CON-9-04 CO:R:C:E 225301 TLS
Steven W. Baker, Esq.
Bellsey and Baker
100 California Street Suite 670
San Francisco, California 94111
RE: Ruling request concerning the commingling of merchandise
entered under a temporary importation bond (TIB) with merchandise
entered for consumption; C.S.D. 86-16 (December 9, 1985); C.S.D.
88-1 (June 29, 1987); Harmonized Tariff Schedule of the United
States Annotated (HTSUSA) subheading 9813.00.0520.
Dear Mr. Baker:
This office has received the above-referenced request for a
ruling as provided for under Customs regulations. We have
considered the request and have made the following decision.
FACTS:
Your client wishes to import kits containing parts used to
manufacture merchandise, some of which will be sold domestically
and some exported for sale. You propose that some of the
imported kits be entered for consumption and some under TIB with
the intent to export. It is further proposed that both the kits
entered under TIB and the kits entered for consumption be
commingled for the purposes of manufacturing the end product.
The TIB parts would be accounted for using the first-in/first-out
(FIFO) accounting method.
ISSUE:
Whether the parts entered under TIB may be commingled with
identical parts entered for consumption, with the TIB parts
accounted for upon export using the FIFO accounting method.
LAW AND ANALYSIS:
Articles entered under HTSUSA subheading 9813.00.05 must
meet the following requirements to be eligible for duty-free
treatment:
1) The article must not be imported for sale or sale on
approval and must be exported or destroyed within one year
from the date of importation. (The bond period may be
extended, upon application for one or more further periods
which may not exceed a total of three years.)
2) Must be an article to be repaired, altered, or processed
(including processes which result in articles manufactured
or produced in the United States);
3) The article(s) produced must not be a product described
as any one of the following:
a) alcohol, distilled spirits, wine, beer, or
any dilution or mixture of any or all of the
foregoing; b) a perfume or other commodity
containing ethyl alcohol (whether or not such
alcohol is denatured); or c) a product of
wheat;
4) If the article as processed results in an article
manufactured in the United States, the following must be
adhered to:
a) a complete accounting must be made to the
Customs Service for all articles, wastes, and
irrecoverable losses resulting from such
processing; and
b) all articles and valuable wastes resulting
from such processing will be exported or
destroyed under customs supervision within
the bonded period; except that in lieu of the
exportation or destruction of valuable
wastes, duties may be tendered on such wastes
at rates of duties in effect for such wastes
at the time of importation. See HTSUSA
Chapter 98, Subchapter XIII, U.S. Notes 1(a),
2(a) and (b).
In the present case, the merchandise will be manufactured in this
country and some will be exported from the customs territory.
The merchandise will be accounted for using FIFO. The TIB
merchandise will not be used to produce any alcoholic beverage
products, perfumes containing ethyl alcohol, or wheat products.
This proposed transaction appears to be much like that in C.S.D.
86-16 (December 9, 1985). In that case, the importer commingled
merchandise entered under TIB with domestic merchandise to be
used to manufacture a third product. Some of the finished
product was exported according to TIB requirements and some was
entered for domestic consumption. We ruled in that case that the
FIFO accounting method may be used to account for the merchandise
entered and subsequently exported under TIB.
The ruling noted that we had approved of such a transaction
in the past. See C.S.D. 84-12 (June 23, 1983). It was also
expressly noted in 86-16 that the importer would have on hand at
all times sufficient merchandise to cancel all open TIB entries.
Thus, we maintain that such will be required in this transaction
as well.
Consistent with FIFO guidelines required in earlier rulings,
the commingling to take place under the proposed transaction
should be done on a part-to-part, merchandise-to-merchandise
basis. See C.S.D. 88-1 (June 29, 1987). Thus, each set of parts
must be identified and accounted for separately according to TIB
requirements. We have enclosed a copy of C.S.D. 88-1 for your
convenience. It should provide more details of what we consider
valid FIFO practices under customs transactions.
HOLDING:
The commingled merchandise in the proposed transaction must
be identified and accounted for on a part-by-part basis and the
exported merchandise may be accounted for using the "first-in,
first-out" (FIFO) accounting method. The importer must have on
hand at all times sufficient parts to cover all open TIB entries.
Sincerely,
John Durant, Director
Commercial Rulings Division
Enclosure