CLA-2 CO:R:C:S 557969 MLR
District Director
U.S. Customs Service
San Diego, CA 92101
RE: Internal Advice Request No. 31/94; Applicability of duty
exemption under HTSUS subheading 9802.00.50 to gas turbine
engine sub-assemblies; disassemble; machine; replace parts;
Dear Sir:
This is in response to your memorandum of March 22, 1994,
seeking internal advice at the request of Stein, Shostak, Shostak
& O'Hara, P.C., and Mesa Gateway Greitzer Brokers, Inc. on behalf
of Solar Turbines, Inc. ("Solar"), regarding the applicability of
subheading 9802.00.50, Harmonized Tariff Schedule of the United
States (HTSUS), to gas turbine engine sub-assemblies.
FACTS:
At issue are two Mexican operations: the plasma repair of a
bearing housing, and a weld repair of a turbine nozzle assembly.
The operations performed to the No. 2 Bearing Housing Support
basically consist of match marking the essential parts (which are
identified as the outer support and the inner support),
disassembling the seals, cleaning by sand blasting, inspecting,
machining to remove damaged material, plasma spraying, assembling
replacement parts with the matched parts, finish machining to the
original dimensions, and painting to original specifications.
The operations performed to the 1st State Nozzle Assembly
basically consist of disassembly, cleaning by sand blasting,
inspecting, conducting a pre-welding heat treatment, removing
cracks by grinding, welding cracks, grinding to reestablish the
original contour, conducting a post-welding heat treatment,
machine drilling new holes, and reassembly. The essential part
of the 1st State Nozzle Assembly is identified as the nozzle
case.
The record also contains declarations from Turbotec in
Mexico, stating that a bearing housing and turbine nozzle
assembly were received from Solar and a plasma repair and weld
repair were conducted. Two other declarations are submitted
stating that the same goods exported from San Diego were entered.
ISSUE:
Whether the operations performed to the gas turbine engine
sub-assemblies constitute repairs within the meaning of
subheading 9802.00.50, Harmonized Tariff Schedule of the United
States (HTSUS), thereby qualifying the returned sub-assemblies
for the duty exemption under this tariff provision.
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).
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), which
were published December 30, 1993 (58 Fed. Reg. 69483) (effective
January 1, 1994) are met.
Repairs are operations aimed at restoring articles to their
original condition, but cannot be so extensive as to destroy the
identity of the exported article or to create a new and different
article. Press Wireless, Inc. v. United States, 6 Cust. Ct. 102,
C.D. 438 (1941). In Press Wireless, radio tubes were sent abroad
for repairs which involved the use of heavier filament than that
used in the original manufacture of the tubes. Also, the
markings on the articles were erased, and new numbers were
substituted to facilitate matching the tubes for use in
transmitters. The court held that the use of improved materials
in the restoration was immaterial, as long as the article was not
considered a new and different article of commerce or its
identity was destroyed.
In Headquarters Ruling Letter (HRL) 556452 dated April 4,
1992, Customs considered gas producers. The four "essential
identity" parts, namely the air inlet housing, compressor stator
case, combustor housing, and nozzle support case, were first
serialized, then the units were disassembled, cleaned, grit
blasted, machined, non-essential components were replaced, and
the units were reassembled. It was held that since the
"essential identity" of the exported gas producers was preserved,
the repaired gas producers qualified for the partial duty
exemption under subheading 9802.00.50, HTSUS.
In HRL 554952 dated March 14, 1989, Customs held that used
casting molds re-formed by an "explosive forming" process which
consisted of removing the chrome surface, grinding away defects,
fitting a mandrel into the used mold, wrapping a plastic
explosive around the casting, immersing the unit into water, and
detonating the explosive merely restored the exported casting
molds to their original condition, and therefore, constituted a
repair. In HRL 554731 dated February 2, 1989, Customs considered
fuel injectors which were disassembled and cleaned, and certain
parts were replaced. Customs determined that the fuel injectors
qualified for subheading 9802.00.50, HTSUS, treatment, as long as
the adapter and retainer of the fuel injector were not replaced
and remained together as a matched set, as these constituted the
essential identity of the fuel injector. In HRL 555741 dated
February 25, 1991, Customs held that certain consumer electronic
products tested and subjected to repair operations, consisting of
the replacement of malfunctioning component parts and/or the
addition of missing parts were entitled to the partial duty
exemption under subheading 9802.00.50, HTSUS.
Similarly in case, we find that the operations performed in
Mexico, consisting of disassembly, cleaning by sand blasting,
machining, welding, grinding, painting, and reassembly,
constitute "repairs", as the essential components of the sub-assemblies are retained. Furthermore, it appears that the
documentary requirements of section 181.64 are met; therefore,
the sub-assemblies qualify for the full duty exemption under
subheading 9802.00.50, HTSUS.
HOLDING:
On the basis of the information submitted, it is our opinion
that the Mexican operations enumerated above constitute "repairs"
since the essential components of the sub-assemblies are
retained. It also appears that the documentary requirements of
section 181.64 are met. Therefore, the sub-assemblies qualify
for the full duty exemption under subheading 9802.00.50, HTSUS.
This decision should be mailed by your office to the
internal advice requester no later than 60 days from the date of
this letter. On that date, 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