CLA-2 R:C:S 559197 MLR
Mr. Eddie Wong
Winford International Trading Corp.
61 Elderberry Road
Syosset, New York 11791
RE: Applicability of partial/duty exemption under HTSUS
subheading 9802.00.50 to electrical appliances; irons;
toaster ovens; repair; recondition; refurbish; Mexico;
China
Dear Mr. Wong:
This is in response to your letter of May 8, 1995,
requesting a ruling regarding the applicability of subheading
9802.00.50, Harmonized Tariff Schedule of the United States
(HTSUS), to electrical appliances.
FACTS:
You state that a U.S. manufacturer of household
electrical appliances such as irons, toaster ovens, etc.
plans to ship defective or damaged appliances to Mexico or
China where they will be repaired, reconditioned, or
refurbished. You state that the parts needed for the repair
will be salvaged from the same appliances. The packing
material will be provided either by the U.S. shipper or by
the party where the service will be performed. The repaired
appliances will then be returned to the U.S.
ISSUE:
Whether appliances repaired, reconditioned, or
refurbished in Mexico or China will be eligible for entry
under subheading 9802.00.50, Harmonized Tariff Schedule of
the United States (HTSUS), when they are returned to the U.S.
LAW AND ANALYSIS:
Articles exported from and returned to the U.S., after
having been advanced in value or improved in condition abroad
by repairs or alterations may qualify for a partial duty
exemption, or a duty exemption if performed in Mexico, under
HTSUS subheading 9802.00.50, provided the foreign operation
does not destroy the identity of the exported articles or
create new or commercially different articles through a
process of manufacture. See A.F. Burstrom v. United States,
44 CCPA 27, C.A.D. 631 (1956), aff'g C.D. 1752, 36 Cust. Ct.
46 (1956); Guardian Industries Corp. v. United States, 3 CIT
9 (1982). Articles entitled to the partial duty exemption
are dutiable only upon the cost or value of the foreign
repairs or alterations when returned to the U.S., provided
the documentary requirements of section 10.8, Customs
Regulations (19 CFR 10.8), are satisfied (copy enclosed). If
the operations are performed in Mexico, articles are entitled
to a duty exemption provided the documentary requirements of
section 181.64 of the North American Free Trade Agreement
(NAFTA), Interim Regulations (19 CFR 181.64) are satisfied
(copy enclosed).
Repairs are operations aimed at restoring articles to
their original condition, but cannot be so extensive as to
destroy the identity of the exported article or to create a
new and different article. Press Wireless, Inc. v. United
States, 6 Cust. Ct. 102, C.D. 438 (1941). In Press Wireless,
radio tubes were sent abroad for repairs which involved the
use of heavier filament than that used in the original
manufacture of the tubes. Also, the markings on the articles
were erased, and new numbers were substituted to facilitate
matching the tubes for use in transmitters. The court held
that the use of improved materials in the restoration was
immaterial, as long as the article was not considered a new
and different article of commerce or its identity was
destroyed.
In Headquarters Ruling Letter (HRL) 555819 dated October
11, 1991, up to 17 parts were replaced in combination
telephone answering machines. Customs stated that the
replacement and/or addition of parts to restore products to
their original condition may constitute repair operations for
purposes of subheading 9802.00.50, HTSUS, if the particular
article does not lose its identity and the replacements
and/or additions are not so extensive as to create a new or
different article. Furthermore, Customs stated that where
the foreign repair operations entail the complete disassembly
of the exported article and numerous component parts of the
article are replaced, the concept of essential identity may
come into play. This concept is employed to insure that the
article imported is the same as the article exported, and
operates by identifying certain component parts of an
exported article as embracing the essential identity of the
particular article exported. Component parts so identified
are to be maintained together throughout the repair operation
as a matched set. It was held in HRL 555819, that under the
circumstances of that case, the foreign operations
constituted "repairs" within the meaning of subheading
9802.00.50, HTSUS.
Therefore, we find that defective or damaged appliances
made with U.S. or foreign parts that are repaired,
reconditioned, or refurbished abroad will be eligible for
entry under subheading 9802.00.50, HTSUS. The parts may be
salvaged from the appliances; however, if there is a complete
disassembly of an appliance, those parts which impart the
essential identity of the appliance may not be replaced in
order to be eligible for subheading 9802.00.50, HTSUS,
treatment. Furthermore, if the operations are performed in
China, the returned appliances will be dutiable only upon the
cost or value of the foreign repairs or alteration, provided
the documentary requirements of 19 CFR 10.8 are satisfied.
If the operations are performed in Mexico, the appliances may
be returned duty-free, provided the documentary requirements
of 19 CFR 181.64, interim Regulations are satisfied. In
addition, the non-reusable packing material (whether of U.S.-
or foreign-origin), used for articles entitled to subheading
9802.00.50, HTSUS, treatment, are not subject to duty.
HOLDING:
On the basis of the information submitted, repaired,
reconditioned, or refurbished electrical appliances will be
eligible for entry under subheading 9802.00.50, HTSUS,
provided that, if complete disassembly is involved, those
parts which impart the essential identity of the appliance
are not replaced. If the operations are performed in China,
the returned appliances will be dutiable only upon the cost
or value of the foreign repairs or alteration, provided the
documentary requirements of 19 CFR 10.8 are satisfied. If
the operations are performed in Mexico, the appliances may be
returned duty-free, provided the documentary requirements 19
CFR 181.64, interim Regulations are satisfied.
A copy of this ruling letter should be attached to the
entry documents filed at the time the goods are entered. If
the documents have been filed without a copy, this ruling
should be brought to the attention of the Customs officer
handling the transaction.
Sincerely,
John Durant, Director
Commercial Rulings Division
Enclosures