CLA-2 CO:R:C:S 557536 WAS
Mr. Arthur Cherry
Arthur Cherry Associates
1315 Walnut Street
Suite 807
Philadelphia, PA 19107
RE: Eligibility of certain machines for duty-free treatment
under subheading 9801.00.20, HTSUS; lease agreement.
Dear Mr. Cherry:
This is in response to your letter dated June 8, 1993, on
behalf of General Electric Company and its subsidiary, GE
Rental/Lease, Inc., concerning the eligibility of certain
machines for duty-free treatment under subheading 9801.00.20,
Harmonized Tariff Schedule of the United States (HTSUS). Your
letter was forwarded to us from the New York Seaport, National
Import Specialist Division, for a response.
FACTS:
You state that GE Rental/Lease is in the business of
providing data processing and other equipment on short-term
leases, frequently to foreign customers. The leased equipment
may be of domestic or foreign origin, and may be acquired by GE
Rental/Lease directly from manufacturers, distributors, or in
used condition from third parties. In some cases, the country of
origin of the leased equipment is not known to GE Rental/Lease,
and in some cases, even though the country of origin is known or
believed to be U.S., the documentation necessary to demonstrate
U.S. origin for classification under subheading 9801.00.10,
HTSUS, is unavailable. Consequently, you state that at the end
of a lease to a foreign customer, GE Rental/Lease often is
required to enter the articles as foreign and deposit the
appropriate duty. In the case of foreign articles, GE
Rental/Lease ordinarily was not the importer of the first
importation of the articles into the U.S., but is the importer in
subsequent importations while the articles are owned by GE
Rental/Lease. You state that the articles are both exported and
reimported by or for the account of GE Rental/Lease. The
articles are reimported without having been advanced in value or
improved in condition by any process of manufacture or other
means while abroad.
ISSUE:
Whether a company who is not the original importer of an
article and pays duty upon the first reimportation of the leased
machine can qualify the machine for duty-free treatment under
subheading 9801.00.20, HTSUS, upon subsequent returns to the U.S.
LAW AND ANALYSIS:
Subheading 9801.00.20, HTSUS, provides duty-free treatment
for "articles previously imported, with respect to which the duty
was paid upon such previous importation, . . . if [the articles
are] (1) reimported, without having been advanced in value or
improved in condition by any process of manufacture or other
means while abroad, after having been exported under lease or
similar use agreements, and (2) reimported by or for the account
of the person who imported it into, and exported it from, the
United States."
We have previously held that, pursuant to 801.00, Tariff
Schedules of the United States (TSUS) (the precursor to
subheading 9801.00.20, HTSUS), merchandise must be reimported by
or for the account of the person who imported it into, and
exported it from the U.S., and also the merchandise must have
been leased to a foreign manufacturer. In HRL 067920 dated
August 31, 1982, a crane company placed a purchase order for a
crane with an American-based company who accepted the order and
in turn passed the order to an affiliated factory in Sweden. The
foreign-made crane was then entered into the U.S. by and for the
account of the American-based company and, after sale, was
forwarded to the crane company's jobsite in the U.S. The crane
company subsequently exported the crane under a lease agreement
to a Mexican firm. The crane was later returned to the U.S. by
and for the account of the crane company. We held that although
the crane may have been imported for the crane company because of
a purchase agreement, the entry documents show that the American-based company was the importer of record and duty was paid by
that firm. Generally, Customs has held that the term "importer"
means "the person primarily liable for the payment of any duties
on the merchandise, or an authorized agent acting on his behalf."
In HRL 067920, we found that the american-based company was the
designated importer of record and paid customs duties for which
it was primarily liable. The company was a separate business
entity and failed to show that it was acting as agent "by or for
the account" of the exporter, and re-importer of the crane.
In HRL 553676 dated February 28, 1986, a mold was imported
from Portugal into the U.S., and subject to duty-free treatment
under the Generalized System of Preferences (GSP) by Max Klein
Company of Wisconsin. The mold was subsequently exported to a
Canadian manufacturer under a lease agreement by Bow Plastics Ltd
in an exclusive right and license agreement, which gave Bow
Plastics the authority for the transportation of the mols back
and forth and the payment of duties. The Max Klein Company
stated that the described mold was being leased to Bow Plastics
and the lease agreement was considered valid. The mold was
imported into the U.S. by Bow Plastics from Canada, and duty
paid. The mold was later returned to Bow Plastics in Canada for
a second production run and again reimported by Bow Plastics.
Duty-free treatment was granted because the mold was imported
into the U.S. on both occasions from Canada by the Customs agent
acting on behalf of his principal, Bow Plastics, who in turn was
responsible for the transportation of the molds, back and forth,
and given the llicense to make and sell planters produced from
the mold and to pay the duty.
Moreover, in a recent case interpreting item 801.00, Tariff
Schedules of the United States (TSUS) (the precursor provision to
subheading 9801.00.20, HTSUS), the Court of International Trade
stated that the purpose of this provision is "to eliminate an
assessment of duty which has the appearance of double taxation."
See Werner & Pfleiderer Corp., v. United States, Slip Op. 93-166.
The court in Werner also stated that "the provision concerning
goods exported under lease, in particular, is not 'the sort of
exemption from duties which must be narrowly construed.'"
In the instant case, it is clear that the machine satisfies
the first requirement under subheading 9801.00.20, HTSUS. The
machine is reimported into the U.S. without having been advanced
in value or improved in condition abroad by any process of
manufacture or other means, and the machine is exported under a
lease agreement. In addition, consistent with HRL's 067920 and
553676, the second requirement under this provision is satisfied,
since GE Rental/Lease is the same entity who imported the
equipment into the U.S. and paid the applicable duty, exported it
under lease and then reimported the machinery. Nothing in
subheading 9801.00.20, HTSUS, requires a party to be the original
importer into the U.S. in order for the article to be eligible
for duty-free treatment under this provision. The requirements
are simply that the article must have been previously imported
duty-paid, exported by the same party, and then reimported by the
same party after lease, without having been advanced in value or
improved in condition while abroad. These conditions are met by
GE Rental/Lease since, although it is not the original importer,
the information shows that they have imported the equipment into
the U.S., paid the applicable duty, exported the article to a
foreign company under a lease agreement, and subsequently
reimported the same article into the U.S. Accordingly, we are of
the opinion that the equipment is eligible for duty-free
treatment under subheading 9801.00.20, HTSUS, when reimported
into the U.S. by GE Rental/Lease.
In addition, articles which may be of U.S. origin but which
cannot be documented as such would also be entitled to duty-free
treatment under subheading 9801.00.20, HTSUS, if applicable
duties are paid upon their initial importation and the other
statutory requirements are met.
HOLDING:
Based upon the information provided, we are of the opinion
that equipment (whether U.S. or foreign) which is previously
imported with full payment of duty by GE Rental/Lease,
subsequently exported by the same party under a lease agreement
and then reimported by the same party into the U.S. without
having been advanced in value or improved in condition while
abroad, is eligible for duty-free entry into the U.S. under
subheading 9801.00.20, HTSUS, provided the documentation
requirements of section 10.1(a), Customs Regulations (19 CFR
10.1(a)), are satisfied.
Sincerely,
John Durant, Director
Commercial Rulings Division