CLA-2 CO:R:C:S 558746 DEC
TARIFF NO: 9801.00.25
Mr. Patrick Barrett
Arizona Customs Brokers
2602 South Twenty-fourth Street - Suite 101
Phoenix, Arizona 85034
RE: Alarm and security equipment; Sample or specification;
Dear Mr. Barrett:
This is in response to your letter dated August 15, 1994, on behalf of Quorum
International, in which you seek a determination of the eligibility of alarm and security
equipment for duty-free treatment pursuant to subheading 9801.00.25, Harmonized
Tariff Schedule of the United States (HTSUS).
FACTS:
Quorum International imports alarm and security equipment from various
countries including China, Great Britain, Malaysia, Taiwan, and Canada. This
merchandise is held at a United States distribution point for order processing to various
branch offices of Quorum International. A large amount of equipment is shipped to
Canada where it is distributed to salesmen through Quorum International's branch
offices. Equipment that arrives in an inoperable state due to jarring and mishandling in
transit is returned to Quorum International in the United States for repair, exchange or
refund.
ISSUE:
Whether alarm and security equipment rendered defective due to mishandling
while in transit from the United States to Canada may be reimported duty-free into the
United States for repair, exchange, or refund under subheading 9801.00.25, HTSUS.
LAW AND ANALYSIS:
Dutiable merchandise imported and afterwards exported, even though duty
thereon may have been paid on the first importation, is liable to duty on every
subsequent importation into the Customs territory of the United States, unless exempt
by law. Section 141.2, Customs Regulations (19 CFR 141.2).
One such exemption is set out in subheading 9801.00.25, HTSUS, which
provides for the duty-free entry of:
[a]rticles, previously imported, with respect to which the duty was
paid upon such previous importation if (1) exported within three years
after the date of such previous importation, (2) reimported without having
been advanced in value or improved in condition by any process of
manufacture or other means while abroad, (3) reimported for the reason
that such articles do not conform to sample or specification, and (4)
reimported by or for the account of the person who imported them into,
and exported them from the United States.
Articles satisfying each of the above requirements are entitled to duty-free treatment,
assuming compliance with the documentary requirements of section 10.8a, Customs
Regulations (19 CFR 10.8a). This regulation contains the same criteria found in
subheading 9801.00.25, HTSUS. The documents required are declarations by the
person abroad who received and is returning the merchandise and by the owner or
importer (or consignee or agent). Each declaration must include a description of the
articles, and the latter declaration must set forth information relative to the original
importation of the merchandise, such as port and date of importation, entry number,
and name and address of the importer at the time the duty was paid. (19 CFR
10.8a(b)).
Assuming that Quorum International presents Customs with the documents
required pursuant to section 10.8a, Customs agrees that the first, second, and fourth
criteria of subheading 9801.00.25, HTSUS, will be satisfied. However, in order for
Quorum International to qualify for duty-free treatment under subheading 9801.00.25,
HTSUS, there must be some tangible evidence that the returned merchandise does not
conform to "specification." The scope of that term, however, is not limited to physical
specifications or sample comparison. Evidence of failure to meet specification can be
evidenced by the written contract, or if oral, by the declarations required under 19 CFR
10.8a(b).
In this case, the alarm and security equipment is returned to the United States
because it is defective due to mishandling while in transit. Accordingly, we find that
merchandise which is delivered in a defective condition and which is rejected for that
reason by the person to whom it is shipped qualifies as merchandise which fails "to
conform to sample or specification" for purposes of subheading 9801.00.25, HTSUS.
That subheading was intended for situations in which merchandise was exported and
rejected because it was not satisfactory to the person to whom it was shipped. Such
intention is evidenced by a report of the Senate Finance Committee dated December
16, 1970 (S. Report No. 91-1467, 91st Sess, 2nd Sess. (1970) reprinted in U.S. CODE
CONG. & AD. NEWS 5717, which provides, in part, that:
The committee was informed that in at least one instance a shipment
of articles was imported and the normal duty was paid. Thereafter
the articles were sold and exported to a customer in a foreign country,
who subsequently rejected them for the reason that they did not
conform to specification. Upon return to the United States, the articles
were again subject to duty under U.S. tariff law. The committee is of
the opinion that the laws should be changed, as proposed in H.R. 9138,
to prevent a recurrence of double liability for duty in imported article
under similar circumstances.
We note that only failure to conform to a sample or specification merits duty-free
treatment under subheading 9801.00.25, HTSUS. Failure to merely meet a specific
product's expectation is not a justifiable basis for entry under this tariff provision. HRL
553027, dated July 19, 1984.
HOLDING:
Alarm and security equipment rendered defective or inoperable due to
mishandling while in transit from the United States to Canada, and rejected for that
reason by the person to whom the equipment is shipped, may be reimported duty-free
into the United States under subheading 9801.00.25, HTSUS, upon compliance with
the documentary requirements of 19 CFR 10.8a.
A copy of this ruling letter should be attached to the entry documents filed at the
time this merchandise is entered. If the documents have been filed without a copy, this
ruling should be brought to the attention of the Customs officer.
Sincerely,
John Durant
Director, Commercial Rulings Division