CLA-2 CO:R:C:S 555932 KCC
Ms. Suzanne Smith
Purchaser/Expediter
Wartsila Diesel, Inc.
Route 5, Box 116B
Chestertown, Maryland 21620
RE: Alternators attached to engines and imported into the
U.S.Alterations; new and different article; 9801.00.20;
9801.00.25. Burstrom; Guardian Industries
Dear Ms. Smith:
This is in response to your letter dated June 4, 1990,
concerning the applicability of subheading 9802.00.50, Harmonized
Tariff Schedule of the United States (HTSUS), to Japanese origin
alternators imported into the U.S. for refurbishing, exported to
Finland for attachment to engines, and then reimported into the
U.S. as part of the engines. The portion of your request
regarding the vessel repair statute was the subject of a separate
response in Headquarters Ruling Letter (HRL) 111117 dated March
4, 1991. We regret the delay in responding to your request.
FACTS:
You propose to sell thirty-six engines to a U.S. flag
carrier to be used in the repowering of their vessels. The
vessels are currently powered by engines and alternators of
Japanese origin. The repowering will require the purchase of new
engines and refurbishing of the old alternators.
The alternators will be removed from the engines and you
will arrange to have the refurbishing completed in the U.S.
After completion of the refurbishing operation, you intend to
register the alternators on Customs Form 4455 (Certificate of
Registration) and export them to Finland. In Finland, the
alternators will be coupled with the new engines and tested.
Once tested, the engines with the refurbished alternators will be
returned to the U.S. for subsequent sale to the U.S. flag
carrier. Thereafter, the engines with the refurbished
alternators will be installed aboard the vessels at various U.S.
ports by engineers of your firm.
ISSUE:
Whether the alternators attached to the engines will be
entitled to the partial duty exemption available under subheading
9802.00.50, HTSUS, when imported into the U.S.
LAW AND ANALYSIS:
All articles imported into the U.S. are subject to duty
unless specifically exempted therefrom under the HTSUS. It
appears from your letter that you intend to reimport the
alternators attached to the engines under subheading 9802.00.50,
HTSUS. This tariff provision provides for the assessment of duty
on the value of repairs or alterations performed on articles
returned to the U.S. after having been exported for that purpose.
However, the application of this tariff provision is precluded in
circumstances where the operations performed abroad destroy the
identity of the articles or create new or commercially different
articles. See, A.F. Burstrom v. United States, 44 CCPA 27,
C.A.D. 631 (1956), aff'd, C.D. 1752, 36 Cust.Ct. 46 (1956); and
Guardian Industries Corporation v. United States, 3 CIT 9 (1982),
Slip Op. 82-4 (Jan. 5, 1982).
We are of the opinion that the attachment operation
performed in Finland is not considered an alteration, and
therefore, the alternators attached to the vessel engines will
not be entitled to the partial duty exemption available under
subheading 9802.00.50, HTSUS. Attaching the alternator to the
engine creates a new and different article--the vessel engine.
Contrary to the underlying premise of this tariff provision, the
articles that are imported into the U.S. are not the same
articles that were exported.
Additionally, duty-free treatment is available for certain
articles previously imported and duty paid pursuant to
subheadings 9801.00.20 and 9801.00.25, HTSUS. Subheading
9801.00.20, HTSUS, provides for the free entry of articles
previously imported and duty paid if, upon reimportation, the
articles have not been advanced in value or improved in condition
by any process of manufacture or other means while abroad, and
the articles were exported under lease or similar use agreements.
Subheading 9801.00.25, HTSUS, provides for the free entry of
articles previously imported and duty paid if the articles were
exported within three years after the date of such previous
importation, reimported without having been advanced in value or
improved in condition by any process of manufacture or other
means while abroad, and reimported for the reason that such
articles do not conform to sample or specification.
The alternators attached to the engines do not qualify for
duty-free treatment under either of these subheadings because the
foreign-origin alternators apparently are not exported to Finland
under a lease or similar use agreement, and they are not
reimported due to a lack of conformity with sample or
specification. Additionally, the attachment operation would be
considered to advance in value and improve in condition the
foreign alternator. Therefore, upon return to the U.S., the
alternators are dutiable as part of the value of the engines to
which they are attached.
HOLDING:
On the basis of the information presented, it is our opinion
that the attachment operation performed in Finland is not
considered an alteration. Accordingly, the alternators are not
eligible for the partial duty exemption available under
subheading 9802.00.50, HTSUS. Therefore, the engines (including
the alternators attached thereto) are dutiable on their full
value when imported into the U.S.
Sincerely,
John Durant, Director
Commercial Rulings Division