CON-3-01 CO:R:C:E 222863 TLS
Mr. Michael J. Spain
Sonnenberg, Anderson, O'Donnell & Rodriguez
200 West Adams Street Suite 2625
Chicago, Illinois 60606
RE: Reimportation of merchandise under heading 9801 of the
Harmonized Tariff Schedule of the United States Annotated
Dear Mr. Spain:
Your letter of October 3, 1990, requesting a binding ruling
on the above-referenced matter has been forwarded to this office
for consideration. We have considered the points raised in your
submission and our decision follows.
FACTS:
You state that your client, Imperial World, Inc., is
currently importing precious jewelry samples under heading 7113
of the Harmonized Tariff Schedule of the United States Annotated
(HTSUSA). Included in these samples are gold rings, bracelets,
necklaces, and pendants. Some of the articles are gem-set with
precious or semiprecious stones, such as diamonds, sapphires,
rubies, emeralds, topaz, and amethyst, among others.
Some of these articles are occasionally sent back to the
factory where they were made so that they may be exhibited to
customers visiting the manufacturing plant. You state that the
merchandise sent back is used only for exhibition purposes; no
further processing or manufacturing is done to these articles.
You also state that Imperial World (hereafter, "Imperial" or
"importer"), does this because it finds establishing inventories
at both the manufacturing plant and in the United States to be
too expensive.
After the merchandise has been exhibited at the
manufacturing plant, Imperial reimports it back into U.S. Customs
territory. The importer wishes to have the reimported
merchandise classified under HTSUSA subheading 9801.00.20, which
would entitle it to duty-free status. Imperial imports and
reimports most of its jewelry through the port of Chicago and
would like to have this ruling apply to prospective entries.
ISSUE:
Whether the articles as reimported into Customs territory
after being exhibited abroad are entitled to duty free treatment
under HTSUSA heading 9801.
LAW AND ANALYSIS:
Under HTSUSA, the following is provided for:
9801.00.20 Articles, previously imported, with
respect to which duty was paid upon
such previous importation or which
were previously free of duty
pursuant to the Caribbean Basin
Economic Recovery Act or Title V of
the Trade Act of 1974, if (1)
reimported, without having been
advanced in value or improved in
condition by any process of
manufacture or other means while
abroad, after having been exported
under lease or similar use
agreements, and (2) reimported by
or for the account of the person
who imported it into, and exported
it from, the United States.....Free
(emphasis added.)
The predecessor of 9801.00.20 was item 801.00 of the Tariff
Schedules of the United States (TSUS). That particular provision
was amended in 1984 to provide for, inter alia, articles that had
been exported under similar use agreements and leases to entities
other than foreign manufacturers. Trade and Tariff Act of 1984,
Pub. L. No. 98-573, 118, 98 Stat. 4922 (1984). Before the
amendment, duty free treatment applied only to merchandise that
had been exported under lease to foreign manufacturers.
In the present case, the importer makes no mention of a
lease agreement between the manufacturer and itself. Rather,
Imperial claims that it qualifies for the 9801 exemption under
the similar use provision. The particular use in this case would
be the exhibition of the articles at the manufacturing plant.
The importer further states that the manufacturer does not pay
for the use of the samples and that both parties benefit through
customers' orders as a result of the exhibition. Upon
reimportation, Imperial World is also the importer of record in
this instance as well as during the original importing.
While there exists no court case precedent interpreting
"similar use agreement" under 9801, and the legislative history
of the provision does not provide a clear definition, we find
"similar use agreement" to mean an agreement similar to that of a
lease. We believe the provision was added to cover transactions
that do not involve formal lease agreements but are very much
like leases in most respects. In fact, in the legislative
history of the House bill that introduced this particular
amendment, it is stated that "[t]he intent of this legislation is
to extend coverage of [801.00] to the reimportation of goods
which were exported under lease to someone other than a foreign
manufacturer..." H.R. Rep. No. 34, 98th Cong., 2d Sess. 157
(July 25, 1984). Given as much, we must now decide whether the
agreement between Imperial and the manufacturer is similar to a
lease agreement.
Imperial contends that the agreement between it and the
manufacturer constitutes a "bailment" situation and further
states that this is a type of similar use agreement referred to
under 9801. The term "lease" has been defined as follows:
When used with reference to tangible personal property,
[the] word "lease" means a contract by with one owning
such property grants to another the right to possess,
use and enjoy it for specified period of time in
exchange for periodic payment of a stipulated price,
referred to as rent. Black's Law Dictionary 800 (5th
ed. 1979).
A lease may be distinguished from the present transaction by
applying the following definition of "bailment":
A delivery of goods of personal property, by one person
to another, in trust for the execution of a special
object upon or in relation to such goods, beneficial to
either to the bailor or bailee or both, and upon a
contract, express or implied, to perform the trust and
carry out such object, and thereupon either to
redeliver the goods to the bailor or otherwise dispose
of the same in conformity with purpose of the trust.
(emphasis added). Black's Law Dictionary 179 (5th ed.
1979).
Specific kinds of bailment are further defined; a "gratuitous
bailment" best describes the situation in the present case and it
is defined as follows:
Another name for a depositum or naked bailment, which
is made only for the benefit of the bailor and is not a
source of profit to the bailee. Black's Law Dictionary
180 (5th ed. 1979).
The important distinction between the bailment situation the
importer refers to and a formal lease agreement is the absence of
a payment in a bailment arrangement. In this sense, a bailment
is more like a use agreement. Referring back to the legislative
history, we find that the expressed intent of the provision is to
facilitate entry of the articles reimported without having been
enhanced or further processed while abroad. In this sense, the
distinction between those articles leased upon exportation and
those merely subject to a "use" agreement of some kind is
irrelevant to the purpose of the law. It is clear that with the
1984 amendment to 801.00 Congress intended to make the law less
restrictive in meeting its goals. Accordingly, the spirit of the
law indicates that we not concern ourselves with whether or not
the importer leased the merchandise upon exportation. There is
nothing in the law or legislative history, either expressed or
implied, that suggests the application of 9801.00.20 hinged upon
a transaction involving a payment. Therefore, in light of the
importer's adherence to all of the requirements stated under the
relevant law, we find that Imperial's reimportation of the
subject merchandise is eligible for duty free status under
subheading 9801.00.20.
HOLDING:
The reimportation of articles of jewelry is eligible for
duty free status under HTSUSA subheading 9801.00.20, being that
duty had been previously paid on the merchandise, they were not
advanced in value or improved in condition while abroad, and they
were reimported by the party who exported them from the United
States under a similar use agreement.
Sincerely,
John Durant, Director