CLA-2 CO:R:C:S 557890 MLR
Mr. Conrad R. Schudel
Schudel & Associates
132 N. El Camino Real Ste. 303
Encinitas, CA 92024
RE: Applicability of duty exemption under HTSUS subheading
9802.00.50 to automobiles; mechanical repairs; body work;
repainting; reupholstery
Dear Mr. Schudel:
This is in reference to your letter of April 7, 1994,
requesting a ruling regarding the implications on automobiles
exported to Mexico where body work, mechanical reparations,
repainting, and reupholstery work will be performed.
FACTS:
You state that you wish to form a company that will export
automobiles to Mexico where body work, mechanical reparations,
repainting, and reupholstery work will be performed.
ISSUE:
Whether the automobiles subjected to body work, mechanical
reparations, repainting, and reupholstery work in Mexico will
qualify for the duty exemption under subheading 9802.00.50,
Harmonized Tariff Schedule of the United States (HTSUS), when
returned to the U.S.
LAW AND ANALYSIS:
Articles exported from and returned to the U.S., after having
been advanced in value or improved in condition by repairs or
alterations in Mexico, may qualify for a duty exemption under HTSUS
subheading 9802.00.50, provided the foreign operation does not
destroy the identity of the exported articles or create new or
commercially different articles through a process of manufacture.
See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956),
aff'g C.D. 1752, 36 Cust. Ct. 46 (1956); Guardian Industries Corp.
v. United States, 3 CIT 9 (1982). Accordingly, entitlement to this
tariff treatment is precluded where the exported articles are
incomplete for their intended purpose prior to the foreign
processing. Guardian; Dolliff & Company, Inc. v. United States,
455 F.Supp. 618 (CIT 1978), aff'd, 599 F.2d 1015 (Fed. Cir. 1979).
Articles are entitled to this duty exemption provided the
documentary requirements of section 181.64, of the North American
Free Trade Agreement (NAFTA), Interim Rules (T.D. 94-1), set forth
at 58 Fed. Reg. 69483 (December 30, 1993) (copy enclosed), are met.
In Headquarters Ruling Letter (HRL) 555135 dated October 18,
1988, Customs considered passenger automobiles exported to Mexico
where components such as the engine and drivetrain, steering and
suspension were rebuilt and repaired. The frame, bumpers, and
shell of the automobiles were also straightened and/or welded.
The seats, headliners, carpets, dash items, oil, brake shoes,
tires, filters, defective windows, windshields, bulbs, lens covers,
and mirrors were also repaired or replaced. After the automobiles
were reassembled, they were painted and returned to the U.S. It
was held that these foreign repairs and refurbishments did not
create a new or commercially different article, and that the
automobiles returned were the same articles as those exported.
Consequently, the foreign repairs and refurbishments were
considered a repair within the meaning of item 806.20, Tariff
Schedules of the United States (TSUS) (now subheading 9802.00.50,
HTSUS).
Similarly, in the instant case, although you do not provide
specific details on the mechanical repairs to be made, we find that
automobiles exported to Mexico and subjected to mechanical
reparations, operations which repair the body, repainting, and
reupholstery work, will qualify for the full duty exemption under
subheading 9802.00.50, HTSUS, when returned to the U.S., provided
the documentary requirements of section 181.64 are satisfied.
Regarding the documentation and insurance required to use
automobile trailers, we suggest you contact the State of California
and the Mexican Government.
HOLDING:
On the basis of the information submitted, it is our opinion
that automobiles subjected to mechanical reparations, operations
which repair the body, repainting, and reupholstery work in Mexico,
will qualify for the full duty exemption under subheading
9802.00.50, HTSUS, when returned to the U.S., provided the
documentary requirements of section 181.64 (T.D. 94-1) are
satisfied.
Sincerely,
John Durant, Director
Commercial Rulings Division