HQ 0222075 - Entry of LEOMACS casting machine produced by the Toshiba Machine Corporation - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1993 HQ Rulings > HQ 0221393 - HQ 0222782 > HQ 0222075

HQ 222075

March 7, 1990

ENT-1-01-CO:R:C:E 222075 GG

CATEGORY: ENTRY

Stephen J. McDermott
Customs Administrator, Tax Staff
General Motors Corporation
General Motors Building
3044 West Grand Boulevard
Detroit, Michigan 48202

RE: Entry of LEOMACS casting machine produced by the Toshiba Machine Corporation

Dear Mr. McDermott:

This is in response to your letter dated January 22, 1990, in which you request a ruling on the subject of a planned importation of a LEOMACS casting machine produced by the Toshiba Machine Company. Specifically, you ask whether the machine can be imported under one of the exceptions to the import sanctions imposed on products of that company.

FACTS:

Central Foundry, a division of General Motors Corporation (GMC), signed a binding purchase agreement on September 2, 1988, for a 250 ton LEOMACS casting machine manufactured by the Toshiba Machine Company (TMC). TMC reportedly is the sole supplier of this machine, which is used for the development of aluminum blocks, heads, and other castings and advanced materials. Central Foundry allegedly acquired this machine for the purpose of completing its research and development on a new casting process. The machine will soon be shipped to the United States. Alternate arrangements have been made to place the machine in a GMC facility in Canada in anticipation of a decision that permission for importation will be denied.

ISSUE:

1) Can Central Foundry enter the LEOMACS machine under a regular consumption entry as an exception to the prohibition on the importation of TMC products for information and technology?

2) In the alternative, does the LEOMACS machine qualify for temporary importation under bond pursuant to 19 CFR 12.142(i) and subheading 9813.00.30 of the Harmonized Tariff Schedule? If so, could the temporary importation bond be cancelled, if, subsequent to its importation, the importation qualifies for an Department of Defense exception to the importation prohibition?

3) Central Foundry wants to import component or spare parts made by both TMC and other, non-sanctioned companies. All of these items, including those not manufactured by TMC, would be imported directly from TMC. Would the presentation of affidavits from both the non-sanctioned manufacturer and TMC, satisfy Customs documentation requirements concerning the identity of the parts? Can Central Foundry import the component and spare parts under a temporary importation bond?

LAW AND ANALYSIS:

In response to the first issue, there is no exception which would allow the importation under a regular consumption entry of TMC merchandise qualifying as "technology", unless such technology is a product contracted for prior to June 30, 1987. 19 CFR 12.142(i) provides an exception for the importation of TMC technology as long as it is entered under a temporary importation bond of the kind described in subheading 9813.00.30 of the Harmonized Tariff Schedule (HTS). The requirement that technology be entered under the restraints of this temporary importation provision was imposed to guard against the unrestricted entry of all finished TMC products which otherwise might qualify as technology. Importation under subheading 9813.00.30, HTS meets the purpose of the exception without eliminating the ban on the importation of sanctioned products.

The second issue raises the question of whether the LEOMACS machine does in fact qualify for temporary importation under 19 CFR 12.141(e) and subheading 9813.00.30, HTS. 19 CFR 12.141(e) states that the importation prohibition on TMC products shall not apply to information and technology. "Information and technology" is defined in 19 CFR 142(i) as

"includ[ing] plans, drawings, and other written and pictorial data in any form or medium, and personal transmissions of any of the foregoing. The term shall also include component parts, finished products, or other articles to which these prohibitions would otherwise apply if temporarily imported under the provisions of subheading 9813.00.30, HTS solely to demonstrate such technology and which are thereafter exported."

Subheading 9813.00.30, HTS permits the temporary duty-free importation under bond of "articles intended solely for testing, experimental or review purposes, including specifications, photographs and similar articles for use in connection with experiments or for study". Articles imported under this provision cannot be imported for sale or for sale on approval and must be exported within one year of the date of importation, a time which upon application may be extended for up to a total of 3 years.

The purposes to which Central Foundry plans to put the machine appear to fall within the scope of activities envisioned by subheading 9813.00.30, HTS. Specifically, Central Foundry plans to conduct material R&D programs for aluminum, magnesium, aluminum and magnesium metal matrix composites and aluminum and magnesium cermets, and to demonstrate the capability of the machine to produce products using the above materials with or without sand cores and steel inserts; to evaluate and optimize the LEOMACS mechanical, electrical, and ceramics systems to minimize downtime and to increase repeatability, efficiency and flexibility in order to meet customer requirements; to develop and optimize die design and maintenance procedures; to produce experimental, prototype, and low volume evaluation products; and to demonstrate product capabilities at customers' plants. From this description it is possible to conclude that the machine is being imported for two purposes: 1) to test its adaptability or suitability to Central Foundry's casting operations; and 2) to test, review and demonstrate its production capabilities. Such uses would be permitted under subheading 9813.00.30, HTS, and for this reason Central Foundry can temporarily import the LEOMACS machine under the technology exception of 19 CFR 12.142(i).

