MAR-05 RR:TC:SM 560827 BLS
Steven S. Weiser, Esq.
Arthur W. Bodek, Esq.
Siegel, Mandell & Davidson, P.C.
One Astor Plaza
1515 Broadway
New York, New York 10036-8901
RE: Applicability of subheadings 9801.00.10 and 9801.00.20,
HTSUS, to returning
samples
Gentlemen:
This is in reference to your letter dated January 23, 1998,
on behalf of Esprit de Corp ("Esprit"), requesting a ruling
concerning the applicability of subheadings 9801.00.10 and
9801.00.20, Harmonized Tariff Schedule of the United States
(HTSUS), to certain samples to be returned from abroad.
FACTS:
Esprit expects that several times each year it will send
abroad, as baggage, samples of company merchandise (primarily
apparel and accessory items), for the purpose of soliciting
orders therefor, accompanied by members of its U.S.-based sales
representatives. In connection with this program, the sales
representative will transport the samples to localities outside
of the customs territory of the U.S., including various foreign
countries and Guam. Each sales representative will be required
to sign Esprit's "Standards for Overseas Use of Sales Samples by
Esprit Sales Representatives", included as an attachment. In
such document (hereinafter, the "Use Agreement"), the sales
representative acknowledges its understanding that he or she is
acting as the designated agent of Esprit in effectuating Esprit's
exportation of the samples and that the articles are entrusted to
the sales representative only for the duration of each sales trip
and only for the purpose of soliciting order(s) in the locale
covered by such trips.
Some of the samples will be of U.S.-origin while others will
be of foreign origin. You state that all of the foreign articles
will have been previously imported by Esprit with
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duties deposited and, where applicable, textile visas presented.
The sales representatives will return to the customs territory of
the United States with the samples (which will not be mutilated),
either through the same port from which they departed or,
possibly, through a different port.
ISSUES:
1) Whether the U.S.-origin samples transported abroad are
eligible for entry under subheading 9801.00.10, HTSUS, upon
return to the U.S.
2) Whether the foreign-origin samples transported abroad are
eligible for entry under subheading 9801.00.20, HTSUS, upon
return to the U.S., and exempt from quota and visa requirements.
LAW AND ANALYSIS:
1) Applicability of Subheading 9801.00.10
Subheading 9801.00.10, HTSUS, provides for the free entry of
U.S. products that are exported and returned without having been
advanced in value or improved in condition by any means while
abroad, provided the documentary requirements of section 10.1,
Customs Regulations (19 CFR 10.1), are met. While some change in
the condition of the product is permissible abroad, 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. See Border Brokerage Company v. United
States, 65 Cust. Ct. 50, C.D. 4052, 314 F. Supp. 788 (1970),
appeal dismissed, 57 CCPA 165 (1970).
Shipment to Guam
The Supreme Court has ruled that "exportation" is the
severance of goods from the mass of things belonging to [the
United States] with the intention of uniting them to the mass of
things belonging to some foreign country. Swan & Fitch Co. v.
United States, 190 U.S. 143 (1903). See also 19 CFR 101.1. As
the samples will be transported by the sales representatives to
various foreign countries and the U.S. territory of Guam, the
issue we must address is whether Guam is considered a foreign
country for purposes of determining whether there is an
exportation.
In Rothschild & Co. v. United States, 16 Ct. Cust. App. 442,
446, T.D. 43190 (1929), the Customs Court defined "exportation"
as the transportation of goods from this
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country to a foreign country. The court went on to find that
U.S. territories such as the Virgin Islands, Guam, etc., are not
foreign countries within the meaning of that
definition. In Mitsubishi International Corp. v. United States,
Cust. Ct. 319, 324, C.D. 2597 (1965), a more recent Customs Court
case, the court, citing Rothschild, held that while U.S.
territories (such as Guam) might sometimes be recognized as
distinct from the states under certain Customs laws (tariff
duties, for instance), shipments to those territories nonetheless
do not constitute exportation to a foreign country. The issue in
that case concerned an application for drawback. (See also
Customs Service Decision (C.S.D.) 79-77, 13 Cust. Bull. 1114.)
Based on the foregoing, we find that in the instant case
there will be no exportation of the samples, as Guam is not
considered a foreign country. Thus, these articles will not be
eligible for the duty exemption under subheading 9801.00.10,
HTSUS, upon return of the merchandise to the U.S. However,
inasmuch as no exportation has taken place in this instance, the
subject articles transported to Guam are not considered imported
when returned to the U.S. In order to support the determination
that an exportation did not occur, documentation will be required
to verify that the returning articles are the same articles
transported to Guam.
Shipment to Foreign Countries
As the transported articles are only displayed and not
subject to any further manufacturing or processing operations,
these articles are not advanced in value or improved in
condition. See Headquarters Ruling Letter (HRL) 560630 dated
September 10, 1997.
Accordingly, the U.S.-origin samples transported to foreign
countries for soliciting orders will be eligible for duty-free
treatment under subheading 9801.00.10, HTSUS, upon return to the
U.S., provided the documentation requirements of 19 CFR 10.1 are
satisfied.
