CLA-2 CO:R:C:S 557929 MLR
District Director
4430 E. Adamo Drive
Suite 301
Tampa, Florida 33605
RE: Application for Further Review of Protest No. 1801-92-100030; Denial of duty exemption under HTSUS subheadings
9801.00.20 and 9801.00.25 to injection molding machines;
transaction value
Dear Madam:
This is in reference to a protest and application for
further review filed by Peter Herrick on behalf of Skaraborg
Invest USA Inc. ("Skaraborg"), contesting the denial of the duty
exemption under subheading 9801.00.20 or 9801.00.25, Harmonized
Tariff Schedule of the United States (HTSUS), to injection
molding machines.
FACTS:
The protestant claims that the injection molding machines
should be duty-free under either subheading 9801.00.20 or
9801.00.25, HTSUS, or if dutiable, the appraised value should be
$289,051.00. Customs denied the claim for duty-free treatment
under subheading 9801.00.20, HTSUS, because insufficient
documentation was provided to show that the machines were
"exported under lease or similar use agreements", and that the
machines were being "imported by or for the account of the person
who imported it into, and exported it from, the United States."
The claim under subheading 9801.00.25, HTSUS, was denied
because the requirements of 19 CFR 10.8a(a)(1) and (4), and
10.8a(b) were not satisfied, and the protestant did not show how
the machines did not conform to sample or specification or
provide any entries to prove these machines were previously
imported into the U.S.
The protestant submits a letter from Ken Swanick, President
of Skaraborg dated May 25, 1991, which states that the Husky
machines S/N 8260 and 8261 were previously imported into the U.S.
at the Port of Fort Erie, Buffalo, New York, in June 1985 (S/N
8260) and January 1986 (S/N 8261), by Data Packaging, Inc. of
Somerset, Massachusetts, at which time duty was paid; the
machines were exported from the U.S. at Port Everglades, Miami,
Florida on July 25, 1989, by Precision Engineered Products, Inc.
("Precision"), of Canyon Lake, California, without benefit of
drawback; and the articles were reimported by or for the account
of Skaraborg.
Another letter from Carl-Erik Landen, President of CePe-Plast KB, Sweden, dated May 25, 1991, is submitted, which states
that the machines were received from Precision, they were not
advanced in value or improved in condition by any process of
manufacture or other means, and they were returned to Skaraborg
because they did not conform to the Ilsemann (European)
specification; therefore, the machines could not be sold in the
European marketplace. Specifically, the protestant states that
Precision and CePe-Plast KB entered into an executory contract
for the sale of the machines, and the machines were exported to
Sweden to be used in a test demonstration. The protestant states
that, if the machines could not be used, they would remain the
property of Precision, and that title to the machines would not
pass until the use of the machines in Europe was proven.
Therefore, protestant alleges that this executory contract is a
"similar use agreement."
After CePe-Plast KB determined that the machines did not
meet specifications, the protestant states that CePe-Plast KB
tried to cancel the agreement and return the machines to
Precision; however, Precision refused to cancel the contract.
Therefore, CePe-Plast KB filed a lawsuit in Sweden against
Precision, and on or about September 11, 1990, obtained a
judgment against Precision. Accordingly, the protestant claims
that since the executory contract was cancelled and the machines
were reimported to the U.S. for the account of Precision, CePe-Plast KB became the "alter ego" of Precision, which under the
laws of Sweden and the Harmonized Code, is the same person as
Precision. The protestant also requests a waiver of the
documentary requirements of 19 CFR 10.8a.
If duty-free treatment is denied, the protestant claims that
there is no transaction value for this merchandise under
19 U.S.C. 1401a(b)(1) because the merchandise was not sold for
exportation to the U.S. The protestant claims that the pro forma
invoice supplied with the entry was for the purpose of
identifying the merchandise, and the reference to the "value for
Customs USD 700,000" has no meaning. The protestant submits that
the proper appraised value for this merchandise, determined
pursuant to 19 CFR 152.107, is $289,051.00 as indicated in a
letter from HUSKY Injection Molding Systems Ltd. dated December
18, 1991, which states that the two machines, serial number 8260
and 8261, have an approximate resale value of $80,000.00 and
$90,000.00, respectively, and the Husky Stack Molds are worth
approximately $50,000.00. The record also contains an invoice
from Chicago Mold Engineering Co., Inc. dated February 26, 1985,
setting the price of the tray mold at $79,051.00. The protestant
also claims that under Generally Accepted Accounting Principles
the tray mold would be eligible for a reduction in value based on
depreciation.
ISSUES:
I. Whether the injection molding machines are eligible for the
duty exemption under either subheading 9801.00.20 or
9801.00.25, HTSUS, when returned to the U.S.
II. Whether the articles should be appraised on the basis of
transaction value.
LAW AND ANALYSIS:
I. Subheadings 9801.00.20 and 9801.00.25, HTSUS
Subheading 9801.00.20, HTSUS, provides duty-free treatment
for:
[a]rticles, previously imported, with respect to which the
duty was paid upon such previous importation or which were
previously free of duty pursuant to the Caribbean Basin
Economic Recovery Act or Title V of the Trade Act of 1974,
if (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.
Section 10.108, Customs Regulations (19 CFR 10.108),
provides, in relevant part, that free entry shall be accorded
under subheading 9801.00.20, HTSUS, whenever it is established to
the satisfaction of the district director that the article for
which free entry is claimed was duty paid on a previous
importation, and is being reimported by or for the account of the
person who previously imported it into, and exported it from the
U.S.
