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HQ 555529


February 19, 1991

CLA-2 CO:R:C:S 555529 CW

CATEGORY: CLASSIFICATION

TARIFF NO.: 9810.00.30; 9810.00.40

District Director of Customs
300 South Ferry Street
Terminal Island
San Pedro, California 90731

RE: Protest 2704-8-001150, contesting denial of item 851.10 and 851.20, TSUS, treatment for drawings, sculptures and a watercolor

Dear Sir:

The above-referenced protest concerns the applicability of the duty-free provisions of items 851.10 and 851.20, Tariff Schedules of the United States (TSUS) (now subheadings 9810.00.30 and 9810.00.40, Harmonized Tariff Schedule of the United States (HTSUS)), to certain imported drawings, sculptures, and a watercolor imported for examination and possible purchase by a museum. Specifically, protestant contests the assessment of the merchandise processing user fee against the imported articles.

FACTS:

Drawings, sculptures and a watercolor were imported by a museum "on loan for study and examination for possible purchase." The importer, a nonprofit institution established for educational purposes or for encouragement of the fine arts, entered the articles under items 851.10 and 851.20, TSUS, which provide for the free entry of drawings and sculptures imported for "the use" of this type of institution. Articles classifiable under these provisions are exempt from the merchandise processing user fee imposed by the Omnibus Budget Reconciliation Act of 1986 (Pub. L. 99-509), as amended

Your office determined that the drawings and sculptures were not entitled to classification under items 851.10 and 851.20, TSUS, because they were not imported for "the encouragement of the fine arts." Therefore, the articles were classified, free of duty, under items 765.03 and 765.15, TSUS, and the appropriate user fees were assessed.

Protestant contends that (1) the articles are properly classified under items 851.10 and 851.20, TSUS, and (2) the assessment of user fees several weeks after liquidation of the entries subject to this protest was "improper, illegal, null and void." By letter of February 4, 1991, counsel for the protestant withdrew the second claim.

ISSUE:

Are the drawings, sculptures and watercolor imported by the qualified institution for examination and approval before exhibition or purchase entitled to classification under items 851.10 and 851.20, TSUS, with an exemption from the merchandise processing user fee?

LAW AND ANALYSIS:

With certain exceptions not applicable to this case, articles provided for in Schedule 8, TSUS (now Chapter 98, HTSUS), are exempt from the merchandise processing user fee. 19 U.S.C. 58c(a)(9). Accordingly, articles properly classifiable under items 851.10 or 851.20, TSUS, would be exempt from the fee. Classification under these items is conditioned upon the articles being imported for "the use" of the qualified nonprofit institution. The question involved here is whether importation for study and approval before purchasing can be considered to be for "the use" of the institution.

In Headquarters Ruling Letter (HRL) 555657 dated May 14, 1990 (copy enclosed), we considered whether a sculpture to be imported by the protestant under the same circumstances as exist in this case is entitled to classification under subheading 9810.00.40, HTSUS (formerly item 851.20, TSUS). For the reasons set forth in HRL 555657, we concluded that a sculpture imported by a qualified institution for study and approval prior to exhibition or purchase may be treated as imported for "the use" of the institution.

Consistent with the holding in HRL 555657, we find that the drawings and sculptures subject to this protest are entitled to classification under items 851.10 and 851.20, TSUS. However, as neither of these provisions encompasses paintings, the watercolor is ineligible for tariff treatment under these provisions.

HOLDING:

Drawings and sculptures imported for examination and approval prior to purchase by a qualified nonprofit institution are considered to be for "the use" of the institution within the meaning of items 851.10 and 851.20, TSUS. Therefore, the drawings and sculptures subject to this protest are entitled to duty-free treatment under these tariff provisions without the assessment of the merchandise processing user fee. However, as neither item 851.10 or 851.20, TSUS, encompasses paintings, the watercolor subject to this protest is ineligible for classification under either of these provisions and is subject to the user fee.

Accordingly, the protest should be allowed in part and denied in part in accordance with this decision. A copy of this decision should be attached to the Form 19, Notice of Action, to be sent to the protestant.

Sincerely,

John Durant, Director

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