CLA-2 CO:R:C:V 555135 DBI
Mr. Alfred Roser
Roser Customs Service, Inc.
P.O. Box 48
Brownsville, Texas 78520
RE: Applicability of partial duty exemption of item 806.20,
TSUS, to automobiles exported to Mexico to be disassembled,
repaired and refurbished
Dear Mr. Roser:
This is in response to your letters of June 2 and August
20, 1988, on behalf of Mr. Mervin J. Yetley, concerning the
applicability of item 806.20, Tariff Schedules of the United
States (TSUS), to passenger automobiles exported to Mexico to be
repaired and refurbished and then returned to the U.S.
FACTS:
You state that the process begins with an evaluation in the
U.S. of the repairs to be made to each passenger automobile.
After the necessary replacement parts are obtained for each
automobile, the automobile and the parts will be exported from
the U.S. to Mexico. All automobiles, parts, and supplies (oil,
lubrication, welding rods, etc.) to be exported to Mexico will be
of U.S. origin.
In Mexico, various major components will be removed as
necessary and mechanical components will be disassembled to the
extent required. After disassembly, the need for any additional
required repairs will be noted, at which time arrangements will
be made to purchase any additional parts from the U.S. and export
them to Mexico.
Components, such as the engine and drivetrain as well as
the steering and suspension, will be rebuilt and repaired in
Mexico. Repairs will be made to other components, including the
frame, shell, seats, etc., as needed. Disposable items, such as
oil, brake shoes, tires and filters normally will be replaced.
The frame, bumpers, and other body parts usually will be repaired
by straightening and/or welding. In some cases replacement of
these parts will be required. Items such as seats, headliners,
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carpets and dash items will be repaired when possible, but in
most cases it is expected that these units will be replaced or
will require some replacement parts. Defective windows,
windshields, bulbs, lens covers and mirrors will be replaced.
The automobile will be reassembled and painted and a protective
undercoating may be added. Additional items, such as trim and
decals, will be added as needed. The repaired/refurbished
automobiles will then be returned to the U.S. for sale.
ISSUE:
Whether the described passenger automobiles, when returned
to the U.S., will be eligible for the partial duty exemption in
item 806.20, TSUS (9802.00.40, Harmonized Tariff Schedule of the
United States (HTSUS)).
LAW AND ANALYSIS:
Item 806.20, TSUS, provides for the assessment of duty on
the value of repairs or alterations performed on articles
exported for that purpose. However, the application of this
tariff provision is precluded in circumstances where the
operations performed abroad destroy the identity of the articles
or create new or commercially different articles. See A.F.
Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1957);
Guardian Industries Corporation v. United States, 3 CIT 9, Slip
Op. 82-4 (Jan. 5, 1982). Item 806.20, TSUS, treatment also is
precluded where the exported articles are incomplete for their
intended use and the foreign processing operation is a necessary
step in the preparation or manufacture of finished articles.
Dolliff and Company, Inc. v. United States, 66 CCPA 77, C.A.D.
1225, 599 F.2d 1015 (1979).
We have previously held that certain repairs performed
abroad on U.S.-made automobiles are eligible for item 806.20,
TSUS, treatment. For instance, we held in a ruling dated July
22, 1981 (HQ 542424), that U.S.-made automobiles exported to
Japan for the purpose of converting the engine to incorporate
emission systems were eligible for treatment under item 806.20,
TSUS. The modifications made in Japan to the cylinder heads,
intake and exhaust manifolds, carburetors and other parts were
found not to create a new or commercially different automobile
upon its return to the U.S.
In a ruling dated February 2, 1979 (HQ 058822), we held
that U.S.-made automobiles exported to Mexico for installation of
a replacement body were entitled to item 806.20, TSUS, treatment.
We reasoned that the returned automobiles were the same completed
articles of commerce dedicated to the same use with the described
modifications. The foreign processing of the exported
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automobiles did not produce changes in the performance
characteristics of the exported article that would alter its
subsequent handling and uses over that which earlier prevailed.
In the present case, the described foreign repairs and
refurbishments do not create a new or commercially different
article. The automobiles that are returned are the same articles
as those exported with the described modifications.
The cost or value of replacement parts, irrespective of
origin, used in the repair or refurbishment of the returned
automobiles are to be included in the value of the repairs
performed abroad. Any part included in a returned automobile
which was not a part of the automobile exported for repair is
considered a replacement part.
HOLDING:
On the basis of the information submitted, it is our
opinion that the foreign repairs and refurbishments may be
considered a repair within the meaning of item 806.20, TSUS, and,
therefore, the returned automobiles are entitled to tariff
treatment under item 806.20, TSUS, upon compliance with section
10.8, Customs Regulations (19 CFR 10.8).
Sincerely,
John Durant
Director, Commercial
Rulings Division