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HQ 221961


May 15, 1990

CON-4-03-CO:C:R:E 221961 JR

CATEGORY: ENTRY CONDITIONALLY FREE

Regional Commissioner of Customs
New York Region
6 World Trade Center, Suite 716
New York, New York 10048-0945
ATTN: Area Director, JFK Airport (NIS 233)

RE: Internal Advice Request, IA #64/89; Articles Exported for Exhibition at a Trade Fair; 9801.00.60, HTSUS; Prohibition Against Commercial Ventures; Intent at Time of Exportation; Your memorandum, FILE: CLA-2:98:S:N:N1:233-116, November 22, 1989

Dear Sir:

This is in response to your memorandum dated November 7, 1989, requesting internal advice on the classification of jewelry, precious stones and semi-precious stones, returned to the United States after exhibition at a trade fair by the Ru-Gem International Corporation.

FACTS:

The facts are as follows: On September 14, 1989, Ru-Gem International Corporation registered 199 pieces of finished jewelry and 3158 pieces of loose gemstones, precious and semi- precious, on a Certificate of Registration (Customs Form 4455). Ru-Gem subsequently exported this merchandise for exhibition at the Hong Kong Watch and Jewelry Fair. On September 25, 1989, all of the 3357 pieces exported to Hong Kong were returned to the United States.

Ru-Gem contends that the proper classification is subheading 9801.00.60, Chapter 98, Harmonized Tariff Schedule of the United States, HTS, which provides duty-free treatment since the merchandise was exported for the purpose of exhibition and since all the items were returned at the conclusion of the fair. Ru-Gem further argues that regardless of the fact that orders were taken during the fair, this does not prevent it from still qualifying under subheading 9801.00.60, HTS, because the primary purpose was the exhibition as evidenced by the return of the entire inventory to the United States.

Your office's position is that the merchandise is precluded from classification under subheading 9801.00.60, HTS, since the merchandise was not exported solely or primarily for exhibition, but for the purpose of soliciting orders which is a commercial venture. Your office views the motivating factor that caused Ru-Gem's exportation was the sale of the merchandise rather than exhibition, and that the trade fair was merely a way to show off the pieces of merchandise.

ISSUE:

The question which must be addressed is whether an exporter's intention of securing future business through the taking of orders at a trade fair can be equated with the intention of the exporter, at the time of exportation, to sell merchandise which violates the prohibition against commercial ventures under subheading 9801.00.60, HTS.

LAW AND ANALYSIS:

Subheading 9801.00.60, HTS, (formerly item 802.30, Tariff Schedules of the United States, TSUS) provides for the free entry of articles which are returned after having been exported solely for temporary use abroad for exhibition or use in connection with any public exposition, fair, or conference, provided such articles are returned by or for the account of the person who exported them (emphasis added).

Before we address this issue directly, a discussion of the history of the provision is necessary. As you are aware, this office has issued several rulings interpreting former item 802.30, TSUS. See Ruling 058569 of December 8, 1978, and Ruling 063176 of July 20, 1979. Both subheading 9801.00.60 and former item 802.30 are based on former 19 U.S.C. 194, which contains very similar language to its successor provisions (802.30 and 9801.00.60) in that there are no words prohibiting a sale. As fully discussed in our ruling of December 8, 1978, 058569 DL, upon the consolidation in 1962 of certain free entry provisions (namely, items 802.10, 802.20 and 802.30, TSUS) under one superior heading in Subpart 1A, Schedule 8, TSUS, the word "solely" was added to the heading immediately preceding the three aforementioned items. However, the 1960 Tariff Study stated that the consolidation was not to effect any significant change. Prior to this consolidation, a sale was prohibited only under the predecessor provision to item 802.10 (formerly paragraph 1815, Tariff Act of 1930, as amended) and not under the predecessor provisions to items 802.20 and 802.30. There is no indication that Congress intended item 802.30 (or for that matter the present provision) to be construed more narrowly than its predecessor provision of 19 U.S.C. 194. We have held that a sale of some of the articles exported for the purposes of item 802.30 would not preclude the remaining articles from free entry under that provision when returned to the United States. See Ruling 058569 DL. Our rulings suggest that although this provision was not intended to accord duty-free treatment to articles which were exported with the primary intention of conducting sales, we, however, have not found that the provision prohibits all indicia of commerciality, such as an incidental sale. See aforementioned rulings.

The answer to the question asked above is no. The taking of orders is not the equivalent of an actual sale of goods.

It is clear that compliance with the provision of subheading 9801.00.60, HTS, requires that no commercial venture be contemplated at the time of exportation. In Ruling 063176, we have interpreted commercial venture to mean the sale of goods. Further, the phrase "temporary use" in the superior heading of subheading 9801.00.60, HTS, by definition, prohibits a sale. If, however, a sale does occur, it can only be incidental to the showing at an exhibition, fair, or conference, so that the remaining merchandise is not jeopardized for the preferential treatment accorded under subheading 9801.00.60, HTS. An incidental sale would be when an exporter at the exposition or fair is prevailed upon to sell some of his wares.

The controlling factor that the Customs Service should focus on in determining the applicability of subheading 9801.00.60, HTS, is the intention of the exporter at the time of exportation. If a situation develops that an exporter sells goods at every exhibition, fair or conference he attends, the exporter would be hard pressed to prove to Customs that he did not contemplate upon exportation a commercial venture. On the other hand, if an exporter has a regular pattern of attending expositions or fairs and returning with his entire inventory intact but has one incident where a few inventory pieces were sold, that sale should not bar the entire inventory from returning duty-free under subheading 9801.00.60, HTS, if from the facts and circumstances it is a fair inference that the intention to sell took place during the exposition and not previous thereto.

The district office states that the primary purpose of a trade fair is for the immediate sale of merchandise or the taking of orders for future delivery and, therefore, classification under subheading 9801.00.60, HTS, would not be permitted. We disagree. A fair is an exhibition designed to acquaint prospective buyers or the public at large with the range and quality of currently available or planned products. See Webster's Third New International Dictionary of the English Language, G. & C. Merriam Co., 1971. In our opinion, a trade fair's purpose is to generate interest in the products displayed and in attracting prospective business. The display of domestic articles abroad at an exhibition promotes U.S. industry for future business and/or manufacturing. We do not view the fact that some orders were solicited at the fair to negate the primary intention of the exporter to exhibit his wares. A secondary intention of hoping to secure orders from the articles displayed should not invalidate compliance with the duty-free treatment of subheading 9801.00.60, HTS.

We find persuasive the affidavit of Ru-Gem's representative (Exhibit 2) that the intention of the company was to show their goods at the exhibition and not to sell for delivery to customers any of the exported articles. The fact that none of the displayed jewelry was sold and that all of the goods listed on CF 4455 were returned to the United States after having been exhibited in Hong Kong demonstrates to our satisfaction that the primary purpose was exhibition even though a secondary objective was the expectation of taking future orders. We view the fact that Ru-Gem accepted orders for future delivery as not nullifying the primary intention of exhibition.

HOLDING:

To summarize, we hold, based on the facts in this case, that the primary intention of Ru-Gem was to exhibit articles at a trade fair and return them to the United States. The exporter's acquisition of future orders does not violate subheading 9801.00.60's general prohibition against sales at the exposition when the primary intention was for exhibition and the exported articles are returned to the United States. The inherent purpose of a trade fair is the promotion of future U.S. commerce and the act of taking future orders is not a sale of goods so as to preclude classification under subheading 9801.00.60, HTS. A copy of this decision may be furnished to the inquirer.

Sincerely,

Harvey B. Fox, Director

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