CLA-2 CO:R:C:V 554731 GRV
John J. Scanlon, Esq.
Kemp, Smith, Duncan & Hammond
2000 MBank Plaza
P.O. Drawer 2800
El Paso, Texas 79901-1441
RE: Request for Clarification of Headquarters Ruling Letter
554408 (April 22, 1987)
Dear Mr. Scanlon:
This is in response to your letter of September 1, 1987, on
behalf of Diesel ReCon Company, requesting clarification of Head-
quarters Ruling Letter 554408 (April 22, 1987), concerning the
applicability of subheading 9802.00.50, Harmonized Tariff Sched-
ule of the United States (HTSUS) (formerly item 806.20, Tariff
Schedules of the United States (TSUS)) to certain diesel fuel
injectors to be exported to Mexico for remanufacture and return
to the U.S.
FACTS:
In our ruling of April 22, 1987, we stated that the remanu-
facturing process to be performed abroad, wherein fuel injectors
are to be disassembled into their constituent parts, the parts
cleaned and repaired and placed in storage with other identical
parts awaiting reassembly into new and different fuel injectors,
would result in a conversion of the exported fuel injectors into
new and different articles. Thus, we stated that these opera-
tions were beyond the scope of the term "repairs or alterations"
under item 806.20, TSUS. However, we also stated that were it
possible to retain the essence of the exported fuel injectors
throughout the foreign repair process, so that the same units
would be returned as were exported, then the returned injectors
might be entitled to item 806.20, TSUS, treatment.
In your original request for a ruling on this matter, dated
December 17, 1986, you indicated that of the components parts
comprising the fuel injectors, the plungers and barrels repre-
sented the essence of the fuel injector units.
In your letter of September 1, 1987, you requested clari-
fication concerning:
(1) whether the identity and essence of each diesel fuel
injector would be maintained by entering the adaptor
and retainer portions of the injector into the repair
process as a matched set, even though the adaptor or
retainer, or both, might be replaced during the repair
process;
(2) whether, by entering the adapter and retainer into the
repair process, the diesel fuel injectors may be re-
paired without regard to the number of injectors in
the lot being repaired;
(3) whether it must be proven that the adaptor and retainer
components are from the same diesel fuel injector by
means of placing identical serial numbers on each
adapter and retainer in a set; and
(4) whether reusable, non-essential components of the fuel
injectors being repaired may be commingled in storage
bins or in inventory until required for reassembly.
ISSUE:
Whether, under the circumstances set forth in the request
for clarification of our ruling of April 22, 1987, the diesel
fuel injectors would qualify for the partial duty exemption pro-
vided for in HTSUS subheading 9802.00.50 upon their return to the
U.S.
LAW AND ANALYSIS:
Effective January 1, 1989, the HTSUS superseded and re-
placed the TSUS. TSUS item 806.20 was carried over into the
HTSUS as subheadings 9802.00.40 (repairs or alterations made
pursuant to a warranty) and 9802.00.50 (other repairs or altera-
tions). These tariff provisions provide a partial duty exemp-
tion for articles returned to the U. S. after having been ex-
ported to be advanced in value or improved in condition by means
of repairs or alterations. Under these tariff provisions, there
is a duty only upon the value of the foreign repairs or altera-
tions, provided the documentation requirements of section 10.8,
Customs Regulations (19 CFR 10.8), are met.
Repairs are operations aimed at restoring articles to their
original condition, but cannot be so extensive as to destroy the
identity of the exported article or to create a new and different
article. Press Wireless, Inc. v. United States, 6 Cust. Ct. 102,
C.D. 438 (1941). Thus, application of this tariff provision is
precluded where the foreign operation destroys the identity of
the exported article or creates a new or different commercial
article. In Headquarters Ruling Letter 554539 (August 25, 1987),
we stated that:
[s]o long as the identity of these units is maintained
throughout the disassembly and repair process, and there is
a genuine repair of parts carried out during the foreign
process, these units may be entered under the repairs
provision of item 806.20....
In the present case, the exported diesel fuel injectors are
disassembled into some nine discrete, potentially reusable, com-
ponent parts. Other parts, such as O-rings, orifice plugs, gas-
kets, and screens are removed, scrapped and replaced. You state
in your September 1, 1987, letter that the essence of a fuel in-
jector is best represented by the adaptor and retainer of that
injector. You indicate that an average of 95 percent of adaptors
and retainers pass through the repair process without need of re-
placement. However, only about half of the barrels and plungers
pass through the repair process without replacement. On the
basis of this information, we agree that the identities of the
fuel injectors would be better represented by the adaptors and
retainers.
Therefore, so long as both the adaptor and retainer of the
same fuel injector enter and go through the repair process to-
gether as a matched set, the essential identity of each fuel in-
jector will be maintained for purposes of conforming to the re-
quirements of HTSUS subheading 9802.00.60. However, neither the
adaptor nor the retainer of a particular exported injector may be
replaced during the repair process, as this would violate the
uniqueness of the identified matched set and destroy the identity
of the exported article which that set represents. This is con-
sistent with the holdings in Headquarters Ruling Letters 554817
(November 18, 1987), 554816 (November 23, 1987), and 555117
(December 22, 1988).
In answer to your second question, the repair of the in-
jectors may be accomplished without regard to the number of units
in the lot being repaired, provided the essential identity of
each exported injector for which HTSUS subheading 9802.00.50
treatment will be sought is maintained throughout the foreign
repair process.
Concerning your third question, to maintain the essential
identity of the exported fuel injectors, the adapter and retainer
of each exported injector must be marked in some manner to indi-
cate that they are a matched set from the same injector and to
distinquish one matched set from all others.
Lastly, so long as the essential components of the diesel
fuel injectors are retained as matched sets during the repair
process, the remaining, nonessential components of the disas-
sembled injectors may be commingled with other identical parts in
storage bins or in inventory until required for reassembly.
As we stated in Headquarters Ruling Letter 555117 (December
22, 1988), the essential components constitute the item being re-
paired abroad. Under section 10.8(l) of the Customs Regulations
(19 CFR 10.8(l)), the cost or value of the repairs performed in-
clude the cost or value of all articles, domestic and foreign,
used in the repair. Consequently, the cost or value of the re-
pair of the alternators would include the cost or value of both
new parts and the non-essential used parts removed during dis-
assembly of the alternators and commingled with other like parts
pending reassembly.
HOLDING:
On the basis of the information presented, if the adapter
and retainer of each fuel injector for which HTSUS subheading
9802.00.50 treatment is sought are identified and retained as a
matched set, throughout the foreign repair process and without
replacement of either or both of these parts, the essential iden-
tity of the injector would be maintained. Under these circum-
stances, the repaired fuel injectors would qualify for the par-
tial duty exemption under HTSUS subheading 9802.00.50, upon com-
pliance with the documentary requirements of 19 CFR 10.8. How-
ever, the dutiable value of the repairs will include the cost or
value of all articles, domestic and foreign, used in the repair.
Sincerely,
John Durant, Director
Commercial Rulings Division