In Headquarters Ruling Letter (HRL) 557193 dated
July 19, 1993, Customs determined that forklift trucks originally
imported into the U.S. by Caterpillar Inc., leased by Hawthorne
Lift Systems, California, to Hyundai de Mexico, and imported by
Hyundai Precision America, Inc., were not eligible for subheading
9801.00.20, HTSUS, since there was no indication that either
Hyundai Precision America, Inc. or Hawthorne Lift Systems was
acting on behalf of Caterpillar when the forklifts were exported
and reimported. Therefore, because the trucks were not
reimported by or of the account of the person who imported them
into, and exported them from the U.S., subheading 9801.00.20,
HTSUS, was inapplicable.
Similarly, in this case, no documentation has been submitted
to show that the machines were reimported by or for the account
of Data Packaging, Inc., the previous importer of the protested
merchandise. It is clear from the regulations that the decision
to grant duty-free treatment is dependent upon the district
director being satisfied that the requirements of 19 CFR 10.108
are met. Since the protestant has failed to provide the
documentation necessary to satisfy the district director, we find
that the machines are ineligible for duty-free treatment under
subheading 9801.00.20, HTSUS.
Subheading 9801.00.25, HTSUS, provides for the duty-free
entry of:
[a]rticles, previously imported, with respect to which the
duty was paid upon such previous importation if (1) exported
within three years after the date of such previous
importation, (2) reimported without having been advanced in
value or improved in condition by any process of manufacture
or other means while abroad, (3) reimported for the reason
that such articles do not conform to sample or
specification, and (4) reimported by or for the account of
the person who imported them into, and exported them from,
the United States.
Articles satisfying each of the above requirements are entitled
to duty-free treatment, assuming compliance with the documentary
requirements of section 10.8a, Customs Regulations (19 CFR
10.8a). This regulation contains the same criteria found in
subheading 9801.00.25, HTSUS. The documents required are
declarations by the person abroad who received and is returning
the merchandise, and by the owner or importer (or consignee or
agent). Each declaration must include a description of the
articles, and information relative to the original importation of
the merchandise, such as port and date of importation, entry
number, and name and address of the importer at the time the duty
was paid. 19 CFR 10.8a(b).
In this case, the record reflects that the machines were
previously imported into the U.S. by Data Packaging, Inc. at the
Port of Fort Erie, Buffalo, New York, in June 1985 (S/N 8260) and
January 1986, and that the machines were exported from the U.S.
at Port Everglades, Miami, Florida, on July 25, 1989, by
Precision. This does not meet the first requirement under
subheading 9801.00.25, HTSUS, that the articles are exported
within three years after the date of such previous importation.
Nor is the fourth requirement satisfied, that the machines were
reimported by or for the account of the person who imported them
into (i.e., Data Packaging, Inc.), and exported them from, the
U.S.
In addition, the documentary requirements of 19 CFR 10.8a
were not satisfied. The protestant requests a waiver of these
documentary requirements. As provided by 19 CFR 10.8a(c):
[i]f the district director concerned is reasonably satisfied
because of the nature of the articles or production of other
evidence that the requirements of subheading 9801.00.25,
[HTSUS], and the related section and the additional U.S.
notes have been met, he may waive the production of the
documents provided for in paragraph (b) of this section.
Accordingly, since the district director did not waive the
documentary requirements, the claim for subheading 9801.00.25,
HTSUS, should be denied.
II. Transaction Value
Merchandise imported into the U.S. is appraised in
accordance with section 402 of the Tariff Act of 1930, as amended
by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. 1401a). The
preferred method of appraisement under the TAA is transaction
value, defined as "the price actually paid or payable for the
merchandise when sold for exportation to the United States", plus
certain statutorily enumerated additions. 19 U.S.C. 1401a(b)(1).
In the instant case, the protested merchandise was appraised
under the transaction value method based on a commercial invoice
presented with the entry which identified the value of the
merchandise as being $700,000. Section 141.86(a)(5)-(6), Customs
Regulations {19 CFR 141.86(a)(5)-(6)}, provides that each invoice
of imported merchandise shall set forth the purchase price of
each item, or the value of each item if the merchandise was not
shipped pursuant to a purchase or an agreement to purchase.
There is nothing on the commercial invoice to indicate that the
protested merchandise was shipped otherwise than pursuant to a
purchase or agreement to purchase.
Protestant contends that the protested merchandise was not
the subject of a sale and, therefore, cannot be appraised under
transaction value; however, protestant has not submitted any
documentation to support this claim. Accordingly, it is our
position that the protested merchandise was correctly appraised
as entered on the basis of transaction value.
HOLDING:
On the basis of the information submitted, the protested
merchandise is not eligible for duty-free treatment under
subheading 9801.00.20 or 9801.00.25, HTSUS, because the articles
were not reimported by or for the account of the person who
previously imported them into, and exported them from the U.S.
Furthermore, the protested merchandise was correctly appraised as
entered on the basis of transaction value. Accordingly, the
protest should be denied in full.
In accordance with Section 3A(11)(b) of Customs Directive
099 3550-065 dated August 4, 1993, Subject: Revised Protest
Directive, this decision should be attached to Customs Form 19,
Notice of Action, and be mailed by your office to the protestant
no later than 60 days from the date of this letter. Any
reliquidation of the entry in accordance with the decision must
be accomplished prior to mailing of the decision. Sixty days
from the date of the decision the Office of Regulations and
Rulings will take steps to make the decision available to customs
personnel via the Customs Rulings Module in ACS and the public
via the Diskette Subscription Service, Freedom of Information Act
and other public access channels.
Sincerely,
John Durant, Director
Commercial Rulings Division