CLA-2 RR:C:SM 560022 DEC
Robert E. Burke, Esq.
Barnes, Richardson & Colburn
200 East Randolph Drive
Suite 7920
Chicago, Illinois 60601
RE: Repairs/Alterations; HRL 554816; 19 CFR 181.64; HRL 554539;
HRL 555443; HRL 556609; Daisy-Heddon, Div. Victor Comptometer
Corp. v. United States, 600 F.2d 799, 66 CCPA 97,
C.A.D. 1228 (1979)
Dear Mr. Burke:
This is in response to your letter dated August 12, 1996, on
behalf of Cummins Engine Company, Diesel ReCon Division
(Cummins), concerning the eligibility of fuel injection pumps for
entry under subheading 9802.00.50, Harmonized Tariff Schedule of
the United States (HTSUS). You specifically requested that we
consider modifying Headquarters Ruling Letter (HRL) 554816, dated
November 23, 1987. You supplemented your original ruling request
with additional submissions dated January 15, 1997, and April 1,
1997, which provided supplementary information as a result of our
January 15, 1997, meeting at our office. Samples of the various
fuel pumps were submitted for our examination.
Pursuant to section 625, Tariff Act of 1930 (19 U.S.C.
1625), as amended by section 623 of Title VI (Customs
Modernization) of the North American Free Trade Agreement
Implementation Act, Pub. L. 103-182, 107 Stat. 2057, 2186 (1993)
(hereinafter section 625), notice of the proposed modification of
HRL 554816 was published on January 7, 1998, in the Customs
Bulletin, Volume 32, Number 1.
FACTS:
Cummins is a manufacturer of diesel engines and also
"reconditions" used engine components such as fuel injection
pumps. You state that Cummins ships used fuel pumps to their
facilities in Mexico where parts are removed from the fuel pump's
main housing which consists of a large machined casting. The
main body is cleaned, inspected, and machined. If any parts that
are removed are capable of reuse they may be used "as is" or
subjected to machining or other processing so that they are
capable of being reused. Subsequently, the fuel pump is
assembled using both reconditioned and new parts.
Diesel ReCon Company (now the Diesel Recon Division of
Cummins) received HRL 554816 which addressed the eligibility of
certain types of fuel pumps for item 806.20, Tariff Schedules of
the United States (TSUS) (the precursor to subheading 9802.00.50,
HTSUS)), treatment. The types of pumps identified in HRL 554816
were the Bosch, Lucas, Stanadyne, and PT pumps. Counsel for
Diesel ReCon Company indicated in that case that the housing, top
cover, and fuel pump drive gear of the pumps were kept together
throughout the reconditioning process so that the essential
identity of the fuel pumps was maintained throughout the foreign
processing. Customs agreed with counsel's position and held that
provided the housing, top cover, and fuel pump drive gears were
maintained in designated match sets throughout the foreign
processing, the fuel pumps were subjected to qualifying repair
operations and eligible for a partial duty exemption. See HRL
554816. You state that in HRL 554816 Customs inexplicably
mandated that the housing, top cover, and fuel pump drive gear be
maintained as a matched set throughout the repair operations even
though some of the pumps at issue were not designed with a top
cover or fuel pump drive gear.
In your August 12, 1996, correspondence, you indicated that
no duty exemption under subheading 9802.00.50, HTSUS, is being
requested with respect to the Stanadyne pump. This ruling
request covers the In-Line, Rotary, and Cummins fuel pump models.
The In-Line (Bosch) model includes the MW style, the P 7100
style, and the A style. The Rotary (Lucas) model includes the
Lucas model and the VE model. The Cummins model includes the PT
model.
ISSUE:
Whether the fuel injection pumps described above will be
entitled to entry under subheading 9802.00.50, HTSUS, when
imported into the U.S.
