OT:RR:CTF:VS H278564 AJR
Mr. Larry Ordet
Sandler, Travis & Rosenberg, P.A.
1000 NW 57th Court, Suite 600
Miami, FL 33126
RE: Subheading 9801.00.10, HTSUS; High-End Cars
Dear Mr. Ordet:
This is in response to your letter, dated April 29, 2016, on behalf of your client, Cars USA Shipping, LLC (“Cars USA”), concerning the dutiable status of certain high-end cars.
FACTS:
Cars USA is a non-vessel operating common carrier (“NVOCC”) that specializes in transporting high-end, antique, or vintage automobiles (“high-end cars”) for their clients, which seek to sell the high-end cars. These high-end cars are automobiles of foreign origin that are typically classified under heading 8703, Harmonized Tariff Schedule of the United States (“HTSUS”).
Cars USA assists their clients by transporting the high-end cars on consignment from the United States to auction houses, or other parties, located in France, England, Monaco or other international venues. The high-end cars typically enter the foreign country under temporary bond. If these cars do not sell at auction while abroad, the owners of the high-end cars will re-import them into the United States, generally within a couple months from when shipped abroad. At issue are the high-end cars returned to the United States on or after April 25, 2016, and within three years from when they are transported abroad.
Counsel for Cars USA states that while abroad, the high-end cars will not be advanced in value or improved in condition in any way. However, minor cleaning operations necessary to maintain the high-end cars in condition for examination at auction will be performed, such as a regular car wash and wax to remove dirt and grime that may have accumulated on the cars when transported to the foreign destination.
ISSUE:
Whether the subject high-end cars are eligible for duty-free treatment under subheading 9801.00.10, HTSUS.
LAW AND ANALYSIS:
Section 904(b) of the Trade Facilitation and Trade Enforcement Act of 2015 (Pub. L. 114-125, February 24, 2016) amended subheading 9801.00.10, HTSUS, to include any products which are returned within 3 years after having been exported. Previously, subheading 9801.00.10, HTSUS, only applied to products of the United States. Subheading 9801.00.10, HTSUS, now provides for the duty-free treatment of:
Products of the United States when returned after having been exported, or any other products when returned within 3 years after having been exported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad.
Counsel for Cars USA cites to Headquarters Ruling Letter (“HQ”) 557731, dated May 31, 1994, to show that the high-end cars will be exported. We note that HQ 557731 addressed exportation in the context of determining whether the intent of the export was permanent or temporary for purposes of claiming eligibility under subheading 9801.00.60, HTSUS. Noting that the controlling factor was the intention of the party at the time of the shipment, HQ 557731 held that the products were not eligible for duty-free treatment under 9801.00.60, HTSUS, because they were not exported for use temporarily abroad solely for exhibition as there was evidence of an intent to sell the products abroad by auction at the time of shipment. The instant case is more analogous to HQ H274355, dated June 23, 2016; HQ H096897, dated April 6, 2011; and HQ 557668, dated March 3, 1994, which involved merchandise shipped from the United States on consignment to a third-party for purposes of selling the merchandise while abroad. In these cases, CBP found that the merchandise was considered exported within the context of subheading 9801.00.10, HTSUS. Because the instant case involves circumstances similar to HQ H274355, HQ H096897, and HQ 557668, we find that the high-end cars at issue are considered exported for purposes of Chapter 98, HTSUS, preferential tariff treatment.
In this case, high-end cars not sold at auction while abroad will be returned to the United States. Counsel for Cars USA states that this re-importation will typically take place a few months after their date of exportation from the United States. Prior to the amendment, only “[p]roducts of the United States when returned after having been exported” were eligible for duty-free treatment. The amendment to subheading 9801.00.10, HTSUS, now allows, “any other products when returned within 3 years after having been exported” to be eligible for duty-free treatment. Therefore, the amendment no longer requires articles to be products of the United States in order to be eligible for subheading 9801.00.10, HTSUS, treatment, and the high-end cars will be eligible for treatment under the amended subheading 9801.00.10, HTSUS, if they are returned within 3 years of their exportation date from the United States.
