CON-9-04 RR:CTF:EP 231372 LLB
Category: Temporary Importation Bonds
BCB International, Inc.
Attn: Ms. Helen I. Sugar
1010 Niagara Street
Buffalo, NY 14213-1501
Re: Temporary Importation Bond; WEGU Canada, Inc.; cleaning; application of adhesive; subheading 9813.00.005, HTSUS; bushing sleeves; 7326.90.8587, HTSUS (2006); NY F89940(July 21,2000); HQ 227432 (April 23, 1997); HQ 227363 (July 22, 1998); HQ 230110 (Dec. 12, 2003); 19 U.S.C. § 3333(a)(2)
Dear Ms. Sugar:
This letter is in response to your February 28, 2006, letter that you sent to
the Director, National Commodity Specialist Division, requesting a binding ruling on behalf of your client, WEGU Canada, Inc. Your ruling request was sent to this office for our direct response to you. We gather from your ruling request and the attachments thereto, that you would like the classification of bushing sleeves and a determination as to whether the process the bushing sleeves undergo in the United States qualifies the merchandise for duty deferral under the Temporary Importation Bond (TIB) provisions set forth in Chapter 98 of the Harmonized Tariff Schedule of the United States (HTSUS). Our decision follows.
Facts
We have gathered the following facts from the February 28, 2006, ruling request and the undated letter attached thereto from WEGU Canada Inc. (WEGU). WEGU, a Canadian company, purchases bushing sleeves from another Canadian company (hereinafter Canadian company A), which imports the merchandise from India and China. Canadian company A then ships the bushing sleeves to a U.S. company for cleaning and painting with an adhesive. After cleaning and painting the bushing sleeves, the U.S. company returns the bushing sleeves to WEGU in Canada. WEGU then applies bonding rubber to the bushing sleeve. According to WEGU, rubber will not bond to the bushing sleeves unless they have been painted with an adhesive. The bushing sleeves are then used by WEGU’s customer, Canadian company B, in the production of shock absorbers. According to the April 17, 2000, electronic mail forwarded by you from WEGU, WEGU maintains ownership of the bushing sleeves during importation and exportation.
Issues
1. Whether the bushing sleeves described herein are eligible for duty-free entry under 9813.00.05, HTSUS
2. Whether the processing of the bushing sleeves, as described herein, leaves the merchandise in the same condition so as to avoid payment of duty upon exportation to Canada
Law and Analysis
Initially, we note according to the National Commodity Specialist Division (NCSD), that the bushing sleeves are classified under subheading 7326.90.8587, HTSUS (2006), before they are processed. See NY F89940(July 21, 2000). Further, the NCSD has also informed this office that the cleaning and the application of the adhesive paint prior to exportation would not change the foregoing classification.
Issue 1
Pursuant to General Note 1, Harmonized Tariff Schedule of the United States ("HTSUS"), all merchandise imported into the United States is subject to duty unless specifically exempted therefrom. Under subheading 9813.00.05, HTSUS, articles to be repaired, altered or processed (including processes which result in articles manufactured or produced in the United States), may be entered temporarily free of duty, under bond, for exportation within one year from the date of importation. This period may be extended for one or more additional periods, which when added to the initial period does not exceed three years. U.S. Note 1(a) of Subchapter XIII, Chapter 98, HTSUS. In order to qualify under this provision, the merchandise imported may not be imported for the purpose of sale or sale on approval.
With regard to the cleaning of and application or “painting” of adhesive of the bushing sleeves, we have held that similar processes constituted a process for the purpose of 9813.00.05. See HQ 227432 (April 23, 1997)(adhesive coating to polyester film); HQ 227363 (July 22, 1998)(acrylic coating to fabric); and HQ 230110 (Dec. 12, 2003)(application of dry lubrication to stainless steel). Thus, we conclude the cleaning and adhesive painting process described herein is also a process for purposes of 9813.00.50, HTSUS.
