CLA-2 RR:CR:SM W561705 MLR
TARIFF NOs.: 3707.90.32; 9009.90; 9801.00.80
Port Director
U.S. Customs Service
198 West Service Road Champlain, NY 12919
RE: Application for Further Review of Protest No. 0712-99-100157; subheading 9801.00.80; drawback; free of duty; toner; toner cartridges
Dear Sir:
This is in reference to the above-referenced protest and application for further review filed by Leahy & Ward, LLP, on behalf of A.N. Deringer, Inc. and United Laser, Inc., contesting the liquidation of entries under subheading 9801.00.80, Harmonized Tariff Schedule of the United States (HTSUS), with the assessment of drawback previously allowed, to toner and toner cartridges.
FACTS:
Protestant filed three protests. The merchandise primarily at issue in the subject entry and protest, is stated to be toner cartridges dedicated for use in photocopy machines. The invoice sets forth the following merchandise:
Product No. Quantity Description
XEX6R244 290 Toner
XEX6R752 42 Toner 5614
XEX6R364 34 Toner 5318
XEX6R379 100 Toner 5312
Copies of product catalogs indicate that the above referenced product numbers are cartridges of Xerox brand toner for certain copier models. In addition, some entries contained products designated as “6R229, 6R301, and 6R206” which are stated to be toner and not parts dedicated for use in photocopy machines.
Protestant also states that a number of entries contain products identified as Hewlett Packard printer cartridges, and Panasonic drum toners (listed as UNLUG 3313 and UNLUG 3309). Some of the entries also included lubricating oil. Since these items do not appear to be covered in entries subject to the protest forwarded for further review, these particular goods will not be discussed.
The merchandise was entered under subheading 9801.00.10, HTSUS, from Canada, on May 22; June 3, 12, and 18; and September 11, 1998. Customs issued a Notice of Action on February 24, 1999, indicating a rate advance for the merchandise because no American manufacturer’s affidavit was provided, and no response was provided concerning drawback. The Notice of Action listed certain entries and that the entries would be classified under subheading 9801.00.80, HTSUS, with assessment for the drawback amounts per memorandum 225796 dated October 30, 1995. The entries were liquidated on April 16, 1999, and the protest was timely filed on July 14, 1999.
ISSUE:
Whether the merchandise was properly classified under subheading 9801.00.80, HTSUS, with the assessment of drawback previously allowed upon exportation.
LAW AND ANALYSIS:
Subheading 9801.00.80
Subheading 9801.00.80, HTSUS, provides as follows:
Articles previously exported from the United States which--except for U.S. note 1 of this subchapter--would qualify for free entry under one of the foregoing items and are not otherwise free of duty . . .
U.S. note 1(a) of Subchapter I, Chapter 98, HTSUS, states that the provisions in the subchapter (except subheadings 9801.00.70 and 9801.00.80) shall not apply to any article that is exported with the benefit of drawback.
The rate of duty is as follows:
…the sum of any duty and internal revenue tax imposed upon the importation of like articles not previously exported, but in no case in excess of the sum of (a) any customs drawback proved to have been allowed upon such exportation of the article, and (b) any internal-revenue tax imposed, at the time such article is entered, upon the importation of like articles not previously exported.
In determining the duty under this provision, it is noted that the term “like articles” refers to foreign articles not previously exported. U.S. Note 2(a), Subchapter I, Chapter 98, HTSUS, provides, in part, that for purposes of subheading 9801.00.80, the rate of duty in no case shall be more than the duty and tax that would apply if the article were wholly of foreign origin.
Pursuant to the Notice of Action, the merchandise was classified under subheading 9801.00.80, HTSUS, with amounts indicated for drawback. Protestant claims that if the merchandise as a foreign article is free of duty, no duty may be assessed under the Chapter 98 tariff provision.
In HRL 559161 dated September 19, 1995, Customs found that cigarettes, neither advanced in value nor improved in condition while abroad, and the type of merchandise normally subject to a drawback allowance in connection with its exportation from the U.S., were classifiable in subheading 9801.00.80, HTSUS. In determining the duty to be paid upon importation, it was incumbent upon Customs to determine the drawback allowed upon exportation of the cigarettes, either from actual records, or in accordance with the methodology provided in 19 CFR 10.3(a)(1). However, in Headquarters Ruling Letter (HRL) 224025 dated October 22, 1992, Customs considered tractors assumed to be free of duty under heading 8701.30.50, HTSUS, under the Canadian Free Trade Agreement. Customs stated that if the tractors were free of duty under heading 8701.30.50, HTSUS, they would not meet the qualifications of subheading 9801.00.80, HTSUS, and would be classifiable under the appropriate subheading under heading 8701, HTSUS.