LAW AND ANALYSIS:
Subheading 9802.00.50, HTSUS, provides for the assessment of
duty on the value of repairs or alterations performed on articles
returned to the U.S. after having been 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 (1956), aff'd, C.D. 1752, 36 Cust. Ct. 46 (1956); and
Guardian Industries Corporation v. United States, 3 CIT 9 (1982).
Subheading 9802.00.50, HTSUS, treatment is also 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. See Dolliff &
Company. Inc. v. United States, 81 Cust. Ct. 1, C.D. 4755, 455 F.
Supp. 618 (1978), aff'd, 66 CCPA 77, C.A.D. 1225, 599 F.2d 1015
(1979). Articles entitled to this partial duty exemption are
dutiable only upon the cost or value of the foreign repairs or
alterations, provided the documentary requirements are satisfied.
Pursuant to section 181.64(a), Customs Regulations (19 CFR
181.64(a)), "repairs or alterations" are defined for purposes of
importations from NAFTA countries as follows:
For purposes of this section, "repairs or
alterations" means restoration, addition,
renovation, redyeing, cleaning,
resterilizing, or other treatment which does
not destroy the essential characteristics of,
or create a new or commercially different
good from, the good exported from the United
States.
For purposes of the duty allowance under subheading
9802.00.50, HTSUS, the replacement and/or addition of parts to
restore products to their original condition may constitute
repair operations, provided that the particular article does not
lose its identity and the replacement and/or additions are not so
extensive as to create a new or 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, as long as the article was not considered a new and
different article of commerce or its identity was destroyed, the
use of improved materials in the restoration was of no
consequence.
Thus, application of this tariff provision is precluded
where the foreign operation destroys the identity of the exported
article or creates a new or different commercial article. In HRL
554539, dated August 25, 1987, we stated that:
So long as the identity of [the exported
unit] is maintained throughout the
disassembly and repair process, and there is
a genuine repair of parts carried out during
the foreign process, these units may be
entered under the repairs provision of item
806.20, Tariff Schedules of the United States
(TSUS) [the predecessor tariff provision to
subheading 9802.00.50, HTSUS].
Where, as here, the foreign repair operation entails the
complete disassembly of the exported article and numerous
component parts of the article are replaced, the concept of
"essential identity" becomes relevant. This concept is employed
in
interpreting this tariff provision to ensure 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. Thus,
replacing any one of these essential components would violate the
uniqueness of the matched set and result in a new article of
commerce, thereby precluding eligibility for the duty exemption
under subheading 9802.00.50, HTSUS. See HRL 555443, dated
November 30, 1990, and rulings cited therein.
In HRL 554816, dated November 23, 1987, Customs addressed
the eligibility of certain types of fuel pumps for item 806.20,
TSUS, treatment. The types of pumps at issue were the Bosch,
Lucas, Stanadyne, and PT pumps. In that ruling, counsel for
Diesel ReCon Company indicated that the housing, top cover, and
fuel pump drive gear of the pumps were kept together throughout
the reconditioning process so that the essential identity of the
fuel pumps was maintained throughout the foreign processing.
Customs agreed with counsel's position and held that provided the
housing, top cover, and fuel pump drive gears were maintained in
designated match sets throughout the foreign processing, the fuel
pumps were eligible for a partial duty exemption.
You now seek a finding from Customs that the fuel pump
housing alone imparts the "essential identity" to the fuel pumps
at issue and request a modification or revocation of HRL 554816.
You contend that the fuel pump housing alone imparts the
essential identity of the fuel pumps because it is the largest
and most integral component of the finished pump. In addition,
you contend that the fuel pump housing represents the general
profile of the finished article. You state that HRL 554816
requires modification or revocation also because it requires in
all cases that the pump's housing, top cover, and fuel pump drive
gear be maintained as a matched set throughout the repair process
when some of the models at issue in HRL 554816 were not designed
with a top cover nor a fuel pump drive gear.
