CLA-2 RR:TC:SM 559720 MLR
Mr. H. Dale Slayton
Delta Machine Products
P.O. Box 648
759 Hurricane Shoals Road
Lawrenceville, GA 30245
RE: Applicability of duty exemption under HTSUS subheading
9801.00.10 to Delta DT-240 Track Mount Cable Plow
Dear Mr. Slayton:
This is in reference to your letter of March 1, 1996,
requesting a ruling regarding the applicability of subheading
9801.00.10, Harmonized Tariff Schedule of the United States
(HTSUS), to a Delta DT-240 track mount cable plow.
Additional information was provided on June 28, 1996.
FACTS:
It is stated that a D6E-PS short tractor is purchased
through Caterpillar, Inc. Peoria, Illinois, from Brazil. The
unit only consists of a frame and track roller assembly, and
it does not contain an engine, transmission, radiator
hydraulics, or a bulldozer blade. Rather, it must be pulled
from the trailer. Upon receipt, the short tractor contains a
"Made in Brazil" metal plate.
At your facility, it is stated that a drive train is
added which consists of a Caterpillar 3306 engine, a
radiator, an oil heat exchanger, an engine pump adapter, five
hydraulic pumps, three motors, a two-speed drop box, a
hydraulic hose, and fittings which are all stated to be
manufactured in the U.S. Additionally, a U.S.-origin
vibratory plow assembly (rear section) is added which
consists of a heavy plate fabrication and machined
components. The cable reel (front section), also of U.S.-origin, consists of tubular steel fabricated components and
is also added at your facility. It is stated that the
addition of this U.S. content adds over 175 percent over the
cost of the D6E-PS short tractor. After these components are
assembled together, the finished article is referred to as a
Delta DT-240 cable plow which is a vibratory plow for plowing
communications cable. In a telephone conversation with a
member of my staff, you stated that the cable plow may be
shipped abroad for lease and, subsequently, returned to the
U.S.
ISSUE:
Whether the Delta DT-240 cable plows will qualify for the
duty exemption available under subheading 9801.00.10, HTSUS,
when returned to the U.S.
LAW AND ANALYSIS:
Subheading 9801.00.10, HTSUS, provides for the free entry
of products of the U.S. that have been exported and returned
without having been advanced in value or improved in
condition by any process of manufacture or other means while
abroad, provided the documentary requirements of section
10.1, Customs Regulations (19 CFR 10.1), are met. While some
change in the condition of the product while it is abroad is
permissible, operations which either advance the value or
improve the condition of the exported product render it
ineligible for duty-free entry upon return to the U.S.
Border Brokerage Company, Inc. v. United States, 314 F. Supp.
788 (1970), appeal dismissed, 58 CCPA 165 (1970).
For an article to be eligible for duty-free entry under
subheading 9801.00.10, HTSUS, it must first be a "product of"
the U.S. Accordingly, the Brazilian D6E-PS short tractor
imported into the U.S. must be substantially transformed into
a new and different article, or have been merged into a new
and different article.
A substantial transformation occurs when, as a result of
manufacturing process, a new and different article emerges,
having a distinct name, character or use, which is different
from that originally possessed by the article or material
before being subjected to the manufacturing process. See
Texas Instruments, Inc. v. United States, 69 C.C.P.A. 142,
681 F.2d 778 (1982).
In Headquarters Ruling Letter 731568 dated July 31, 1989,
Customs considered the country of origin of automobiles
assembled in Malaysia using an engine and transmission from
Japan, plastic parts from Australia, electrical parts from
the United Kingdom, textile and related products from the
U.S., lamps and seatbelts from Korea, and most or all of the
other remaining parts from Malaysia. Noting the
sophistication of modern automobiles, it was held that the
assembly of the components in Malaysia rendered the subject
automobiles products of Malaysia since the manufacturing
process in Malaysia caused the component automobile parts to
lose their separate identities.
In HRL 733266 dated August 15, 190, Customs considered
the country of origin marking of diesel engines which were
manufactured in Brazil and sold in the U.S. for use in the
manufacture of agricultural tractors and electrical
generating sets. It was determined that the foreign engines
were substantially transformed in the U.S. into different
articles of commerce.
In this case, the foreign article imported into the U.S.
is the short tractor which is combined with a U.S. drive
train, vibratory plow assembly, and cable reel. Similar to
HRL 731568, we find that the short tractor is substantially
transformed into a new and different article of commerce in
the U.S. The imported article undergoes a change in name
from a short tractor to a telephone cable plow machine.
Additionally, the short tractor undergoes a change in use
from a unit consisting only of a frame and a track roller,
which could be made into a number of machines, into a
dedicated telephone cable plow by the addition the vibratory
plow assembly and cable reel. The short tractor also
undergoes a change in character in the U.S. since it is
inoperable and receives its identity as a plow machine by the
addition of the U.S. drive train. Accordingly, it is our
opinion that the telephone cable plow machine is a "product
of" the U.S.
It is stated that the telephone cable plow machine may be
exported for lease and, subsequently, returned to the U.S.
The use of the plow machine is not an operation which either
advances the value or improves the condition of the exported
product. Therefore, it will be eligible for duty-free entry
upon return to the U.S. under subheading 9801.00.10, HTSUS.
HOLDING:
On the basis of the information submitted, it is our
opinion that the short tractor imported into the U.S. is
substantially transformed into a dedicated telephone cable
plow machine, the "product of" the U.S. The use of the plow
machine under a lease abroad is not an operation which either
advances the value or improves the condition of the exported
product. Therefore, it will be eligible for duty-free entry
under subheading 9801.00.10, HTSUS, upon return to the U.S.,
provided the documentary requirements of 19 CFR 10.1 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
Tariff Classification Appeals
Division