CLA-2 CO:R:C:S 557661 CW
District Director
555 Battery Street
San Francisco, CA. 94111
RE: Internal Advice Request No. 46/93; Eligibility of returned,
repaired telephone products for a partial duty exemption
Dear Sir:
This is in reference to your memorandum of May 6, 1993,
forwarding a Request for Internal Advice initiated by AT&T,
concerning the acceptability of an accounting method to trace
repaired goods which are entered under subheadings 9802.00.40 and
9802.00.50, Harmonized Tariff Schedule of the United States
(HTSUS). This office received the Internal Advice Request from the
National Import Specialist Machinery Branch, New York Seaport, on
October 27, 1993.
FACTS:
The Consumer Products division of AT&T exports defective
corded and cordless telephones, telephones with integrated systems
and telephone answering systems to repair facilities in Hong Kong,
Singapore, Malaysia, Thailand and Mexico. Articles repaired in the
Far East are entered through the ports of San Francisco and Los
Angeles, while articles repaired in Mexico are entered through the
ports of Laredo, El Paso and, recently, Harlingen.
When the defective telephone products subject to this Internal
Advice were exported, AT&T filed with Customs Certificates of
Registration on Customs Form (CF) 4455 listing the quantity and
models being exported. AT&T also entered this export shipment
information into a data base at that time. Each of the foreign
repair facilities enters the articles to be repaired into a general
repair inventory. When repaired articles are returned to the U.S.,
AT&T reconciles the imported quantity against the exported quantity
(as reflected on the CF 4455) by using a first-in-first-out (FIFO)
inventory method. In other words, the first articles received at
the repair facilities and placed into inventory, as identified in
the data base, are presumed to be the first to be taken out of
inventory, repaired, and returned to the U.S.
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According to AT&T, newly manufactured or remanufactured
telephone products are not substituted for articles which were
exported for repairs and, in fact, new articles are not imported in
the same shipments as repaired articles. AT&T states that in
"...most instances, substitution of new articles is impossible
because there exists no source of new articles near to the repair
facility."
A certain portion of the exported articles are found to be
non-repairable and are junked. The number of junked articles is
recorded by the repair facilities and they are eventually removed
from AT&T's accounting records. Thus, according to AT&T, all of
the articles listed on the CF 4455s are accounted for.
AT&T maintains that:
[a] direct link from a repaired article to the exact export
shipment from which it originated is not necessary to ensure
that the article is eligible for classification under the
repair provisions. A FIFO method of tracing repaired articles
to exports meets the statutory requirements, and review of the
regulations, cases and rulings indicates such method would be
acceptable. The export documentation maintained by AT&T and
the certification from the repair facility evidence that every
article imported under the repair program had been exported
from the U.S. We do not believe that an article exported for
repair must be tied-back to the CF 4455 under which its export
was registered in order to entitle the repaired article to
treatment under HTSUS 9802.00.40 or .50. Identification of
the exact export shipment from which the repaired article
originated is not necessary to enforce the law, and should not
be required.
You state in your memorandum of May 6, 1993, that the
documentation requirements set forth in section 10.8, Customs
Regulations (19 CFR 10.8), for goods entered under subheadings
9802.00.40 and .50, HTSUS (both before and after those requirements
were modified by T.D. 94-47), provide Customs with a means to trace
repaired articles back to when those specific articles were
exported. You indicate that the use of a FIFO system does not
reconcile the CF 4455s in accordance with 19 CFR 10.8 and,
therefore, the repaired articles are not entitled to tariff
treatment under subheading 9802.00.40 or .50, HTSUS.
ISSUE:
Whether, under the circumstances described above, the
returned, repaired telephone products are entitled to tariff
treatment under subheading 9802.00.40 or .50, HTSUS.