The foregoing conclusion is based on the premise that Central Foundry intends to export the LEOMACS machine within 3 years of importation, and not to sell or offer to sell the machine during that time. The intent of the importer at the time of importation is a crucial factor in determining whether the merchandise is eligible for entry under a TIB provision. A later determination of a different intent, occasioned by a breach of the bond and backed by evidence such as a preexisting contract, may subject the owner of the merchandise to a penalty claim in addition to the assessment of liquidated damages.

You indicate that Central Foundry intends to demonstrate product capabilities at its customers' plants. Although the imported article itself is not being demonstrated, the demonstration of its products should not preclude the importation of the LEOMACS machine under subheading 9813.00.30, HTS. As long as the machine was imported solely for testing, review and experimental purposes, and the production and subsequent demonstration of products were merely incidental to any of these permitted purposes, then temporary importation of the machine under bond would be allowed.

The Customs Service would not automatically cancel the temporary importation bond if, after importation, the LEOMACS machine subsequently qualified for a Department of Defense exception to the importation prohibition. Central Foundry or the surety would have to tender the full amount of the liquidated damages specified in the bond before the bond could be cancelled. As stated above, the discovery by the Customs Service that Central Foundry had always intended that the machine would remain in the United States under such an exception, may subject Central Foundry to a penalty action as well as to a liquidated damages claim.

The sanctions target only products of Toshiba Machine Company and Kongsberg Trading Company; accordingly, component or spare parts manufactured by other, non-sanctioned companies would not be subject to the sanctions, even if imported directly from TMC or Kongsberg Trading Company. In a situation where Central Foundry is importing non-sanctioned articles from a sanctioned company, Customs may require, under the authority vested in 19 CFR 12.143, documentation to show that these articles were not, through an original manufacturing process or subsequent substantial transformation, TMC or Kongsberg Trading Company products. The district director of the district where the merchandise is being imported can more accurately ascertain, on a case-by-case basis, exactly what kind of documentation would suffice to establish that the merchandise being imported is not a product of a sanctioned company. Although the presentment of affidavits from both the non-sanctioned manufacturer and TMC may satisfy some Customs districts on the issue of who made the machine, other district directors may require further proof, such as a certificate of manufacture, to conclusively demonstrate that the imported article was not a product of a sanctioned firm. Central Foundry may avail itself of the option, outlined in 19 CFR 141.63, of submitting all entry summary documentation for preliminary review prior to the arrival of the imported articles.

With respect to your question on whether Central Foundry may import component and spare parts under a temporary importation bond, it is the Customs Service's position that in this instance such parts would be admissible under either subheading 9813.00.05 or 9813.00.30 of the Harmonized Tariff Schedule. Parts imported to repair domestic or imported articles have been ruled to be admissible under the former as articles to be altered and/or processed, while parts for an article entered under subheading 9813.00.30, HTS are entitled to entry under that law when imported after the entry of the principal article and if necessary for the experimental use of the principal article. Importation of component or spare parts made by a sanctioned company would, of course, be subject to all of the other conditions outlined in 19 CFR 12.142.

HOLDING:

1) A machine that qualifies under the technology exception to the Toshiba Machine Company products importation prohibition, cannot be entered under a regular consumption entry. A qualifying machine must be entered temporarily under bond to comply with 19 CFR 12.142(i).

2) The LEOMACS machine, on account of the fact that it is being imported solely to test its adaptability or suitability to a specific use or uses, and to test, review and demonstrate its production capabilities, is eligible for temporary importation under bond pursuant to 19 CFR 12.142(i) and subheading 9813.00.30, HTS. Customs would not automatically cancel the bond if, subsequent to its importation, the machine were to qualify for a Department of Defense exception to the importation prohibition. It may cancel the bond after the importer has voluntarily tendered the full amount of liquidated damages specified in the bond.

3) The district director is responsible for determining what kind of documentation is needed to substantiate that imported spare or component parts were manufactured by a non-sanctioned firm, in situations where an importer imports, directly from the Toshiba Machine Company, component or spare parts made by a non- sanctioned company. Some districts might require other documents in addition to affidavits to establish the identity of the manufacturer of imported articles. The importer may submit, before the arrival of the parts, entry documentation for preliminary review under the procedures outlined in 19 CFR 141.63 and 19 CFR 142.2(b)(1). Component or spare parts may be entered under the temporary importation under bond provisions of subheading 9813.00.05 or 9813.00.30, HTS, provided that all of the other conditions of 19 CFR 12.142 are adhered to.

Sincerely,

John Durant, Director
Commercial Rulings Division

Previous Ruling Next Ruling

See also: