CLA-2 CO:R:C:S 558723 MLR
Mr. Michael L. Chance
Transportation & Transit Assoc., Inc.
3251 Garmon Drive
Loganville, Georgia 30249
RE: Applicability of duty exemption under HTSUS subheading
9801.00.10 to self-propelled railway diesel coaches;
refurbish in Canada; U.S.-origin
Dear Mr. Chance:
This is in reference to your letter of August 25, 1994,
requesting a ruling regarding the applicability of subheading
9801.00.10, Harmonized Tariff Schedule of the United States
(HTSUS), to self-propelled railway diesel coaches ("coaches")
which you plan to refurbish in Canada.
FACTS:
You are currently pursuing a contract for an extensive
refurbishment of approximately 10 coaches in Canada, with labor
and materials valued at about $500,000. You indicate that the
coaches were originally manufactured in the U.S. by the Budd
Company. In a facsimile dated August 30, 1994, you indicate that
the coaches were exported to Canada approximately 10 years ago,
and will be restored to their original serviceable condition as
exported to Canada by renewing or replacing any components with
physical or mechanical wear. In some instances, you plan to
return the coaches in their used and deteriorated condition
without performing any refurbishment work on them in Canada.
You also mentioned in a telephone conversation with a member of
my staff that the coaches were new when they were exported to
Canada.
ISSUES:
I. Whether the coaches refurbished in Canada will qualify for
the duty exemption available under subheading 9801.00.10,
HTSUS, when returned to the U.S.
II. Whether the coaches will qualify for the duty exemption
available under subheading 9801.00.10, HTSUS, when returned
to the U.S. in their used and deteriorated condition.
LAW AND ANALYSIS:
Subheading 9801.00.10, HTSUS, provides for the free entry of
products of the U.S. that have been exported and returned without
having been advanced in value or improved in condition by any
process of manufacture or other means while abroad, provided the
documentary requirements of section 10.1, Customs Regulations (19
CFR 10.1), are met. See 59 Fed. Reg. 25563 (May 17, 1994), for
recent amendments to 19 CFR 10.1 (copy enclosed). While some
change in the condition of the product while it is abroad is
permissible, operations which either advance the value or improve
the condition of the exported product render it ineligible for
duty-free entry upon return to the U.S. Border Brokerage
Company, Inc. v. United States, 314 F. Supp. 788 (1970), appeal
dismissed, 58 CCPA 165 (1970).
In determining whether an advancement in value or
improvement in condition exists at the time of importation, the
overall value and condition of the article at the time it was
exported from the U.S. shall be compared with its overall value
and condition at the time of return to the U.S. However, each
case must be decided on its own facts.
Customs has previously held in Headquarters Ruling Letter
(HRL) 067592 dated December 16, 1981, that U.S.-origin military
vehicles exported abroad in a new condition and overhauled and
rebuilt in order to maintain them in an operable and serviceable
condition were entitled to the tariff benefits of item 800.00,
Tariff Schedules of the United States (TSUS) (now subheading
9801.00.10, HTSUS). See also HRL 054097 dated January 15, 1978
(ordinary maintenance and minor repairs to automobiles would not
preclude the applicability of item 800.00, TSUS); see also HRL
555754 dated February 4, 1991 (spools damaged in Mexico and
restored to their condition as exported to Mexico, were entitled
to duty-free treatment under subheading 9801.00.10, HTSUS).
Accordingly, based on the rulings above, the coaches restored to
their condition as exported to Canada will be entitled to duty-free treatment under subheading 9801.00.10, HTSUS, provided the
U.S. identity of the coaches is maintained and the documentary
requirements are satisfied.
In regard to whether the coaches will qualify for the duty
exemption available under subheading 9801.00.10, HTSUS, when they
are returned to the U.S. in their used and deteriorated
condition, HRL 063433 dated December 12, 1979, is relevant. In
HRL 063433, recreational vehicles of U.S. manufacture were leased
in Canada for nine months, and subsequently used to travel
through the U.S. for a maximum of three months before they were
returned to Canada. It was determined that these vehicles would
be entitled to duty-free entry pursuant to item 800.00, TSUS,
since they were not advanced in value or improved in condition
while in Canada. Similarly, in this case, the coaches are used
in Canada and will be returned to the U.S. in their used and
deteriorated condition without being advanced in value or
improved in condition while in Canada. Accordingly, the coaches
will be entitled to duty-free treatment under subheading
9801.00.10, HTSUS, provided the documentary requirements are
satisfied.
HOLDING:
On the basis of the information submitted, it is our opinion
that the self-propelled railway diesel coaches are not advanced
in value or improved in condition as a result of the
refurbishment operations performed in Canada, as they will merely
be restored to their exported condition. Furthermore, the
coaches returned to the U.S. without any refurbishment work are
not advanced in value or improved in condition. Accordingly, the
self-propelled railway diesel coaches will be entitled to duty-free treatment under subheading 9801.00.10, HTSUS, when returned
to the U.S., provided the documentary requirements of 19 CFR
10.1, as amended by 59 Fed. Reg. 25563 (May 17, 1994), are
satisfied.
Sincerely,
John Durant, Director
Commercial Rulings Division