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LAW AND ANALYSIS:
Subheading 9802.00.40, provides a partial duty exemption for
articles returned to the U.S. after having been exported to be
advanced in value or improved in condition by repairs or
alterations made pursuant to warranty. Subheading 9802.00.50,
HTSUS, provides the same partial duty exemption for articles
exported for repairs or alterations made other than pursuant to
warranty. Such articles are dutiable only upon the cost or value
of the foreign repairs or alterations, provided the documentary
requirements of section 10.8, Customs Regulations (19 CFR 10.8),
are satisfied.
Prior to the modification of the documentation requirements
set forth in 19 CFR 10.8 effected by T.D. 94-47, this provision
required the filing of a Certificate of Registration, CF 4455, with
the district director before exportation of the articles to be
repaired. The Certificate includes the quantity and description of
the articles being exported and the dates when, and ports where,
the articles were examined by Customs and laden aboard the
exporting carrier. The form also includes a statement to be signed
by the importer when the articles are returned that "[d]uty-free
entry is claimed for the described articles...." The regulation
also requires the importer to file with Customs a declaration of
the person who performed the repair or alteration, stating "in
substantially the following form" that the:
"...articles herein specified are the articles which, in the
condition in which they were exported from the United States,
were received by me (us) on ________, 19__, from ____________
(Name and address of owner or exporter in the United
States)...."
This declaration also includes the "marks and numbers" relating to
the articles as well as a description of the articles. In
addition, 19 CFR 10.8 requires the filing of a declaration of the
owner, importer, consignee, or agent that "the articles entered in
their repaired or altered condition are the same articles covered
by the Certificate of Registration."
The above documentation requirements (which existed at the
time the articles subject to this request were imported) establish
that articles that are returned to the U.S. and entered under
subheading 9802.00.40 or 9802.00.50, HTSUS, must be traced back to
the export shipment and Certificate of Registration encompassing
those specific imported articles. These requirements are designed
to prevent, to the extent possible, the substitution of new or
remanufactured articles for the articles that were exported from
the U.S. for repairs or alterations. The use of a FIFO inventory
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method to "reconcile" CF 4455s does not satisfy the importer's
responsibility, under the above documentation requirements, to
to establish that the "articles entered in their repaired or
altered condition are the same articles covered by the Certificate
of Registration." (Emphasis added).
However, 19 CFR 10.8(j) provides that:
If the district director concerned is satisfied because of the
nature of the articles, or production of other evidence, that
the articles are imported under circumstances meeting the
requirements of subheading 9802.00.40 [or 9802.00.50], HTSUS,
and related section and additional U.S. notes, he may waive
the declaration [of the person who performed the repair or
alteration and the declaration of the owner, importer,
consignee or agent].
In a telephone conversation with your office, we were advised
that there was no indication or suspicion, in regard to the
merchandise subject to this Internal Advice Request, that newly
manufactured or remanufactured telephone products were substituted
for the articles exported for repairs. The information available
to us indicates that, at least during the period encompassed by
this request, the foreign facilities in which the articles were
repaired were not also producing new or remanufactured products.
Thus, the potential for substitution of articles not entitled to
subheading 9802.00.40 or 9802.00.50, HTSUS, treatment appears to
have been minimal. Under these circumstances, we are satisfied
that the articles subject to this request were exported for repairs
and that they otherwise meet the conditions and requirements of
subheading 9802.00.40 or 9802.00.50, HTSUS. Therefore, the
requirement, pursuant to the declarations provided for in 19 CFR
10.8, of tracing the imported articles back to the date and place
of export is waived in this case.
HOLDING:
Based on the information provided, we are satisfied that the
articles subject to this request were exported for repairs and
imported under circumstances meeting the conditions and
requirements of subheading 9802.00.40 or 9802.00.50, HTSUS.
Therefore, they are entitled to the partial duty exemption under
those provisions. This decision is specifically limited to the
entries subject to this request.
This decision should be mailed by your office to the internal
advice requester no later than 60 days from the date of this
letter. On that date, the Office of Regulations and Rulings will
take steps to make the decision available to Customs personnel via
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the Customs Rulings Module in ACS and the public via the Diskette
Subscription Service, Freedom of Information Act and other public
access channels.
Sincerely,
John Durant, Director
Commercial Rulings Division