CLA-2 RR:CR:SM 561541 RSD
CATGORY: CLASSIFICATION
TARRIF NO. 9801.00.10
Alan R. Klestadt, Esq.
Brett Ian Harris, Esq.
Grunfeld, Desiderio, Lebowitz & Silverman,
245 Park Avenue, 33rd Floor
New York, New York 10167-3397
RE: Eligibility of used alternators and starters imported from Canada for
duty-free treatment as American Goods Returned
Dear Messrs. Klestadt, and Harris:
This is in response to your letter dated October 8, 1999, on behalf of Unit Parts Company, requesting a ruling on the applicability of subheading 9801.00.10, Harmonized Tariff Schedule of the United States (HTSUS), to certain used alternator and starter cores imported from Canada.
FACTS:
Unit Parts Company rebuilds used automotive alternators and starters (commonly called “cores”) in the United States. The company obtains its supply of alternator and starter cores from automotive aftermarket retailers, who usually give consumers purchasing replacement parts a discount in exchange for their used components. One of the suppliers of alternator and starter cores to Unit Parts is a major Canadian retailer of automotive parts. These cores are removed from vehicles in Canada, and Unit Parts imports them into the U.S.
Upon arrival at the Unit Parts facility in Oklahoma City, Oklahoma, the alternator and starter cores are completely disassembled. Individual components that are reusable are cleaned, sorted, and placed into bins with like components from other units, while damaged components are discarded. The alternator and starters are then rebuilt using both new components and components reclaimed from the cores.
Unit Parts provides automotive parts primarily for vehicles manufactured by General Motors, Ford, and Chrysler. This ruling only concerns alternators and starters originally manufactured by General Motors and Ford.
It is stated that Delco-Remy manufactures 99% of the alternators used in the production of new GM passenger cars and light trucks at its’ plants in Albany, Georgia (Plant 29) and Andersen, Indiana (Plant 11). The starters for GM vehicles are manufactured at Delco-Remy facilities located in Merridian, Mississippi (Plant 25) and Andersen, Indiana (Plant 3). GM alternators and starters are grouped into families. Each family of products consists of a base design, which may be modified to meet the specialized performance standards required by a particular automobile or truck. You claim that an experienced observer can easily identify the “family designation” of a particular GM alternator or starter and the manufacturing plant that produced the components. You state that by identifying the “family designation” of the GM alternators and starters imported by Unit Parts from Canada, it is possible to determine where such products were manufactured. Accompanying your submission is an affidavit from a former engineer at General Motors who worked on the design and installation of manufacturing systems for alternators, starters and batteries used in all models of General Motors passenger cars and light trucks. According to the affidavit, 99% of the alternators and starters utilized by General Motors for Northern American production were produced in one of the plants mentioned above.
With respect to the Ford alternators, based on information provided by an expert retained by Unit Parts, you indicate that Ford manufactures all of the alternators under the Motorcraft brand name at the Rawonville Ford Plant in Ypsilanti, Michigan. To support claims for duty-free treatment under subheading 9801.00.1055, HTSUSA, for alternator and the starter cores from Canada, the invoices presented by Unit Parts at the time of entry will identify the alternator and starter cores as either GM or Ford products. In addition, the GM cores will be invoiced by their family designations.
ISSUE:
Whether the used alternator and starter cores imported from Canada are eligible for duty-free entry as American goods returned under subheading 9801.00.10, HTSUS when they are returned to the U.S.
What are the country of origin marking requirements for the used alternators and starters removed from automobiles in Canada and returned to the U.S.?
LAW AND ANALYSIS:
9801.00.10
Subheading 9801.00.10, HTSUS, provides for the free entry of products of the United States 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. Some change in the condition of the product while it is abroad is permissible. However, 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) outlines the necessary documentation required for duty-free entry under subheading 9801.00.10, HTSUS. Section 10.1(a) requires that the foreign shipper make a declaration that the articles claimed to be free of duty under subheading 9801.00.10, HTSUS, were exported from the United States and that they are returned without having been advanced in value or improved in condition while abroad. The declaration is to include the port from which the goods were exported and the approximate date. In addition, section 10.1(a) also requires that “...the owner, importer, consignee, or agent having knowledge of the facts regarding the claim for free entry...” sign a declaration that the foreign shipper’s declaration is true and provide the name and location of the manufacturer of the articles.
Section 10.1(d) provides that, if the port director is reasonably satisfied, based on the nature of the articles or production of other evidence, that the articles are imported in circumstances meeting the requirements of subheading 9801.00.10, HTSUS, the port director may waive the requirements of producing the documents specified above. Thus, the decision to grant such a waiver rests with the port director.
In HRL 960554 dated August 17, 1998, certain U.S.-origin components, consisting of power supplies, control units and two refrigeration systems, were connected to a physical vapor deposition apparatus (PVD) in Great Britain for testing. After testing, the power supplies, control units and refrigeration units were disconnected from the PVD apparatus for shipment to the U.S. We held that these U.S. components which were merely connected to the PVD apparatus in Great Britain for testing and then disconnected were not the object of advancement in value or improvement in condition. The articles were returned to the U.S. in exactly the same condition as when they were exported; there were no holes drilled or any other work performed abroad other than the assembly and disassembly, and therefore we determined that they were entitled to duty-free treatment under subheading 9801.00.1025, HTSUS.
