CLA-2 RR:TC:SM 561005 BLS
Mr. Bruce H. Leeds
Senior Export/Import Advisor
Hughes Space and Communications
Bldg. S41, M/S A373
P.O. Box 92919
Los Angeles, CA 90009-2919
RE: Subheading 9801.00.85; tools of trade; corporations; parent-subsidiary; Moberly v. United States; HRL 560256
Dear Mr. Leeds:
This is in reference to your letter dated May 13, 1998,
concerning the applicability of subheading 9801.00.85, Harmonized
Tariff Schedule of the United States (HTSUS), to certain articles
used abroad to support the launch of commercial communications
satellites.
FACTS:
Hughes Space and Communications (HSC) is involved in the
launch of commercial communications satellites at certain sites
abroad, including French Guiana, China and Kazakhastan. HSC
will normally export the following groups of articles to the
foreign launch site:
The satellite, fuel, and in some instances a
rocket motor;
Critical spare parts of the satellite to cover
any failures that may occur during final
integration and mating to the launch vehicle;
Special containers for the above;
Test and handling equipment and tools used by
the HSC launch support personnel;
A battery operated forklift;
Consumables, including office supplies and
miscellaneous spare parts of the satellite and
equipment;
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Equipment for the morale of the HSC personnel,
such as TVs
and VCRs.
You state that these articles are used exclusively by the
HSC employees at the site. Many if not most of the articles are
made in the U.S. However, a significant portion of the articles
are either foreign or of unknown origin. If foreign or unknown
origin you state they were acquired in the U.S. The articles are
returned through various U.S. ports, depending on the launch site
and the mode of transportation. The most commonly used ports are
Los Angeles, Miami and New York.
For contractual reasons the exporter of record of the
satellite and the accompanying articles is Hughes Space and
Communications International, Inc. ("HSCII"), a wholly owned
subsidiary of HSC. HSCII is the entity which contracts with the
international customers and is responsible for shipping to the
site and for placing the satellite in orbit. When the articles
are returned to the U.S., entry is made in the name of HSC, the
owner of the articles.
ISSUE:
Whether the articles exported and returned qualify for duty-free treatment under subheading 9801.00.85, HTSUS.
LAW AND ANALYSIS:
Subheading 9801.00.85, HTSUS, provides duty-free treatment
for:
[p]rofessional books, implements, instruments, and
tools of trade, occupation, or employment, when
returned to the United States after having been
exported for use temporarily abroad, if imported by or
for the account of the person who exported such items.
Section 44 of the Miscellaneous Trade and Technical Corrections
Act of 1996, Pub. L. No. 104-295, 110 Stat. 3514 (1996), added
subheading 9801.00.85, HTSUS, to permit the duty-free entry of
"tools of the trade" by corporations which previously could only
be entered duty-free if they were exported and reimported by the
same individual under subheading 9804.00.10, HTSUS. See Senate
Report No. 104-393 dated October 1, 1996. See also Headquarters
Ruling Letter (HRL) 223198 dated October 17, 1991, which provides
that subheading 9804.00.10, HTSUS, is considered a personal
exemption available only to individuals arriving in the U.S. from
a foreign country, and that merchandise consigned to and entered
by or for the account of a firm does not
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qualify for this exemption.
Customs has previously approved a variety of articles which
qualified as "professional equipment and tools of trade" for
temporary entry free, under bond, under subheading 9813.00.50,
HTSUS, for use by nonresidents sojourning temporarily in the
United States. Such articles have included mobile shredding
units used to shred documents (HRL 221702 dated December 27,
1989); cinematography equipment (HRL 222651 dated January 7,
1991); and a mobile X-ray unit with equipment (HRL 223970 dated
September 22, 1992.) The equipment and tools of the trade
provided for under subheading 9813.00.50 are intended to be
necessary for the exercise of the calling, trade, or profession
of a person visiting this country to perform a specific task.
While the requirements for entry under HTSUS subheading
9813.00.50 and subheading 9801.00.85 are different, the term,
"tools of the trade", in both provisions has essentially the same
meaning. Accordingly, the test as applied to the instant case is
whether the articles exported and returned are necessary for the
exercise of the trade or profession.
We find that the items used (or intended to be used) by HSC
employees necessary for the exercise of their trade or profession
include those items directly related to the satellite launch,
i.e., spare parts of satellites, test equipment, forklift, fuel,
etc., as well as items such as office supplies and miscellaneous
parts used in support of the required task. However,
televisions, VCRs, and other articles intended for the personal
use of the HSC personnel, are not items necessary for the
exercise of the particular trade or occupation. Accordingly,
these articles would not be entitled to duty-free entry under
subheading 9801.00.85, HTSUS.
Pursuant to new subheading 9801.00.85, as noted above, "...
implements, instruments, and tools of trade, occupation, or
employment..." may now be entered free of duty by a corporation,
provided the returned articles are "imported by, or for the
account of the person who exported such items."
It is a basic principle of corporate law that a corporation
is a separate and distinct legal being. See Moberly v. United
States, 4 Cust. Ct. 91, C.D. 294 (1940). Therefore, although
HSC and HSCII are in a parent-subsidiary relationship, they are
separate legal entities. See Tennessee Valley Authority v. Exxon
Nuclear Co. , Inc., 753 F.2d
493, (6th Cir. 1985). Accordingly, as separate entities or
"persons," importation by HSC of the merchandise exported by
HSCII under these facts does not constitute an importation by or
for the account of the person who exported such item. See
Headquarters Ruling Letter (HRL) 560256 dated July 23, 1997,
which held that
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equipment used in the installation, maintenance, or repair abroad
of other merchandise may be reimported duty-free under subheading
9801.00.85, HTSUS, provided the corporate owner exported the
merchandise temporarily and the same merchandise is imported "by
the same corporation or for its account." Emphasis added.
Consequently, under these facts, the items returned to the
United States will not be entitled to duty-free treatment under
the provisions of subheading 9801.00.85, HTSUS.
HOLDING:
On the basis of the information submitted, it is our opinion
that the equipment, fuel, parts and office supplies used or
intended to be used directly or otherwise in support of the
satellite launch abroad are "...implements, instruments, and
tools of trade, occupation, or employment...," within the meaning
of subheading 9801.00.85, HTSUS.
However, as these articles are not imported by or for the account
of the exporter, HSCII, they will not be entitled to duty-free
treatment upon return to the United States.
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