CLA-2 CO:R:C:S 556790 WAW
District Director
U.S. Customs Service
423 Canal Street
New Orleans, LA 70130
RE: Application for Further Review of Protest No. 2002-92- 100070;
19 CFR 10.183; General Note 3(c)(vi); Civil Aircraft Agreement
Dear Sir:
This is a decision on an Application for Further Review of
the above-referenced protest, filed by Federal Express Corp.,
concerning the eligibility of a DC-10-10 which has been modified
in Portugal for duty-free treatment pursuant to the Civil Aircraft
Agreement (Title VI of Public Law 96-39), upon entry into the U.S.
The entry the subject of this protest is dated December 7, 1990.
FACTS:
The merchandise at issue in this protest consists of an
aircraft, referred to as Model No. N68058, SN 46705, McDonnell
Douglas DC-10 Series 10. Federal Express protests the value
advance of $1,859,240.55, and commingling of the aircraft
modification parts on this entry under subheading 8481.30.20,
Harmonized Tariff Schedule of the United States (HTSUS), dutiable
at 8 percent. The value advance and classification change in the
entry resulted in an additional duty due of $148,739.28. Federal
Express claims that the cost of all modification parts and labor
charges should be included as part of the value of the duty-free
Civil aircraft under subheading 8802.40.0090, HTSUS.
The subject aircraft was purchased by Federal Express from
McDonnell Douglas Corp., and flown to Portugal where additional
equipment was added and certain modifications were made on the
plane by TAP Air Portugal. Among some of the modifications made
in Portugal was the installation of a "weight increase" using parts
of U.S.-origin purchased by Federal Express and valued at $418,000.
Aircraft design weights were increased as part of a passenger to
freighter modification contract between Federal Express and
McDonnell Douglas and was accomplished by TAP Air Portugal during
the period from August 31, 1990 to December 6, 1990. During this
same period, a structural modification to the wing pylons was
performed by TAP. The cool pylon modification consists of a
structural modification to the fixture which holds a turbine engine
pod to the wing of the aircraft.
The aircraft was returned to the U.S. for a Zero B/C
maintenance check at a vendor in Alabama. Certain unserviceable
spare parts of U.S.-origin valued at $100,000 were also returned
with the aircraft. The cost of the Portugese labor and Portugese
origin parts used in the installations and modifications was
calculated at $482,000. At the time of entry, the returned
unserviceable parts of U.S.-origin were entered under HTSUS
subheading 9801.00.10. The aircraft and the U.S.-origin furnished
parts were entered under HTSUS subheading 9802.00.40. The
remaining $482,000 which comprised the Portugese-origin materials
and labor were entered under HTSUS subheading 8803.30.00104/Free
as parts of civil aircraft.
In a letter of September 18, 1991, in response to a Request
for Information, the protestant stated that, in addition to the
above modifications on the aircraft, another charge of $586,692.12
was incurred for extra materials provided by TAP that were not
anticipated prior to the initiation of the stated modification
work. These charges were not known to exist at the time of entry
and consequently were not made part of the entry package.
Protestant has provided an exhibit of charges and work performed
at the TAP Lisbon, Portugal facility for the subject aircraft.
It is Federal Express' position that the operations performed
in Portugal serve to modify the N68058 aircraft into a standard
Federal Express DC-10 Series 10 freighter configuration. The
resulting aircraft is identical to all DC-10-10F aircraft which are
now in operation with Federal Express. Federal Express claims that
the work performed and the parts used in the modification process
enhance the basic capability of the aircraft and are an integral
part of the unit itself. Protestant claims that the final product
is virtually identical in form and function to the aircraft prior
its conversion into a cargo aircraft. Furthermore, protestant
maintains that the aircraft should be entered under subheading
8802.40.0090, HTSUS, which encompasses "Airplanes and other
aircraft, of an unladen weight exceeding 15,000 kg. . . Used or
rebuilt: . . . Other aircraft." This provision provides in the
Special subcolumn for the duty-free treatment of products
qualifying under the Agreement on Trade in Civil Aircraft. Thus,
protestant claims that the cost of all labor, modifications, and
associated parts should be entered under subheading 8802.40.0090,
HTSUS, and entitled to duty-free treatment under the Agreement in
trade on civil aircraft.