In this case, protestant claims that the toner cartridges are duty-free under subheadings 9009.90.50 and 9009.90.70, HTSUS. The toner, listed as 6R206, 6R229, and 6R301, is alleged to be classified under subheading 3707.90.32, HTSUS.
In accordance with U.S. Note 2(a), Subchapter 1, Chapter 98, HTSUS, and HRL 224025, we find that to the extent the toner cartridges are duty free or the duty on the toner is less than the amount assessed under subheading 9801.00.80, HTSUS, the goods may be classified in their appropriate tariff provisions within Chapters 1 –97, HTSUS.
Classification
Classification of merchandise under the HTSUS is in accordance with the General Rules of Interpretation (GRIs), taken in order. GRI 1 states in part that, for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes, and provided the headings or notes do not require otherwise, according to GRIs 2 through 6.
Mita Copystar, Inc. v. United States, 966 F. Supp. 1245 (CIT 1997), rehearing denied 994 F. Supp. 393 (CIT 1998), reversed 160 F.3d 710 (Fed. Cir. 1998), and CIT decisions vacated CIT Slip Opinion 99-4 (1999), involved the classification of toner cartridges which are shaped to fit into specific electrostatic photocopiers. Customs classification of the articles was as chemical preparations for photographic uses in subheading 3707.90.30, HTSUS (currently broken out in subheadings 3707.90.31 and 3707.90.32, HTSUS). The final court decision held the proper classification to be as parts and accessories of electrostatic photocopying apparatus in subheading 9009.90.00, HTSUS (currently broken out into four subheadings within subheading 9009.90, HTSUS).
The Court of Appeals for the Federal Circuit based its decision on Note 2(b), Chapter 90, HTSUS (this Note provides for the classification of parts and accessories of articles of Chapter 90). (Before so deciding, the Court held that a Note for Section VI (including heading 3707, HTSUS) did not require classification in that heading, reversing the CIT which had held that the Note did require classification in heading 3707; there is no such note for heading 3215, HTSUS.) The Court set forth the following factors resulting in the determination that the cartridges were parts of photocopying apparatus (160 F.3d at 712-713):
The cartridges are sold with toner inside; they remain with the toner throughout its use by the photocopier; they are the standard device for providing toner to the photocopier and thus play an essential role in the functioning of the machine; and they are not designed for reuse.
Accordingly, protestant claims that based upon Mita Copystar, the toner cartridges dedicated for use in photocopy machines are properly classfied under subheading 9009.90.50 or 9009.90.70. Protestant states that while the invoices indicate that the product in question is toner, the invoices are incomplete in their description and the goods (with the exception of products 6R229, 6R301 and 6R206 which are toner), in fact, are toner cartridges.
We agree with protestant. Based on the product catalogs submitted, some of the item numbers are described as cartridges of specified sizes. Accordingly, to the extent you may wish to verify that the "[t]he cartridges [in this case] are sold with toner inside; they remain with the toner throughout its use by the photocopier; they are the standard device for providing toner to the
photocopier; and they are not designed for reuse", the goods are classified in subheading 9009.00.50 or subheading 9009.00.70, HTSUS. Mita Copystar, 160 F.3d at 712,713. The toner would be classified under subheading 3707.90.32, HTSUS, to the extent the duty assessed is less than that determined under subheading 9801.00.80, HTSUS.
HOLDING:
On the basis of the information submitted, in accordance with U.S. Note 2(a), Subchapter 1, Chapter 98, HTSUS, and HRL 224025, we find that to the extent the toner cartridges are duty free or the duty on the toner is less than the amount assessed under subheading 9801.00.80, HTSUS, the goods may be classified in their appropriate tariff provisions within Chapters 1 –97, HTSUS, and this protest should be granted.
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 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 this decision available to Customs personnel, and to the public via the Customs Home Page on the World Wide Web, the Freedom of Information Act, and other public distribution channels.
Sincerely,
John Durant, Director
Commercial Rulings Division