads to be used in the assembly of infant car seats. Since MFI's Mexican subsidiary is a maquiladora, you advise that the scrap material generated by the cutting process must, by Mexican law, be exported from Mexico rather than be disposed of in that country since the material did not originate in that country. The composite material by weight is 75% polyester foam and 25% woven polyester fabric.
ISSUE:
Whether the returned scrap material qualifies for duty-free treatment under subheading 9801.00.10, HTSUS.
LAW AND ANALYSIS:
Subheading 9801.00.10, HTSUS, provides for the duty-free entry of products of the U .S. that are 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
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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 Co. v. United States, 65 Cust. Ct. 50, C.D. 4052, 314 F. Supp. 788 (1970), appeal dismissed, 58 CCPA 165
(1970).
In Burgess Battery Co. v. United States, C.D. 866 (1944), appeal dismissed, 32 CCPA 207 (1944), zinc sheets of U .S. origin were sent to Canada to be used in the manufacture of battery cups. Zinc trimmings from the irregular top edges of the cups were returned to the U.S. as scrap. The court pointed out that while the exported articles (zinc strips) had been changed in condition from the time of their exportation to the time of their importation, the processing abroad affecting the imported materials were processes of segregation and elimination, and not manufacturing operations, and did not serve to increase their value or improve their condition. Therefore, the returned scrap qualified for duty-free treatment as American goods returned, under a predecessor statute.
Similarly, in the instant case, the scrap material will result from a process of segregation and elimination, and will neither be increased in value or improved in condition from its original condition upon return to the United States.
HOLDING:
Scrap of U.S. origin materials, whether or not of a composite material, will be entitled to duty-free treatment under subheading 9801.00.10, HTSUS, upon return to the U.S., upon compliance with the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1).
Sincerely,
John Durant, Director Commercial Rulings Division