HQ 0555413 - Application for Further Review of Protest No. 3901-8-000726, concerning denial of TSUS item 806.20 treatment to refurbished telephones.F.W. Myers & Co.;H.F. Keeler;Pacific Customs Brokerage Co;Zemansky;Coastwise Steamship;19 CFR 10.8;compliance with regulations;proof of identity - United States International Trade Commision Rulings

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HQ 555413

September 5, 1990

CLA-2 CO:R:C:V 555413 GRV

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.40

District Director of Customs
Chicago, Illinois 60603

RE: Application for Further Review of Protest No. 3901-8-000726, concerning denial of TSUS item 806.20 treatment to refurbished telephones.F.W. Myers & Co.;H.F. Keeler;Pacific Customs Brokerage Co;Zemansky;Coastwise Steamship;19 CFR 10.8;compliance with regulations;proof of identity

Dear Sir:

The above-referenced protest contests your denial of the partial duty exemption under item 806.20, Tariff Schedules of the United States (TSUS) (now subheading 9802.00.40, Harmonized Tariff Schedule of the United States (HTSUS) (repairs or alterations performed pursuant to warranty) and subheading 9802.00.50 (other repairs or alterations)), to used telephones imported from Taiwan following repairs.

FACTS:

The record reflects that certain used, previously-imported phones (dealer and customer returns) were exported during the period 1987-1988 to Taiwan for repairs to be made to their electrical connections. The phones, encompassing some 30 different model types, were returned pursuant to a 2-year warranty arrangement between the distributor (protestant) and manufacturer. A Certificate of Registration (Customs Form 4455), signed by a Customs officer on August 24, 1987, shows that certain articles, identified by model numbers only, were exported for repairs. (Although new phones of the same model numbers were also imported, they were imported separately from the refurbished phones).

The nature of the foreign repair operation consisted of refurbishing the phones by replacing, as needed, broken phone cords, the plastic handset back, the memory door, selected power adaptors, uniformly replacing handset cords, cleaning the exterior of the phone units, and individually repackaging the units for return to the U.S.
Repair Declarations prepared by the foreign manufacturer, while acknowledging receipt of particular shipments of phones for the purpose of repairs and attesting that no substitution of the exported merchandise was made, do not explain the nature of the foreign repair operations performed or describe the identity of the phones, other than by stating the number of units and cartons in the particular shipment.

Upon return of the phones to the U.S., the importer sought partial duty exemption under TSUS item 806.20 for 22 entries of phones. Your office denied the exemption for the following reasons:

(1) the phones were not registered by serial number, thereby presenting Customs with a verification dilemma as to whether the returned phones were, in fact, the same phones that were exported;
(2) no repair affidavits were presented with the entries describing the alleged repairs;
(3) the refurbished phones were in a condition indistin- guishable from new phones of the same model; and, (4) it was unclear whether the phones became defective after they where imported or whether they were defective when originally imported.

Regarding the issue of serial numbers, protestant states that it received a Request for Information (CF 28, dated April 15, 1987) inquiring whether the phones had serial numbers, and that on May 15, 1987, it responded that only two models--ST-660 and ST 662--had such numbers. However, upon Customs inspection of one of the imported shipments, it was found to contain a different model--ST-600--which also bore serial numbers. Protestant contends that Customs gave no indication that its practice of listing only the model numbers of the phones it was exporting on the CF 4455 was unacceptable until one year after the initial CF 28 was issued, and that it had a right to rely on Customs unchallenged acceptance of the manner in which it exported the phones.

ISSUE:

Whether the phones imported into the U.S. are entitled to the partial duty exemption under HTSUS subheading 9802.00.40.

LAW AND ANALYSIS:

TSUS item 806.20 provides a partial duty exemption to articles returned to the U.S. after having been exported to be advanced in value or improved in condition by repairs or alterations. Such articles are dutiable only upon the value of the foreign repairs or alterations, provided the documentary requirements of section 10.8, Customs Regulations (19 CFR 10.8), are satisfied.

