CLA-2 RR:TC:SM 560421 MLR
Port Director
U.S. Customs Service
700 Doug Davis Drive
Atlanta, GA 30354
RE: Application for Further Review of Protest No. 1704-95-100458; Denial of duty exemption under HTSUS subheading
9801.00.25 to Sleep Study Units
Dear Sir:
This is in reference to a protest and application for
further review filed by Healthdyne Technologies
("Healthdyne"), contesting the denial of the duty exemption
under subheading 9801.00.25, Harmonized Tariff Schedule of
the United States (HTSUS), to sleep study units.
FACTS:
Your office indicates that eight items shipped from
Germany and invoiced as "sleep study units" (hereinafter
"units") were imported by Healthdyne on September 23, 1994.
The units were initially entered under subheading
9801.00.10, HTSUS, but Healthdyne later indicated that they
were manufactured in Germany. Accordingly, the units were
reclassified as patient monitoring systems under subheading
9018.19.55, HTSUS. The entry was liquidated on May 19,
1995, and the protest was timely filed on August 17, 1995.
Healthdyne claims that it originally imported the units
into the U.S. sometime in 1993, and your office states that
Healthdyne has provided a copy of the purchase order
covering that transaction. Your office states that the
units were apparently sold to Healthdyne's customers and
were used for an unspecified period of time before being
returned to Healthdyne for repair sometime in 1994. Your
office states that Healthdyne shipped them back to the
German manufacturer, but that Healthdyne has not provided
your office with evidence of this exportation. Healthdyne
states that when it was determined that the repairs would be
too costly, the units were returned to Healthdyne in the
U.S.
ISSUE:
Whether the sleep study units are eligible for the duty
exemption under subheading 9801.00.25, HTSUS, when returned
to the U.S.
LAW AND ANALYSIS:
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 the latter
declaration must set forth 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. However, the
port director may waive the documentary requirements upon
satisfaction that the requirements of subheading 9801.00.25,
HTSUS, are met. 19 CFR 10.8a(b).
Your office contends that the protestant has failed to
meet criteria (3) and (4) of subheading 9801.00.25, HTSUS.
Your office claims that Healthdyne has failed to show that
the units were reimported because they failed to conform to
sample or specification, and that subheading 9801.00.25,
HTSUS, is intended for situations where merchandise was
exported from the U.S. and rejected because it was not
satisfactory to the person to whom it was shipped. S. Rep.
No. 91-1467, 91st Cong., 2nd Sess. (1970), reprinted in 1970
U.S. Code Cong. & Ad. News 5717. Rather, your office states
that the units were returned because Healthdyne determined
that the repairs would be too costly.
Additionally, your office states that other than a copy
of a purchase order, Healthdyne has not provided any
documentary evidence that establishes that the units were
originally imported into the U.S. by or for the account of
Healthdyne. Your office also states that Healthdyne has not
provided any documentary evidence to establish that the
units were exported from the U.S. by Healthdyne.
In Headquarters Ruling Letter (HRL) 555409 dated March
12, 1990, Customs considered tantalum and ceramic capacitors
produced in Mexico and shipped to various U.S. customers.
If a customer determined that certain capacitors either
failed to meet its specifications or were defective, they
were shipped to the importer's warehouse in Texas from which
they were then exported back to the Mexican assembly
facility. In Mexico, the re-worked capacitors were placed
in finished goods inventory along with capacitors assembled
from current production, thereby not allowing the importer
to distinguish between the capacitors. Accordingly, in HRL
555409, when the re-worked capacitors were imported into the
U.S., it was determined that although the information
indicated that some of the previously imported capacitors
may have been returned to Mexico for the reason that they
did not conform to U.S. customer specifications, no evidence
was presented to indicate that they were subsequently
reimported because they failed to conform to sample or
specification abroad, as required by clause (3) of this
tariff provision. Consequently, in HRL 555409, Customs
found that the capacitors which were returned to Mexico for
restocking and then reimported were ineligible for duty-free
entry under subheading 9801.00.25, HTSUS.
In HRL 558894 dated March 22, 1995, Customs considered
certain rayon twill woven fabrics which was exported from
the U.S. to Hong Kong, but while the fabric was en route,
the order to purchase this particular fabric was canceled.
The fabric was returned to the U.S. Customs determined that
while the submitted documents indicated that original
importer exported and reimported the fabric, subheading
9801.00.25, HTSUS, treatment was denied because the return
of the merchandise was due to the cancellation of the order
rather than the merchandise's failure to conform to sample
or specification.
In this case, as in the rulings cited above, it is
clear that the units were not returned because they failed
to conform to the German manufacturer's sample or
specification. Rather, the units appear to have been
intended for entry under subheading 9802.00.50, HTSUS, which
allows a partial duty exemption on repairs and alterations
performed abroad; however, because the repairs were too
costly for Healthdyne, the units were just returned without
having been repaired. Accordingly, we do not find that the
third criteria has been met that the units were returned for
failure to conform to sample or specification.
Additionally, 19 CFR 10.8a provides that certain
supplementary documents shall be filed in connection with
the entry of articles claimed to be free of duty under
subheading 9801.00.25, HTSUS. One of the documents includes
a reference to the port, entry number, and the date of entry
of the previous importation, and to the port and date of
exportation. This information must be provided unless the
port director is reasonably satisfied because of the nature
of the articles or production of other evidence that the
requirements of subheading 9801.00.25, HTSUS, have been met.
19 CFR 10.8a(c). In this instance, your office has
indicated that the original purchase order is not
satisfactory to prove that Healthdyne was the original
importer and your office did not receive proof that
Healthdyne exported the units from the U.S. to Germany. As
your office has not waived production of documentation
required under section 10.8a(c), subheading 9801.00.25,
HTSUS, treatment is also denied because the documentary
requirements have not been met and we are not otherwise
satisfied that all of the requirements of this subheading
have been met.
HOLDING:
On the basis of the information submitted, the units
imported into the U.S. are not eligible for duty-free
treatment under subheading 9801.00.25, HTSUS, because they
did not fail to conform to sample or specification, and the
documentary requirements of 19 CFR 10.8a were not satisfied.
Accordingly, the protest should be denied.
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, Lexis, Freedom of Information
Act and other public access channels.
Sincerely,
John Durant, Director
Tariff Classification Appeals
Division