CLA-2 RR:CR:SM 561047 MLR
Timothy Sullivan, Esq.
Gregory C. Anthes, Esq.
Adduci, Mastriani & Schaumberg, L.L.P.
1140 Connecticut Avenue, N.W., Suite 1303
Washington, D.C. 20036
RE: Applicability of duty exemption under HTSUS subheadings
9801.00.10, 9801.00.60, and 9801.00.85 to active matrix
liquid crystal displays and flat panel image sensors;
test equipment; exhibition
Dear Mr. Sullivan and Mr. Anthes:
This is in reference to your letter of April 29, 1998,
forwarded to us by Customs in New York, requesting a ruling
on behalf of OIS Optical Imaging Systems, Inc. (hereinafter
"OIS"), regarding the applicability of subheadings
9801.00.10, 9801.00.60, and 9801.00.85, Harmonized Tariff
Schedule of the United States (HTSUS), to certain active
matrix liquid crystal displays (hereinafter "AMLCD") and
flat panel image sensors (hereinafter "sensors").
Specification brochures were submitted with your request.
FACTS:
The articles at issue are: (1) sample AMLCDs
manufactured by OIS in the U.S.; (2) sample sensors
manufactured by OIS in the U.S.; and (3) test equipment,
either manufactured or purchased by OIS in the U.S. It is
stated that OIS uses these articles to introduce its product
line to potential customers located in the U.S. and abroad.
The AMLCDs incorporate the use of microelectronics and
amorphous materials technology to construct transparent thin
film electronic switching devices, such as diodes or
transistors, on a specially prepared plate of glass, known
as the active plate. The electronic components are made of
semiconductor materials. A filter is applied to the surface
of a second plate of glass known as the passive plate. The
filter has a black background with a microscopic translucent
opening for each pixel in the display. In a color display,
the openings must be alternatively colored in the primary
colors to form pixel groups that will allow the formation of
the entire spectrum of colors. A transparent electrode is
applied below the filter to complete the circuit with the
electronics on the active plate. To complete the AMLCD, a
liquid crystal material is placed between the two plates of
glass. The two plates are then sealed together, and
polarizing layers are laminated to the outside surfaces of
the glass creating the glass cell. When a light source is
placed behind the display, and electronic controllers
(called "drivers") are connected to the active plate to
control the individual switches, the display is complete and
an image can be generated. It is stated that OIS
manufactures the following seven standard models of AMLCDs:
(1) 5.0" x 5.0", 64 Graylevel, AMLCD;
(2) 6.25" x 6.25", 64 Graylevel, AMLCD;
(3) 6" x 8", 8 Graylevel, AMLCD;
(4) 10.4" Diagonal, Rugged AMLCD;
(5) 2.4" x 2.4" AMLCD;
(6) 4.0" x 4.0", 89 Graylevel AMLCD; and
(7) 4.0" x 4.0", 64 Graylevel, AMLCD;
It is also stated that OIS manufactures custom-made AMLCDs
for a number of military and commercial avionics programs.
It is stated that all standard and custom-made AMLCDs are
made and marked "Made in the USA."
The second article at issue are sensors which detect an
image on a surface and convert it into electronic impulses.
It is stated that OIS sensors are found in electronic
copyboards. OIS manufactures sensors that employ both
direct and indirect conversion methods. The direct
conversion mode sensors use an X-ray photoconductive layer
coated over the matrix of pixel electrodes, while the
indirect conversion mode sensors use an X-ray sensitive
phosphor coated over a matrix of photosensitive pixels. It
is stated that all sensors are made and marked "Made in the
USA."
It is also stated that OIS must use test equipment to
exhibit and demonstrate the use of its AMLCDs and sensors to
potential customers. This test equipment comprises two
types of test sets. The first is a combination of standard
equipment that consists of a PC-based Central Processing
Unit ("CPU"), keyboard, monitor, and PC-based software. In
addition, this equipment has a custom designed printed
circuit board and cables to interface the AMLCDs and sensors
to the PC's CPU. The second is the Westar DHA Drive System
("DDS") which is a portable system designed to drive the OIS
Display Head Assembly. The DDS is housed in a small,
portable, sturdy PC chassis. The Westar Test Set includes a
hand-held terminal to allow the user to communicate with an
embedded PC. The DDS also includes back light power. It is
stated that the test system to be used will be determined by
the profile that the prospective customer wishes to see and
the availability of equipment at OIS. It is stated that
depending on the test equipment needed, OIS may purchase it
from other manufacturers, rather than producing the test
equipment in its facilities. Some of the test equipment is
made in the U.S. However, it is stated that OIS always
purchases its test equipment through American distributors.