The duty exemption provided under TSUS item 806.20 is a privilege, and it is well settled that compliance with mandatory regulations is a condition precedent to recovery and that the burden of proof thereof rests on the protestant. See, F.W. Myers & Co., v. United States, C.D. 4515, 72 Cust.Ct. 133, 374 F.Supp. 1395 (1974); H.F. Keeler v. United States, C.D. 1842, 38 Cust.Ct. 48 (1957); and, Pacific Customs Brokerage Co. v. United States, T.D. 48887, 71 Treas.Dec. 530 (1937).

In 1972, the regulations applicable to repaired/altered merchandise were revised. T.D. 72-119, 6 Cust.Bull. 209. These regulations, published at 19 CFR 10.8, provide that there shall be filed, (1) prior to exportation of the articles to be repaired or altered, a Certificate of Registration (Customs Form 4455) to permit the district director to examine such articles before they are exported; and, (2) in connection with an entry, a repair declaration from the person who performed the repairs or alteration in substantially the form set forth at subsection (e), the Certificate of Registration, and a declaration, made by the owner, importer, consignee, or agent having knowledge of the facts, that the articles entered in their repaired or altered condition are the same articles covered by the Certificate of Registration. The information sought by the documentary requirements of 19 CFR 10.8 is designed to enable Customs to verify that the articles returned are the same as the articles exported and that they were repaired/altered within the meaning of TSUS item 806.20. Thus, compliance with these documentary requirements is essential to establish the identity of the articles returned and their eligibility for the partial duty exemption provided. See, Zemansky v. United States, T.D. 39663, 11 Ct.Cust.Appls. 515 (1923) (difficulty in obtaining proof of identity is not to be charged to the Government; it is the misfortune of the importer who seeks to take advantage of the privilege granted him). Cf., United States v. Coastwise Steamship & Barge Co., T.D. 38047, 36 Treas.Dec. 501, 9 Ct.Cust. Appls. 216 (1919) (the regulations for the identity of goods returned prescribed by the Secretary of the Treasury are applicable only so far as practicable, and, if it is impossible from the beginning to identify the article in accordance with the regulations, its identity may be established by satisfactory evidence other than that prescribed by the Secretary).

The form the required repair declaration is to follow embraces two broad elements: (1) it requires identifying information from the person performing the repairs in the format of a recital containing five substantive clauses; and, (2) it requires the person performing the repairs to provide information concerning the nature of the repairs effected and the identity of the articles repaired based on personal observation. The descriptive information required is more detailed than the information required on a CF 4455, as it requires identification marks and numbers, where available, in addition to a general description of the merchandise which is common to both forms.

While the repair declarations belatedly submitted in this case include all of the obligatory recital "clauses," they do not contain any descriptive information regarding the nature of the repairs performed (no description other than "repairs" is on the declarations) or the particular articles repaired sufficient enough for Customs to adequately identify the phones imported as those that were exported. In fact, the repair declarations provide less descriptive information concerning the merchandise to be repaired than was contained on the CF 4455. Your office has stated that it has been unable to verify that the entered phones are the same articles that were exported, as they apparently are virtually indistinguishable from the new phones being imported for the first time. Moreover, the information in the record does not establish to our satisfaction that the imported phones are the same articles as were exported. We note that the record also does not reflect that the declaration of the owner, importer, consignee, or agent, attesting that the articles entered were the same articles covered by the Certificate of Registration, was filed in connection with any of the affected entries. Under these circumstances, we believe that protestant has failed to adequately comply with the documentary requirements of 19 CFR 10.8.

Regarding protestant's contention that it had a right to rely on Customs prior acceptance of documents filed in regard to other entries, Customs must be satisfied of the identity of the returned articles and the acceptability of the repairs on an entry-by-entry basis. We are not satisfied in regard to the entries covered by this protest. Accordingly, as protestant has failed to carry its burden showing compliance with mandatory regulations, the returned phones are ineligible for the partial duty exemption available under TSUS item 806.20.

HOLDING:

On the basis of the record in this protest, as protestant has failed to adequately comply with the documentary requirements of 19 CFR 10.8 so as to establish to Customs satisfaction that the phones imported are the same as those exported, we conclude that the phones are not entitled to TSUS item 806.20 treatment. Accordingly, you are directed to deny the protest in full. A copy of this decision should be attached to the Form 19, Notice of Action, to be sent to the protestant.

Sincerely,

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