CON-4-03-CO:C:R:E 221961 JR
Regional Commissioner of Customs
New York Region
6 World Trade Center, Suite 716
New York, New York 10048-0945
ATTN: Area Director, JFK Airport (NIS 233)
RE: Internal Advice Request, IA #64/89; Articles Exported for
Exhibition at a Trade Fair; 9801.00.60, HTSUS; Prohibition
Against Commercial Ventures; Intent at Time of Exportation; Your
memorandum, FILE: CLA-2:98:S:N:N1:233-116, November 22, 1989
Dear Sir:
This is in response to your memorandum dated November 7,
1989, requesting internal advice on the classification of
jewelry, precious stones and semi-precious stones, returned to
the United States after exhibition at a trade fair by the Ru-Gem
International Corporation.
FACTS:
The facts are as follows: On September 14, 1989, Ru-Gem
International Corporation registered 199 pieces of finished
jewelry and 3158 pieces of loose gemstones, precious and semi-
precious, on a Certificate of Registration (Customs Form 4455).
Ru-Gem subsequently exported this merchandise for exhibition at
the Hong Kong Watch and Jewelry Fair. On September 25, 1989, all
of the 3357 pieces exported to Hong Kong were returned to the
United States.
Ru-Gem contends that the proper classification is subheading
9801.00.60, Chapter 98, Harmonized Tariff Schedule of the United
States, HTS, which provides duty-free treatment since the
merchandise was exported for the purpose of exhibition and since
all the items were returned at the conclusion of the fair.
Ru-Gem further argues that regardless of the fact that orders
were taken during the fair, this does not prevent it from still
qualifying under subheading 9801.00.60, HTS, because the primary
purpose was the exhibition as evidenced by the return of the
entire inventory to the United States.
Your office's position is that the merchandise is precluded
from classification under subheading 9801.00.60, HTS, since the
merchandise was not exported solely or primarily for exhibition,
but for the purpose of soliciting orders which is a commercial
venture. Your office views the motivating factor that caused
Ru-Gem's exportation was the sale of the merchandise rather than
exhibition, and that the trade fair was merely a way to show off
the pieces of merchandise.
ISSUE:
The question which must be addressed is whether an
exporter's intention of securing future business through the
taking of orders at a trade fair can be equated with the
intention of the exporter, at the time of exportation, to sell
merchandise which violates the prohibition against commercial
ventures under subheading 9801.00.60, HTS.
LAW AND ANALYSIS:
Subheading 9801.00.60, HTS, (formerly item 802.30, Tariff
Schedules of the United States, TSUS) provides for the free entry
of articles which are returned after having been exported solely
for temporary use abroad for exhibition or use in connection with
any public exposition, fair, or conference, provided such
articles are returned by or for the account of the person who
exported them (emphasis added).
Before we address this issue directly, a discussion of the
history of the provision is necessary. As you are aware, this
office has issued several rulings interpreting former item
802.30, TSUS. See Ruling 058569 of December 8, 1978, and Ruling
063176 of July 20, 1979. Both subheading 9801.00.60 and former
item 802.30 are based on former 19 U.S.C. 194, which contains
very similar language to its successor provisions (802.30 and
9801.00.60) in that there are no words prohibiting a sale. As
fully discussed in our ruling of December 8, 1978, 058569 DL,
upon the consolidation in 1962 of certain free entry provisions
(namely, items 802.10, 802.20 and 802.30, TSUS) under one
superior heading in Subpart 1A, Schedule 8, TSUS, the word
"solely" was added to the heading immediately preceding the three
aforementioned items. However, the 1960 Tariff Study stated that
the consolidation was not to effect any significant change.