2) Applicability of Subheading 9801.00.20
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 ... 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
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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 port director that the
requirements of the subheading have been met.
Shipment to Guam
Inasmuch as the articles shipped to Guam do not undergo an
"exportation" (see discussion above), they are not eligible for
the duty exemption under subheading 9801.00.20, HTSUS, upon
return to the U.S. Such articles will not be considered imported
when returned to the U.S.
Shipment to Foreign Countries
As previously noted, you state that prior to entry, each of
the foreign-origin articles will have been previously imported by
Esprit and duties paid. In this regard, you state that Esprit
will provide the appropriate import documentation upon request by
the port director. As also noted above with respect to U.S.-origin articles, the foreign-origin samples will not be advanced
in value or improved in condition while abroad. Further, as the
articles will be returned directly to Esprit, the samples will be
reimported by, or for the account of, the person who imported it
into, and exported it from, the United States. The remaining
issue is whether the samples will be exported pursuant to a lease
or similar use agreement.
The predecessor of subheading 9801.00.20, HTSUS, was item
801.00 of the Tariff Schedules of the United States (TSUS). That
particular provision was amended
in 1984 to provide for articles that had been exported under
"similar use agreements" and leases to entities other than
foreign manufacturers. Trade and Tariff Act of 1984, Pub. L. No.
98-573, 118, 98 Stat. 4922 (1984). Before the amendment,
duty-free treatment applied only to merchandise that had been
exported under lease to foreign manufacturers. In Werner &
Pfleiderer Corporation v. United States, 17 C.I.T. 916 (1993), a
case interpreting the amended language of item 801.00, TSUS, the
Court of International Trade stated that "the provision
concerning goods exported under lease, in particular, is not the
sort of exemption from duties which must be narrowly construed."
At issue was whether or not a temporary loan arrangement was the
type of "similar use agreement" contemplated by item 801.00,
TSUS. In holding that a loan was a "similar use agreement," the
court opined that if the drafters of that provision
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intended the provision to encompass nothing broader than a lease,
then the language "similar use agreement" would not have been
added to the provision.
In HRL 560630 dated September 10, 1997, various articles of
merchandise, primarily apparel, accessories, and shoes, were
exported to the United Kingdom under cover of a carnet, for
display at a company fashion show. It was stated that all import
duties with respect to previously imported articles had been paid
and, where
applicable, all textile export visas were presented. The
articles were to be loaned to a related company in the U.K.
pursuant to a use agreement which provided that title to the
property was to remain with the importer and that the articles
were to be returned to
the company in the U.S. after the conference. In that case, we
found that the articles were exported to the United Kingdom from
the U.S. pursuant to a lease or similar use agreement. See also
HRL 222863 dated July 1, 1991.
The facts in this case are analogous to HRL 560630, in that
the articles are samples to be exhibited for purposes of
soliciting orders, and title is retained by the importer. While
in this case the "user" under the use agreement is a sales agent
of Esprit, and not a third party, we find that this type of
transaction is the type of "similar use
agreement" contemplated by the drafters of the statute. See
Werner & Pfleiderer, supra. Therefore, the articles will qualify
for duty-free treatment under subheading 9801.00.20, HTSUS,
provided Esprit previously imported the foreign-origin articles
and paid duty thereon, the articles are reimported by Esprit or
for its account, and the documentary requirements of 19 CFR
10.108 are satisfied. Textile and apparel products imported
under this tariff provision are not subject to visa/quota
requirements. See 59 FR 14392 (March 28, 1994).
HOLDING:
1) U.S.-origin articles transported by Esprit's sales
representatives to foreign countries for purposes of soliciting
orders will be entitled to duty-free treatment under subheading
9801.00.10, HTSUS, provided the documentary requirements of 19
CFR 10.1 are satisfied. Shipment of U.S.-origin articles to Guam
is not considered an "exportation", inasmuch as Guam is not a
foreign country. Therefore, these articles will not be eligible
for the duty exemption under subheading 9801.00.10, upon return
to the U.S. As such articles will not be exported to Guam, they
will not undergo an importation into the U.S. upon return from
Guam.
2) Foreign-origin articles transported to foreign countries
for purposes of soliciting orders will be eligible for the duty
exemption under subheading 9801.00.20, HTSUS,
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when returned to the U.S. provided, they are reimported by or for
the account of Esprit, Esprit previously imported the merchandise
and paid duty thereon, and the documentary requirements of 19 CFR
10.108 are satisfied. Textile and apparel products imported under
this tariff provision are not subject to visa/quota requirements.
See 59 FR 14392 (March 28, 1994). Since shipment of samples to
Guam is not considered an "exportation", the articles returning
from Guam will not be eligible for the duty exemption under
subheading 9801.00.20, HTSUS. As the articles are not exported
to Guam, they will not undergo an importation into the U.S. upon
return from Guam.
A copy of this ruling letter should be attached to the entry
documents filed at the time the goods are entered. If the
documents have been filed without a copy, this ruling should be
brought to the attention of the Customs officer handling the
transaction.
Sincerely,
John Durant, Director
Commercial Rulings Division