ISSUE:
Whether the DC 10-10 aircraft and parts of the aircraft which
are imported from Portugal into the U.S. are entitled to duty-free
treatment under the Agreement on Trade in Civil Aircraft.
LAW AND ANALYSIS:
The Agreement on Trade in Civil Aircraft was implemented by
Title VI, "Civil Aircraft Agreement" of the Trade Agreements Act
of 1979 (Sec. 601, P.L. 96-39, 93 Stat. 144, 96th Cong., 1st Sess.
1979), effective January 1, 1980. On June 7, 1984, 19 CFR Part 10
was amended to include section 10.183, which provides for duty-
free admission of civil aircraft and parts for civil aircraft
certified for use in accordance with the provisions of General Note
3(c)(vi) of the HTSUS. Section 10.183 of the Customs Regulations
(19 CFR 10.183) and General Note 3(c)(iv), HTSUS, provide the
authority under which articles may be eligible for the duty-free
treatment pursuant to the Agreement on Trade in Civil Aircraft when
entering the Customs territory.
Section 10.183 further provides that the importer must file
with the appropriate Customs officer a statement that the imported
article has been imported for use in a civil aircraft and will be
so used. Additionally, the article(s) specifically identified in
the entry summary require approval for use in the civil aircraft
by the Administrator of the Federal Aviation Administration
("F.A.A.") or an airworthiness authority in the country of
exportation. This approval by the country of exportation is
recognized by the F.A.A. as an acceptable substitute for F.A.A.
approval.
General Note 3(c)(vi), HTSUS, defines the term "civil
aircraft" as all aircraft other than aircraft purchased for use by
the Department of Defense or the United States Coast Guard. Parts
imported in the described circumstances would qualify under this
definition.
Section 10.112, Customs Regulations (19 CFR 10.112), provides
that documentation for free entry that was not filed at the time
of entry may be filed at any time prior to liquidation or before
liquidation becomes final. However, 19 CFR 10.183 specifically
states that the failure to provide the certification at the time
of filing the entry summary or to have an approved blanket
certification on file with the district director in the district
where the entry summary is filed shall result in a dutiable entry.
There is no requirement placed upon the importer at the time
of entry summary to prove end use of the merchandise. There is,
however, a requirement that the importer certify that the parts
have been imported for use in a civil aircraft. The certification
represents a statement of intent by the importer that the
merchandise will be put to the qualifying use.
In this case, the importer claims that the aircraft in its
current configuration is a total entity and, based on the tariff
schedule, the modified DC-10-10 should be entered in accordance
with subheading 8802.40.0090, HTSUS. It has been established that
the protestant retains a blanket Civil Aircraft Agreement with the
District Director of Customs in New Orleans, Louisiana, as provided
by 19 CFR 10.183. Based on the documents provided by protestant,
it is our opinion that the protestant has provided sufficient
evidence that the imported article and any parts imported with the
aircraft have been imported for use in civil aircraft; they will
be so used and that the articles have been approved for such use
by the Federal Aviation Authority (FAA) or an airworthiness
authority in the country of exportation. Therefore, we are of the
opinion that the aircraft and any parts imported with the aircraft
are entitled to duty-free treatment pursuant to the Civil Aircraft
Agreement. Accordingly, based on the foregoing analysis,
consideration of subheading 9802.00.40, HTSUS, as an alternative
classification is not necessary. This conclusion is consistent
with Headquarters Ruling Letter 071734 dated April 24, 1984, which
concerned the same importer.
HOLDING:
Based upon the information provided, we are of the opinion
that the imported aircraft and parts will be used in a qualifying
manner under the Agreement in Trade in Civil Aircraft, and will be
entitled to duty-free treatment under this agreement. Therefore,
the protest should be granted. A copy of this decision should be
attached to the CF 19, Notice of Action, and sent to the protestant
to satisfy the notice requirement under the regulations.
Sincerely,
John Durant, Director
Commercial Rulings Division