Counsel for Cars USA states that the re-importation of the high-end cars will have sufficient export documentation to show that the cars will be returned within 3 years of exportation from the United States. Cars USA has also not provided us with a value for the high-end cars, but for purposes of this inquiry we assume that they will be valued over $2,500. Section 10.1, Customs Regulations (19 C.F.R. § 10.1), sets forth the documentary requirements for entry under subheading 9801.00.10, HTSUS. We note that CBP has not yet amended the regulations to implement the change to subheading 9801.00.10, HTSUS. Nonetheless, while portions of the regulations are no longer pertinent, some portions of 19 C.F.R. § 10.1 still remain valid. For example, 19 C.F.R. § 10.1(a)(1) requires the foreign shipper to declare the following information with regard to articles in a shipment valued over $2,500: the port of exportation, the date of exportation, the quantity, the description of the merchandise, the value of the merchandise, the date of the declaration, and whether the articles were advanced in value or in condition by any process of manufacture or other means. Under 19 C.F.R. § 10.1(b), the port director may require such other documentation or evidence as may be necessary to substantiate the claim for duty-free treatment including a U.S. export invoice, bill of lading or airway bill evidencing the exportation of the articles from the United States, and/or the reason for the exportation of the articles demonstrating that the same items were returned within 3 years.
Additionally, counsel for Cars USA states that the high-end cars will be re-imported by the same party that exported the cars from the United States, or by another party. Section 10.1(a)(2), Customs Regulations (19 C.F.R. § 10.1(a)(2)), requires the owner, importer, consignee, or agent having knowledge of the facts regarding the claim for free entry to declare that the foreign shipper’s statement is true; that the articles were not manufactured or produced in the United States under subheading 9813.00.05, HTSUS; and, that the articles were exported without benefit of drawback. Therefore, provided the party re-importing the high-end cars is an “owner, importer, consignee, or agent having knowledge of the facts regarding the claim for free entry” as required by 19 C.F.R. § 10.1(a)(2), then such party may re-import the high-end cars under subheading 9801.00.10, HTSUS.
Counsel for Cars USA also states that minor cleaning operations, such as regular car washes and waxes, will be performed on the high-end cars while abroad, but that such operations will not constitute an advancement in value or improvement in condition under subheading 9801.00.10, HTSUS. 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 United States. See Border Brokerage Co. v. United States, 314 F. Supp. 788 (1970), appeal dismissed, 58 CCPA 165 (1970). In United States v. John V. Carr & Sons, Inc., 69 Cust. Ct. 78, C.D. 4377 (1972), the court held that for purposes of meeting the statutory requirements of item 800.00, Tariff Schedules of the United States (“TSUS”) (precursor to subheading 9801.00.10, HTSUS), the determinative factor is whether there has been an alteration to the product itself that advances its value or improves its condition. In determining whether an advancement in value or improvement in condition exists at the time of importation, the overall value and condition of the article at the time it was exported from the U.S. shall be compared with its overall value and condition at the time of return to the U.S. See HQ 558723, dated December 22, 1994. However, each case must be decided on its own facts. Id. In various rulings, CBP has previously held that U.S.-origin products exported abroad in a new condition, and then processed abroad to maintain them in operable and serviceable condition, would still be entitled to duty-free treatment under this provision when returned to the United States. See HQ 054097, dated January 15, 1978 (holding that ordinary maintenance and minor repairs to automobiles would not preclude the applicability of item 800.00, TSUS). See also HQ H154439, dated May 10, 2011 (noting that the sterilization of fruit cups did not advance their value or improve their condition in a “commercial sense” for purposes of eligibility under subheading 9801.00.10, HTSUS).
When comparing the condition of the high-end cars as exported from the United States, to the condition of the high-end cars as returned to the United States, the performed cleaning operations (i.e. car washes and waxes) will not alter the high-end cars into more valuable products or different vehicles. Rather the car washing and car cleaning will be performed on the high-end cars to keep them in serviceable and operable condition for purposes of the auction while abroad. In a commercial sense, these operations are merely maintaining the cars in the value and condition that they are in when exported. Accordingly, we find that minor cleaning operations, such as car washing and car waxing, will not advance the value or improve the condition of the high-end cars for purposes of subheading 9801.00.10, HTSUS.
HOLDING:
Based on the information presented, the foreign origin high-end cars, in a shipment valued over $2,500, returned within 3 years to the United States may be eligible for duty-free treatment under subheading 9801.00.10, HTSUS, provided the documentary requirements of 19 C.F.R. § 10.1, except with regard to documents showing U.S.-origin, are satisfied; the party re-importing the high-end cars is an owner, importer, consignee, or agent having knowledge of the facts regarding the claim for free entry as required by 19 C.F.R. § 10.1(a)(2); and, the cleaning operations do not advance the value or improve the condition of the high-end cars.
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 CBP officer handling the transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation & Special Programs Branch