Finally, you cite Daisy-Heddon, Div. Victor Comptometer
Corp. v. United States, 600 F.2d 799, 66 CCPA 97, C.A.D. 1228
(1979), which is a case interpreting whether an article is
unfinished for general classification purposes, suggesting that
Customs extend this concept to the subheading 9802.00.50, HTSUS,
context. You argue that since the pump housing is really an
unfinished fuel pump and that the omission of a part essential to
its use (e.g., the top cover or fuel pump drive gear) would not
preclude its classification as the particular article (fuel
pump), then Customs should conclude that the fuel pump housing
constitutes the essential character of the article.
While we agree that the housing component represents the
"essential identity," whether or not it represents the "essential
character" of the finished fuel pumps on the basis of the Daisy-Heddon rationale is not relevant to subheading 9802.00.50, HTSUS,
determinations. Daisy-Heddon is a tariff classification case
which addressed whether the absence of a part essential to the
use of the article precludes the classification of the unfinished
article in the same provision as the completed article. Whether
an article undergoes qualifying repairs/operations pursuant to
subheading 9802.00.50, HTSUS, presents a separate inquiry from
whether an unfinished article is properly classified as the
finished article for classification purposes under General Rule
of Interpretation 2(a), HTSUS. The requirement of preserving an
article's "essential identity" for purposes of qualifying for
subheading 9802.00.50, HTSUS, treatment exists so that already
completed articles do not undergo various processes which serve
to destroy the identity of the article, but rather only undergo
processes that serve only to repair or alter the article. The
Daisy-Heddon decision addressed the issue of how complete an
article must be before it is classified as the finished article,
while subheading 9802.00.50, HTSUS, eligibility is determined
upon an examination of the extent to which the identity of the
article in question is compromised as a result of the
repairs/alterations at issue. Accordingly, Customs finds that
Daisy-Heddon is completely inapplicable to subheading 9802.00.50,
HTSUS, eligibility.
In HRL 556609, dated July 23, 1992, Customs considered the
"essential component" of steering gear assemblies or "core" units
exported to Mexico for repair. In that case, the housing of the
assemblies, which constituted 80% of the value of the assembly,
was not interchangeable but was specific to each model. Because
new housings were not readily available for purchase on the open
market, the core assembly was deemed worthless unless the housing
was repairable. Customs concluded that the housing was the
"essential component" of the cores, and held that,
notwithstanding the replacement of non-essential parts, where the
housing was not replaced in the repair process but remained
segregated from the components of other cores, the steering gear
assemblies were entitled to the duty exemption under subheading
9802.00.50, HTSUS.
Similarly, we find that the operations performed on the fuel
pump housings at issue in this ruling are considered repairs
within the meaning of subheading 9802.00.50, HTSUS. The
cleaning, inspecting, and machining of the housings so that they
can be reused to produce reconditioned fuel pumps do not result
in the creation of a new article, but serve to restore the
article to its original condition, purpose and application.
Accordingly, so long as the essential identity of the fuel pumps
is maintained (e.g., the housing), the use of other non-essential
components which may be reused "as is," reconditioned and then
used, or replaced with new parts is permissible and will not
serve to disqualify the reconditioned fuel pumps from entering
under subheading 9802.00.50, HTSUS, provided Cummins complies
with the documentary requirements of 19 CFR 181.64.
HOLDING:
Based upon the information presented and our examination of
the samples that were submitted with this ruling request, the
returned fuel pumps qualify for entry under subheading
9802.00.50, HTSUS, provided the documentary requirements of 19
CFR 181.64 are met. HRL 554816 is hereby modified.
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.
In accordance with 19 U.S.C. 1625(c)(1), this modification
of HRL 554816 will become effective 60 days after its publication
in the Customs Bulletin. Publication of rulings or decisions
pursuant to 19 U.S.C. 1625(c)(1) does not constitute a change of
practice or position in accordance with section 177.10(c)(1),
Customs Regulations (19 C.F.R. 177.10(c)(1)).
Sincerely,
John Durant, Director
Commercial Rulings Division