In Superscope, Inc. v. United States, 13 CIT 997, 727 F. Supp. 629 (1989), the court held that certain glass panels of U.S. origin that were exported, repacked abroad with certain foreign components, and returned to the U.S. as part of unassembled audio cabinets, were entitled to duty-free entry under item 800.00, Tariff Schedules of the United States (TSUS) (now subheading 9801.00.10, HTSUS), since the U.S. panel portion of the imported article was "not 'advanced in value or improved in condition . . . while abroad,' but [was] merely repacked." Id. at 631. Although the Superscope case concerned the TSUS, not the HTSUS, the decision is believed to be equally applicable to similar situations arising under the HTSUS, since item 800.00, TSUS, and relevant Schedule 8, TSUS, headnotes were carried over virtually unchanged into the HTSUS.
Moreover, in Burgess Battery v. United States, C.D. 866 (1944), appeal dismissed, 32 CCPA 207 (1944), the court held that zinc scrap, the residue from the manufacture in Canada of battery cups from U.S.-origin zinc sheets, was entitled to duty-free treatment as American goods returned under item 800.00, Tariff Schedules of the United States (now subheading 9801.00.10, HTSUS). The court reasoned that zinc was exported and zinc returned; that although it was changed in condition, the Canadian processing did not enhance the zinc scrap’s value or condition.
In HRL 557348, dated August 31, 1993, U.S. origin bolts of 100% woven polyester fabric with a ½ inch thick polyethylene backing were shipped to Mexico. In Mexico, the material was cut to create pads to be used in the assembly of infant car seats. Scrap material generated by the cutting process was exported to the U.S. We held that the scrap material that resulted from the process of segregation and elimination was neither increased in value or improved in condition from its original condition upon return to the United States. Therefore, the U.S. origin scrap was determined to be entitled to duty-free treatment under subheading 9801.00.10, HTSUS, upon return to the U.S.
In this instance, it is stated that the used alternators and starters imported from Canada were originally manufactured in the U.S. and installed into automobiles in the U.S., which were subsequently used in Canada. When the alternators and starters cease to function properly, the automobile owner or a mechanic will remove them from the automobiles in Canada. The alternators and starters are exchanged for a discount on a new part. The importer obtains these used alternator and starter cores from a Canadian aftermarket retailer.
Removing the alternators and starters from the vehicles in Canada will result in a change in their condition because they are no longer attached to the vehicle. However, in our opinion, the mere removal of the alternators and the starters from the cars without any additional processing does not result in an advancement in their value or an improvement in their condition. Therefore, assuming that no processing will be performed on the alternators and starters in Canada other than removing them from the automobiles, and it is established that the alternators and starters were produced in the U.S., they will be eligible for the duty exemption under subheading 9801.00.10, HTSUS, upon their return to the U.S. This also presumes that the documentation requirements of 19 CFR §10.1 are met and that the port director of Customs at the port of entry is satisfied that the items imported into the U.S. are, in fact, of U.S. origin.
MARKING:
You also inquire about the country of origin marking requirements for the imported alternator and starter cores. Section 304 of the Tariff Act of 1930 (19 U.S.C. §1304), as amended, provides that unless excepted, every article of foreign origin imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article.
Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements of 19 U.S.C. §1304. Section 134.1(b), Customs Regulations (19 CFR §134.1(b)), defines “country of origin” as the country of manufacture, production or growth of any article of foreign origin entering the U.S. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the “country of origin” within the meaning of the marking laws and regulations; however, for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin.
In Ashdown, U.S.A. Inc. v. United States, 696 F. Supp. 661 (CIT 1988), the court held that a printing press, which was continually used in West Germany for nine years and which was not intended at the time of original sale to be exported to the U.S., became a bona fide part of the commerce of West Germany and was therefore, not an import from East Germany, where the printing press was produced. In Headquarters Ruling Letter (“HRL”) 561209, dated May 4, 1999, Customs held that used automotive parts (master cylinders, brake cylinders, cv joints) incorporated in vehicles in use in the U.S. or Canada and not marked with a country of origin were considered to be of U.S. or Canadian origin, respectively. In HRL 559968, dated May 7, 1997, Customs determined that the origin of rebuilt automobile axle assemblies was the country where the automobiles were operated. Customs stated in HRL 561209 that “Customs has applied the principles of Ashdown primarily in instances where the country of origin of used articles cannot be determined.” However, in this instance, it is stated that the U.S. origin of the used alternators and starters can be established. Therefore, the principle set forth in Ashdown would not be applicable to this case.
Section 134. 32(m) of the Customs Regulations, (19 CFR 134.32(m)) provides that products of the United States which are exported and returned are excepted from the country of origin marking requirements of 19 U.S.C. 1304. If it is established that the starters and alternators of U.S. origin, they would be excepted from the country of origin marking requirements of 19 U.S.C. 1304.
HOLDING:
On the basis of the information submitted, U.S. manufactured alternator and starter cores removed from cars in Canada will be eligible for duty-free treatment under subheading 9801.00.10, HTSUS, when they are returned to the U S., provided the documentation requirements of 19 CFR §10.1 are satisfied, and it can be established to the Port Director’s satisfaction that the articles are, in fact, of U.S. origin. In accordance with 19 CFR 134.32(m), the alternators and starters of U.S. origin are excepted from the country of origin marking requirements of 19 U.S.C. 1304.
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