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HQ 544015


March 20, 1989

CLA-2 CO:R:C:V 544015 GRV

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.50

Deputy Assistant Regional Commissioner (Regulatory Audit) Northeast Region
Boston, Massachusetts 02222-1056

RE: Request for advice concerning the dutiability under TSUS item 806.20 of certain costs invoiced to BASF Corp. in connection with the foreign repair of blade shafts.Headnote 2, subpart B, part 1, Schedule 8, TSUS (now U.S. Note 3, subchapter II, Chapter 98, HTSUS);19 CFR 10.8(l);C.S.D. 82-150; 542866

Dear Sir:

This is in reference to your letter of July 30, 1987, to the Director, Regulatory Audit Division, Headquarters, requesting the assistance of that office in obtaining a ruling concerning the dutiability of certain costs under item 806.20, Tariff Schedules of the United States (TSUS) (now subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS)). A copy of your letter was forwarded to this office from the Regulatory Audit Division by memorandum of August 24, 1987. We apologize for the delay in issuing this ruling letter.

FACTS:

You state that an audit by your office of BASF Corporation Information Systems of Bedford, Massachusetts ("importer"), revealed that that company was not declaring to Customs certain foreign costs associated with merchandise entered under TSUS item 806.20. The importer purchased blade shafts from its parent company in West Germany for use in cutting audio/video tape. When the blade shafts became worn, the importer returned the blades to West Germany to be reground (sharpened) and tested. Following repairs, the sharpened blades were returned to the U.S.

The importer entered the merchandise under TSUS item 806.20 and declared on the consumption entry an amount representing the total cost/value of the foreign repair operation. However, the commercial invoice from the parent company to the importer, which was not provided to Customs, while reflecting the same repair charge as set forth on the entry, also shows a separate charge for "packing and loading charges, insurance and express carriage to Airport Frankfurt/ Main." You request advice on whether this separate undeclared charge should properly be included as part of the dutiable value of the foreign repairs under TSUS item 806.20.

ISSUE:

Whether the separately itemized charge to the importer for costs incurred in packing, loading and transporting repaired articles from the foreign repair facility to the exporting carrier is dutiable as part of the value of repairs under TSUS item 806.20.

LAW AND ANALYSIS:

As you know, TSUS item 806.20 was carried over into the HTSUS, in part, as subheading 9802.00.50. This tariff provision provides a partial duty exemption for articles returned to the U.S. after having been exported to be advanced in value or improved in condition by means of repairs or alterations. Under this tariff provision, there is a duty only upon the value of the foreign repairs or alterations, provided the documentation requirements of section 10.8, Customs Regulations (19 CFR 10.8), are met.

Headnote 2, subpart B, part 1, Schedule 8, TSUS (now U.S. Note 3, subchapter II, Chapter 98, HTSUS) provides, in part, regarding items 806.20 and 806.30, TSUS, as follows:

(a) The value of repairs, alterations, processing, or other change in condition outside the United States shall be:

(i) the cost to the importer of such change; or (ii) if no charge is made, the value of such change, as set out in the invoice and entry papers; except that, if the appraiser concludes that the amount so set out does not represent a reasonable cost or value, then the value of the change shall be determined in accordance with section 402 of this Act.

Section 10.8(l), Customs Regulations (19 CFR 10.8(l)), provides, in part, that:

[t]he cost or fair market value ... which is to be set forth in the invoice and entry papers as the basis for the assessment of duty under item 806.20, shall be limited to the cost or value of the repairs or alterations actually performed abroad, which will include all domestic and foreign articles furnished for the repairs and alterations, but shall not include any of the expenses incurred in this country whether by way of engineering costs, preparation of plans or specifications, and furnishing of tools or equipment for doing the repairs or alterations abroad or otherwise. (Emphasis added).

As you point out, in Legal Determination 82-0135, dated July 30, 1982 (C.S.D. 82-150; 542866), we stated that costs incurred to transport the articles to be repaired or processed from the U.S. to a foreign facility are not dutiable under TSUS item 806.20 because the expenses were incurred in the U.S. However, this ruling did not discuss the dutiability under item 806.20, TSUS, of costs incurred to transport repaired or altered articles from the repair facility to the U.S.

We believe it is clear from the above-quoted language of 19 U.S.C. 10.8(l), which limits the amount to be set forth in the invoice and entry papers "to the cost or value of the repairs or alterations actually performed abroad," that costs incurred following the foreign repair or processing operation in connec- tion with the transportation of the article from the foreign facility to the U.S. are not dutiable under TSUS 806.20 (HTSUS subheading 9802.00.50).

HOLDING:

The separately itemized charge on the invoice from the parent company to the importer for costs incurred in packing and loading the repaired blade shafts and transporting them from the repair facility to the exporting carrier is not dutiable under TSUS item 806.20 (HTSUS subheading 9802.00.50) as part of the value of the foreign repairs.

Sincerely,


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