In addition, in order to satisfy the requirements for the TIB, the imported article must be timely exported. An "exportation" is defined as ". . . a severance of goods from the mass of things belonging to this country with the intention of uniting them to the mass of things belonging to some foreign country." See 19 C.F.R. § 101.1 and Swan & Finch Company v. United States, 190 U.S. 143 (1903). Thus, in order to have an exportation two elements must be met. There must be a separation from the United States and there must be an intent to unite the good in a foreign country. As stated by the courts, both the element of severance and the element of intent must coincide in order to constitute an act of exportation. Moore Dry Goods Co. v. United States, 11 Ct. Cust. App. 449, T.D. 39531 (1923). In the instant case, there is both a severance of the articles from the U.S. and delivery to a Canadian purchaser, clearly shows an intent to unite the articles with the "mass of things" belonging to a foreign country.
Issue 2
As stated above, WEGU proposes to export the bushing sleeves, which it is entering into the United States under subheading 9813.00.05, HTSUS, to Canada. Pursuant to Chapter 98, Subchapter XIII, U.S. Note 1(c), HTSUS (2005):
For purposes of this subchapter, if an article imported into the United States, for processing, under heading 9813.00.05 is withdrawn for exportation to the territory of Canada or of Mexico, the duty assessed shall be waived or reduced in an amount that does not exceed the lesser of the total amount of duty payable on the article that would have been payable on importation under chapters 1 through 97, inclusive, of the Harmonized Tariff Schedule of the United States or the total amount of customs duties paid to Canada or to Mexico on the exported article, unless such article is covered by section 203(a)(1) through 203(a)(8), inclusive, of the NAFTA Implementation Act. The amount of duties or refunds calculated on such articles pursuant to this note shall be adjusted to take into account any subsequent claim for preferential tariff treatment made to another NAFTA country. This note shall apply to shipments to Canada on or after January 1, 1996, and to Mexico on or after January 1, 2001.
(emphasis added). Section 203 of the North American Free Trade Agreement (NAFTA) Implementation Act, Pub. L. 103-182; 107 Stat. 2057, 2086; 19 U.S.C. § 3333, provides for the treatment of goods subject to NAFTA drawback. Section 203(a)(2) of the NAFTA Implementation Act exempts from the general duty drawback (that is, the NAFTA "lesser of" rule) and duty deferral rules of article 303 of NAFTA, merchandise which is exported to another NAFTA party in the same condition as when it was imported. See Article 303.6(b)(permitting full drawback of U.S. duties upon exportation to other countries, including Canada and Mexico); 19 U.S.C. § 3333(a)(2).
Pursuant to § 3333(a), a good subject to NAFTA drawback means any good other than, inter alia--
. . .
(2) A good exported to a NAFTA country in the same condition as when imported into the United States. For purposes of this paragraph—
(A) processes such as testing, cleaning, repacking, or inspecting a good, or preserving it in its same condition, shall not be considered to change the condition of the good
19 U.S.C. § 3333(a)(2). The Customs Regulations issued under the authority of the NAFTA Implementation Act specifically provide for the availability of drawback on the exportation of merchandise to a NAFTA country. Subsection(b)(1) of § 181.45, provides, that for purposes of this subpart:
. . . a reference to a good in the "same condition" includes a good that has been subjected to any of the following operations provided that no such operation materially alters the characteristics of the good:
(i) Mere dilution with water or another substance;
(ii) Cleaning, including removal of rust, grease, paint or other coatings;
(iii) Application of preservative, including lubricants, protective encapsulation, or preservation paint;
(iv) Trimming, filing, slitting or cutting;
(v) Putting up in measured doses, or packing, repacking, packaging or repackaging; or
(vi) Testing, marking, labeling, sorting or grading.
According to your ruling request, rubber will not bond to the bushing sleeves unless they have been painted with an adhesive. The foregoing process does not appear to fall within any of the exemplars set forth in 19 U.S.C. § 3333(a)(2) or 19 C.F.R. § 181.45(b)(1). Insofar as the application of the adhesive paint is necessary to the further processing of the bushing sleeves, we cannot conclude that such operation does not leave the bushing sleeves in the same condition as imported for purposes of the NAFTA. As such, the bushing sleeves, upon exportation to Canada, will be subject to the General Rate of Duty under the HTSUS.
HOLDING
1. The cleaning and application of adhesive paint of the bushing sleeves is a permissible operation under subheading 9813.00.05, HTSUS.
2. The cleaning and application of adhesive paint to the bushing sleeves does not leave the bushing sleeves in the same condition as imported.
Sincerely,
William G. Rosoff, Chief
Entry Process and Duty Refunds Branch