Therefore, it is claimed that any foreign produced test
equipment purchased by OIS is imported by the American
distributor with duty paid.
OIS plans three scenarios: (1) public exhibition at
trade fairs; (2) private exhibition at a potential
customer's location; and (3) short term, temporary use of an
article at a potential customer's location. It is stated
that each transaction involves an OIS representative taking
the articles abroad with the intent to introduce OIS'
product to a potential customer. It is stated that at the
time of exportation, OIS will not make any drawback claims
and that the articles exported will not be sold to potential
customers. After introducing the article to the customer,
OIS will return it to the U.S. through the port of Detroit,
Michigan.
It is stated that to the best of OIS' knowledge, none
of the public trade shows that OIS marketing engineers
attend deny admission to any person that has a reasonable
business interest in attending the event. For these shows,
the OIS representative will take AMLCDs, a personal computer
used to operate the AMLCDs, and a display booth. These
articles are stated to exceed $10,000 and are included in
the OIS representative's checked baggage.
Under the second scenario, it is stated that OIS will
demonstrate a particular product at a potential customer's
facility. The articles usually involved in this type of
transaction are medical flat panel image sensors and
aircraft instrument AMLCDs. It is stated that in order to
demonstrate the product, OIS must take certain test
equipment depending upon the customer's particular needs.
It is stated that the value of all of the articles taken on
such trips will usually exceed $10,000 and are taken abroad
as part of the OIS representative's checked baggage. It is
also stated that OIS will not sell the demonstration AMLCDs,
flat panel image sensors, or the test equipment.
Under the third scenario, it is stated that a potential
customer may request OIS to permit it to temporarily use an
AMLCD for 30 days. It is stated that this short term test
period permits the potential customer to assess the
compatibility of OIS' merchandise with the customer's system
and equipment. It is stated that in this situation, OIS
ships a sample AMLCD to the customer, but that OIS does not
intend to sell and the potential customer is not permitted
to purchase the sample. At the completion of the trial
period, the potential customer returns the sample AMLCD to
OIS in the U.S.
It is stated that under each scenario, OIS intends to
filed completed Forms 3311 and 4455 with the Port Director
in Detroit at the time of exportation.
ISSUES:
I. Whether the AMLCDs and sensors taken abroad for a
demonstration at a potential customer's facility will
be entitled to duty-free treatment under subheading
9801.00.10, HTSUS, when returned to the U.S.
II. Whether the AMLCDs and sensors taken abroad for display
at a trade show are eligible for duty-free treatment
under subheading 9801.00.60, HTSUS.
II. Whether the test equipment may qualify for duty-free
treatment under subheading 9801.00.85, HTSUS.
LAW AND ANALYSIS:
I. Subheading 9801.00.10
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.
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
United States. Border Brokerage Company, Inc. v. United
States, 314 F. Supp. 788 (1970), appeal dismissed, 58 CCPA
165 (1970).
Section 10.1(a), Customs Regulations {19 CFR 10.1(a)},
outlines the necessary documentation required for duty-free
entry under subheading 9801.00.10, HTSUS. The first
documentary requirement is a declaration by the foreign
shipper (if the value of the returned articles exceed
$1,000), which includes the quantity, description and value
of the returned articles, the U.S. port of export, and the
date of exportation from the U.S. 19 CFR 10.1(a)(1).
The second documentary requirement is a declaration by
the owner, importer, consignee, or agent stating that the
information provided is true and correct, where the articles
were manufactured, they were not manufactured or produced
under bond, and they were not exported with benefit of
drawback. 19 CFR 10.1(a)(2). However, these documentation
requirements may be waived by the port director. 19 CFR
10.1(d).
Under scenario two, where the articles are taken abroad
for a demonstration at a potential customer's facility, and
under scenario three where the articles are temporarily used
by a potential customer, it is claimed that the AMLCDs or
flat panel image sensors are eligible for entry under
subheading 9801.00.10, HTSUS, when they are returned to the
U.S.
We agree that the AMLCDs and sensors may be entered
under subheading 9801.00.10, HTSUS, as OIS states that these
articles are manufactured in the U.S. and will not be
advanced in value or improved in condition while abroad.
Furthermore, it is stated that the AMLCDs and sensors will
not be exported from the U.S. with benefit of drawback.
Therefore, when the AMLCDs and sensors are returned to the
U.S. under subheading 9801.00.10, HTSUS, a declaration by
the foreign shipper and a declaration by the owner,
importer, consignee or agent having knowledge of the facts
regarding the claim for free entry shall be filed, unless
these documentary requirements are waived by the port
director. For your information, Customs amended 19 CFR 10.1
and eliminated the filing of Customs Form (CF) 3311. 59
F.R. 25563 (1994).
