CON-9-09-CO:R:C:E 223971 JRS
Mr. Tim Gillespie
Assistant Vice President
National Railroad Passenger Corporation
AMTRAK Government and Public Affairs
60 Massachusetts Ave., N.E.
Washington, D.C. 20002
RE: Applicability of subheading 9813.00.30, HTSUS, to temporary
importation under bond of high-speed train equipment for testing
purposes.
Dear Sir:
This is in response to your ruling request dated May 14,
1992, on the applicability of a Temporary Importation Bond for
the testing of high-speed rail equipment. Our ruling follows.
FACTS:
Amtrak plans to import a Swedish high-speed tilting train
set to test the operation of the equipment and to obtain
passenger reaction to a modern high-speed train in demonstration
tests during its regularly scheduled service. The train set,
valued at $15 million, will consist of one locomotive, a first
class driving trailer/cab car, three first class coaches, and one
buffet coach for food service. Amtrak will acquire temporarily
the train set through a short-term arrangement known as a "Train
Testing Agreement" with the Swedish State Railways (Statjens
Jrnvgar, a government agency) and Amtrak will return the
equipment after the evaluation is completed. The equipment is
scheduled to arrive in the United States on November 27, 1992 and
is scheduled to return to Sweden on August 5, 1993.
In your memorandum you state that Amtrak cannot purchase
this equipment and, in fact, plans to test other foreign high-
speed rail equipment in the next few years for the purpose of
comparing the technology and economic feasibility of the various
equipment before any consideration is given to the purchasing of
such equipment. After testing various high-speed technologies,
Amtrak will develop design specifications for a new generation of
American high-speed rail passenger equipment. You included a
copy of a letter from a potential American manufacturer in
support of the importation.
Additionally, we acknowledge your submission of the
drawings of the X2000 train set, the "Equipment Test and
Demonstration Agreement" between Amtrak and the manufacturer
which sets out the details of the testing plan and schedule, and
the "Train Testing Agreement." Your request for CONFIDENTIAL
treatment of the drawings and related materials is granted.
ISSUE:
Whether a temporary importation under bond entry is
permissible when the testing phase will include revenue
demonstrations on its railway system in addition to the technical
(mechanical) tests of the equipment?
LAW AND ANALYSIS:
Subheading 9813.00.30, Harmonized Tariff Schedule of the
United States (HTSUS), provides for the temporary duty-free entry
of:
Articles intended solely for the testing,
experimental or review purposes, including
specifications, photographs and similar
articles for use in connection with
experiments or for study.
Such articles when not imported for sale or sale on approval
may be admitted into the United States without the payment of
duty, under bond, for their exportation within 1 year from the
date of importation, which period, in the discretion of the
Secretary of the Treasury, may be extended upon application, for
one or more further periods, which when added to the initial 1
year shall not exceed a total of 3 years. See U.S. Note 1(a) of
subchapter XIII, Chapter 98, HTSUS.
Articles may be entered under subheading 9813.00.30, HTSUS,
when there is an intention to test the article itself, or when
the imported articles or merchandise are imported to be used as
the raw material in testing another domestic or imported article.
However, free entry is not available for importation of articles
which, rather than being tested themselves, are imported to
measure the performance of other articles. Generally, the
Customs Service has interpreted the provision to preclude purely
market tests as being eligible.
With regard to the use of the imported article in a
commercial setting, any such use which is not incidental to the
testing and evaluation program would constitute a violation of
the bond resulting in the assessment of liquidated damages on an
amount equal to double the estimated duties determined at the
time of entry (see Customs ruling 206597, dated July 30, 1976).
In Customs ruling DB 516.23, dated March 16, 1971, Headquarters
held that a railroad company which imported a freight car for the
purpose of testing its ability to function as both a covered
hopper and boxcar, was permitted to use the car to haul revenue
movements of a variety of commodities from selected shippers, as
its use in domestic service was incidental to the legitimate
testing purpose.
In the case under consideration, the high-speed train itself
is imported not only to test its effectiveness on existing rail
lines (technical/mechanical aspect), but also to test its
adaptability or suitability for a specific use, which is
passenger service (economic feasibility). The question becomes
does the use of the train in regularly scheduled domestic service
preclude it from entry under subheading 9813.00.30, HTSUS?
The evaluation of the American riders' reaction to the high-
speed train is an essential element of the testing phase of the
high-speed train technology. Since the seats in the Swedish
train have the passengers facing each other in sets of four, it
is imperative to evaluate the train passengers' reaction to such
seating arrangements in order to determine whether such a design
concept would be acceptable to the American public.
Moreover, the revenue generated from the high-speed test
service will not augment the revenue Amtrak normally collects
because (1) the test train would replace Amtrak's regularly
scheduled train and (2) the fee charged the passenger would not
include the cost of the "Train Testing Agreement" with the
Swedish State Railways or the "Equipment Test and Demonstration
Agreement."
Inasmuch as the regular fee charged the passenger does not
subsidize the cost of the test and the number of trains in
service remains the same, it is clear that no considerable
revenue would result from the testing of the high-speed trains in
Amtrak's regularly scheduled service in the Northeast corridor
from April 4, 1993 to July 21, 1993.
HOLDING:
The use of the train in regularly scheduled train service
as part of the prescribed test procedures would not preclude
entry of the imported train set under the provisions of
subchapter XIII, Chapter 98, HTSUS, on the facts presented.
Sincerely,
John Durant, Director