CLA-2 CO:R:C: 556960 BLS
District Director of Customs
880 Front Street, Rm. 5-S-9
San Diego, California 92188
RE: Internal Advice 54/92; subheading 9802.00.80, HTSUS;
identification of U.S. components, entry-by-entry basis;
commingling; segregation of U.S. and foreign components;
19 CFR 10.24(a); 10.24(d); 10.24(e); HRL 071136
Dear Sir:
This is in reference to your undated memorandum received in
this office October 5, 1992, concerning the applicability of
subheading 9802.00.80, HTSUS, to certain remanufactured
turbochargers imported by Garrett Aftermarket Division of Allied
Signal, Inc. ("Garrett").
FACTS:
Garrett exports used turbochargers to their Mexican facility
in Mexicali. There, they disassemble them, inspect the
disassembled components, clean those components that are still of
usable quality and then assemble turbochargers according to
customer orders. Those components that do not meet quality
standards will be scrapped.
Garrett also exports new U.S.-origin components, which it uses
with the refurbished components, to assemble the turbochargers.
The remanufactured turbochargers ("reman turbos") are shipped to
the U.S.
Assembly of the reman turbos is dependent on specific customer
orders. A customer order can be a minimum of 5 to 200 turbos. The
average order is 50 turbos. Each order is considered a "lot".
Each shipment to the U.S. can consist of up to 10 different lots.
Garrett can identify the number, type and value of the new U.S.-
origin components for each and every customer order or "lot", on
each and every shipment to the U.S. However, Garrett is unable to
identify the U.S. components in each individual turbocharger, since
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the units are not produced individually and none of its internal
documentation is set up by individual unit, but rather by
production lot.
Garrett claims that the new U.S. origin components are
physically and strictly segregated from the recycled components in
the assembly process; that they are never commingled with
refurbished components in common bins; that its internal
requirements and controls can, without exception, identity the
precise quantity and identity of the U.S. components in each lot,
on an entry-by-entry basis. The company claims that it can provide
records to identify the specific components of U.S. origin in
particular shipments.
ISSUE:
1) Whether the imported remanufactured turbochargers may be
eligible for the partial duty exemption under subheading
9802.00.80, HTSUS, when the U.S. components cannot be
identified on the basis of the individual turbocharger, but
may be identified on an entry-by-entry basis.
2) In the alternative, may Garrett use its 6-month cost
submission, currently used to reconcile its costs for
appraisement purposes, to claim subheading 9802.00.80, HTSUS, for
all importations made during the prior 6 month period, and to
reconcile duties owed/refunded at that time.
LAW AND ANALYSIS:
Section 10.24(a), Customs Regulations (19 CFR 10.24(a)),
requires the submission of a foreign assembler's declaration with
the entry of articles claimed to be entitled to the exemption under
subheading 9802.00.80, HTSUS. The declaration must state that, to
the best of the asembler's "knowledge and belief", the articles
being imported were assembled, in whole or in part, from components
that are products of the U.S., and must contain certain information
concerning the U.S. components, including their description,
quantity and value. The declaration must also include a
description of the assembly operations performed abroad, as well
as an endorsement by the importer stating that the declaration and
other documents submitted are correct and comply with all pertinent
Notes of the HTSUS.
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Please note that it is the position of this office that under
19 CFR 10.24, a subheading 9802.00.80, HTSUS, exemption may be
granted only if the importer can demonstrate, for each and every
entry for which the allowance is claimed, that those components
claimed to be products of the U.S. are, in fact, products of the
U.S. Also pursuant to section 10.24, the district director may
waive the detailed entry-by-entry documentation when he/she is
satisfied that the importer and assembler have established
reliable controls, including the strict physical segregation of
U.S. and foreign components and the maintenance of any other
records pertaining to the U.S. components, so that the district
director can identify by audit, if necessary, the specific
components of U.S. origin in particular shipments for which a
subheading 9802.00.80, HTSUS, allowance is claimed. See, for
example, Headquarters Ruling 071136, dated December 27, 1983.
This position precludes from subheading 9802.00.80, HTSUS,
treatment, any claim based on an accounting procedure, such as the
aggregate-quantity method or the cost-ratio method, in which the
U.S. and foreign components had been commingled in such a way that
the precise quantity and value of the U.S. components in a given
shipment could not be substantiated.
In the instant case, if Garrett is able to document the U.S.
origin of the imported components on an entry-by-entry basis, or
establish, to your satisfaction, that the required controls are
maintained to strictly segregate new U.S. origin and foreign or
refurbished components to prevent commingling, then the imported
articles will be eligible for the partial duty exemption under
subheading 9802.00.80, HTSUS, provided all other documentary
requirements of 19 CFR 10.24 are satisfied. The assistance of
Regulatory Audit or other Customs office may be required to verify
the required controls, and to ensure compliance with record-
keeping requirements.
We reject as unacceptable Garrett's alternative request that
the semi-annual computed value cost submission be used as a vehicle
for reconciling the U.S. origin of the components for entries filed
during the preceding 6 month period. Such approach is comparable
to an "aggregate-quantity" method of accounting, and would permit
commingling of U.S. and or refurbished foreign components. The
quantity and identity of U. S. components in a given shipment could
not be substantiated, contrary to 19 CFR 10.24(a), as enunciated
in prior rulings of this office.
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HOLDING:
1) Remanufactured turbochargers will be entitled to the partial
duty exemption under subheading 9802.00.80, HTSUS, assuming all
documentary requirements are satisfied, if the importer can
establish that reliable controls are in effect resulting in strict
physical segregation of new U.S.-origin components and foreign or
refurbished components, and specific U.S. components can be
identified on an entry-by-entry basis.
2) A semi-annual cost submission reflecting the quantity and
value of U.S. components imported during the preceding 6 month
period cannot be used to determine the eligibility of the imported
turbochargers for the partial duty exemption under subheading
9802.00.80, HTSUS.
Sincerely,
John Durant, Director
Commercial Rulings Division