II. Subheading 9801.00.60
Subheading 9801.00.60, HTSUS, provides for the free
entry of articles which are returned after having been
exported for temporary use abroad solely for exhibition or
use in connection with any public exposition, fair, or
conference, provided such articles are returned by or for
the account of the person who exported them.
In connection with the entry of articles exported for
temporary exhibition and returned and claimed to be exempt
from duty under subheading 9801.00.60, HTSUS, a certificate
of exportation on Customs Form 3311, and a declaration of
the importer on Customs Form 4455 for articles of either
domestic or foreign origin are required. 19 CFR 10.66(a)(1)
and (2).
In Headquarters Ruling Letter (HRL) 221961 dated May
15, 1990, Customs stated that the controlling factor that
Customs will focus on in determining the applicability of
subheading 9801.00.60, HTSUS, is the intention of the
exporter at the time of exportation, and that compliance
with the provision of subheading 9801.00.60, HTSUS, requires
that no commercial venture (i.e., sale of goods) be
contemplated at the time of exportation.
With regard to whether articles are exhibited at a
public exposition, fair, or conference, in C.S.D. 92-23 (HRL
556092 dated October 22, 1991), Customs held that a fair or
conference may be considered "public" so long as it does not
deny admission, for reasons other than space limitation, to
persons who have a reasonable business interest in attending
the event.
In this case, it is claimed that the AMLCDs, personal
computer and display booth may be returned to the U.S. under
subheading 9801.00.60, HTSUS, as they will be exhibited at
trade shows where to the best of OIS' knowledge any one may
be admitted with a reasonable business interest. It is also
stated that the articles will not be exported with the
intention of being sold to potential customers while abroad.
Therefore, the AMLCDs, personal computer and display booth
may be returned under subheading 9801.00.60, HTSUS, provided
the documentary requirements of 19 CFR 10.66 are satisfied.
III. Subheading 9801.00.85
Subheading 9801.00.85, HTSUS, provides duty-free
treatment for:
[p]rofessional books, implements, instruments, and
tools of trade, occupation, or employment, when
returned to the United States after having been
exported for use temporarily abroad, if imported by or
for the account of the person who exported such items.
Section 44 of the Miscellaneous Trade and Technical
Corrections Act of 1996, Pub. L. No. 104-295, 110 Stat. 3514
(1996), added subheading 9801.00.85, HTSUS, to permit the
duty-free entry of "tools of the trade" by corporations
which previously could only be entered duty-free if they
were exported and reimported by the same individual under
subheading 9804.00.10, HTSUS.
Under the second scenario, where the test equipment is
taken abroad to aid in the demonstration of the AMLCDs and
sensors at a potential customer's facility, it is claimed
that the test equipment is eligible for entry under
subheading 9801.00.85, HTSUS.
In this case, we find that test equipment, whether of
domestic or foreign origin, exported by OIS for use in the
demonstration of AMLCDs or sensors may be entered under
subheading 9801.00.85, HTSUS, if the merchandise is imported
by or for the account of OIS.
While the Customs Regulations do not currently specify
specific documentation required to substantiate a claim
under subheading 9801.00.85, HTSUS, it is our opinion that
carnets, commercial invoices, packing lists, landing
certifications, Customs documents used to import the
merchandise into the foreign country, or any other
documentation which shows that the merchandise being
imported under subheading 9801.00.85, HTSUS, is the same as
what was exported, may be utilized.
HOLDING:
On the basis of the information submitted, we find that
under scenario two and three where the AMLCDs and sensors
will be exported for demonstration purposes at a potential
customer's facility or for temporary use by a potential
customer, these articles may be imported duty-free treatment
under subheading 9801.00.10, HTSUS, when returned to the
United States, provided the documentation requirements of 19
CFR 10.1 are satisfied. Under scenario one, where the
AMLCDs, personal computer, and display booth will be used at
a public trade show where to the best of OIS' knowledge
anyone with a reasonable business interest may be admitted,
and the articles will not be exported with the intention of
being sold while abroad, they may be returned to the U.S.
under subheading 9801.00.60, HTSUS, provided the documentary
requirements of 19 CFR 10.66 are satisfied. Furthermore,
the test equipment, whether of domestic or foreign origin,
exported by OIS for use in the demonstration of AMLCDs or
sensors may be reimported duty-free under subheading
9801.00.85, HTSUS, provided OIS exports the merchandise
temporarily and the same merchandise is imported by OIS or
for its account.
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