Prior to this consolidation, a sale was prohibited only under the
predecessor provision to item 802.10 (formerly paragraph 1815,
Tariff Act of 1930, as amended) and not under the predecessor
provisions to items 802.20 and 802.30. There is no indication
that Congress intended item 802.30 (or for that matter the
present provision) to be construed more narrowly than its
predecessor provision of 19 U.S.C. 194. We have held that a sale
of some of the articles exported for the purposes of item 802.30
would not preclude the remaining articles from free entry under
that provision when returned to the United States. See Ruling
058569 DL. Our rulings suggest that although this provision was
not intended to accord duty-free treatment to articles which were
exported with the primary intention of conducting sales, we,
however, have not found that the provision prohibits all indicia
of commerciality, such as an incidental sale. See aforementioned
rulings.
The answer to the question asked above is no. The taking of
orders is not the equivalent of an actual sale of goods.
It is clear that compliance with the provision of subheading
9801.00.60, HTS, requires that no commercial venture be
contemplated at the time of exportation. In Ruling 063176, we
have interpreted commercial venture to mean the sale of goods.
Further, the phrase "temporary use" in the superior heading of
subheading 9801.00.60, HTS, by definition, prohibits a sale. If,
however, a sale does occur, it can only be incidental to the
showing at an exhibition, fair, or conference, so that the
remaining merchandise is not jeopardized for the preferential
treatment accorded under subheading 9801.00.60, HTS. An
incidental sale would be when an exporter at the exposition or
fair is prevailed upon to sell some of his wares.
The controlling factor that the Customs Service should focus
on in determining the applicability of subheading 9801.00.60,
HTS, is the intention of the exporter at the time of exportation.
If a situation develops that an exporter sells goods at every
exhibition, fair or conference he attends, the exporter would be
hard pressed to prove to Customs that he did not contemplate upon
exportation a commercial venture. On the other hand, if an
exporter has a regular pattern of attending expositions or fairs
and returning with his entire inventory intact but has one
incident where a few inventory pieces were sold, that sale should
not bar the entire inventory from returning duty-free under
subheading 9801.00.60, HTS, if from the facts and circumstances
it is a fair inference that the intention to sell took place
during the exposition and not previous thereto.
The district office states that the primary purpose of a
trade fair is for the immediate sale of merchandise or the taking
of orders for future delivery and, therefore, classification
under subheading 9801.00.60, HTS, would not be permitted. We
disagree. A fair is an exhibition designed to acquaint
prospective buyers or the public at large with the range and
quality of currently available or planned products. See
Webster's Third New International Dictionary of the English
Language, G. & C. Merriam Co., 1971. In our opinion, a trade
fair's purpose is to generate interest in the products displayed
and in attracting prospective business. The display of domestic
articles abroad at an exhibition promotes U.S. industry for
future business and/or manufacturing. We do not view the fact
that some orders were solicited at the fair to negate the primary
intention of the exporter to exhibit his wares. A secondary
intention of hoping to secure orders from the articles displayed
should not invalidate compliance with the duty-free treatment of
subheading 9801.00.60, HTS.
We find persuasive the affidavit of Ru-Gem's representative
(Exhibit 2) that the intention of the company was to show their
goods at the exhibition and not to sell for delivery to customers
any of the exported articles. The fact that none of the
displayed jewelry was sold and that all of the goods listed on CF
4455 were returned to the United States after having been
exhibited in Hong Kong demonstrates to our satisfaction that the
primary purpose was exhibition even though a secondary objective
was the expectation of taking future orders. We view the fact
that Ru-Gem accepted orders for future delivery as not nullifying
the primary intention of exhibition.
HOLDING:
To summarize, we hold, based on the facts in this case, that
the primary intention of Ru-Gem was to exhibit articles at a
trade fair and return them to the United States. The exporter's
acquisition of future orders does not violate subheading
9801.00.60's general prohibition against sales at the exposition
when the primary intention was for exhibition and the exported
articles are returned to the United States. The inherent purpose
of a trade fair is the promotion of future U.S. commerce and the
act of taking future orders is not a sale of goods so as to
preclude classification under subheading 9801.00.60, HTS. A copy
of this decision may be furnished to the inquirer.
Sincerely,
Harvey B. Fox, Director