CLA-2-98:OT:RR:NC:N1:106
Sydney H. Mintzer, Attorney
Mayer Brown, LLP
1999 K Street, NW
Washington, DC 20006-1101
RE: The applicability of subheading 9801.00.2000, HTSUS, to various automobile parts from China and South Korea, re-packaged in Mexico
Dear Mr. Mintzer:
In your letter dated December 16, 2014, you requested a ruling on behalf of Federal-Mogul Motorparts (FMM) Corporation of Southfield, Michigan on whether various automobile parts were eligible for treatment under subheading 9801.00.20, Harmonized Tariff Schedule of the United States (HTSUS).
The imported products consist of automobile parts, such as tie rods, slip sleeves, oil seals, brake pads and hub assemblies. You state that these items were manufactured in China or South Korea and imported in bulk by FMM. Either FMM pays customs duties on these articles or it purchases them from US distributors who have already paid the respective duties. Following importation or purchase, FMM will export the various automobile parts to a contractor in Mexico who will pack them into retail packaging. FMM will retain ownership of all of the articles shipped to Mexico. They will then reimport the packaged various automobile parts back into the United States.
Section 141.2 of the Customs Regulations (19 CFR 141.2) states that “Dutiable merchandise imported and afterwards exported even though duty thereon may have been paid on the first importation, is liable to duty on every subsequent importation into the Customs territory of the United States” unless specifically exempted therefrom under the Harmonized Tariff Schedule of the United States (HTSUS). Subheading 9801.00.2000, HTSUS, provides for duty-free treatment for “articles previously imported, with respect to which the duty was paid upon such previous importation or which were previously free of duty pursuant to the Caribbean Basin Economic Recovery Act of Title V of the Trade Act of 1974 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 account of the same person who imported it into, and exported it from, the United States.”
Customs does not consider the mere packaging of a good for retail sale as an advancement in value or improvement in condition. See John v. Carr & Sons, Inc., 69 Cust. Ct. 78, C.D. 4377 (1972), aff'd, 61 CCPA 52, C.A.D. 1118 (1974). Also see Headquarters Ruling Letter (HRL) 555624, dated May 1, 1990, which ruled that perfumes packaged into sample pouches abroad were not advanced in value or improved in condition for purposes of subheading 9801.00.10, HTSUS, treatment.
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 district director that the article for which free entry is claimed was exported from the United States under a lease or similar use agreement. According to Black's Law Dictionary 179 (5th ed. 1979), a bailment is "a delivery of goods of personal property, by one person to another, in trust for the execution of a special object upon or in relation to such goods, beneficial to either the bailor or bailee or both, and upon a contract, express or implied, to perform the trust and carry out such object, and thereupon either to redeliver the goods to the bailor or otherwise dispose of the same in conformity with purpose of the trust.” Headquarters ruled, in HRL 560511, dated November 18, 1997, that "bailment" is a "similar use agreement" for the purposes of subheading 9801.00.20, HTSUS.
You assert that your client’s transaction meets all the requirements for consideration of duty free entry under subheading 9801.00.2000, HTSUS. Specifically, you indicate that the various automobile parts, being previously imported and duty paid where applicable, would be subject solely to packaging operations and would not be otherwise advanced in value or improved in condition by any process or manufacture while in Mexico. Further, the subject automotive parts would be exported under conditions that would constitute exportation pursuant to a lease or similar use agreement and your client, FMM, would be the importer, exporter and reimporter of the merchandise.
Based on the information submitted, the various automobile parts that are manufactured in either China or South Korea and re-packaged in Mexico will be eligible for duty-free treatment under subheading 9801.00.2000, HTSUS, when returned to the United States, provided that the district director at the port of entry is satisfied that FMM previously imported the various automobile parts in bulk and paid duty thereon; FMM purchases them from US distributors that have already paid customs duties on the articles; they are reimported by or for the account of FMM; FMM exported the bags from the U.S. under a lease or a similar use agreement; and the documentary requirements of section 10.108, Customs Regulations, are satisfied. Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on World Wide Web at http://www.usitc.gov/tata/hts/. This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177). A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, please contact National Import Specialist Matthew Sullivan at [email protected].
Sincerely,
Gwenn Klein Kirschner
Director
National Commodity Specialist Division