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HQ 555966


May 24, 1991

CLA-2 CO:R:C:S KCC 555966

CATEGORY: CLASSIFICATION

TARIFF NO.: 9801.00.20

Area Director of Customs
U.S. Customs Service
110 South Fourth Street
Minneapolis, Minnesota 55401

RE: Application for Further Review of Protest No. 3501-0-000241, concerning reimportation of a machine tool. Documentary requirements; 19 CFR 10.108

Dear Sir:

The above-referenced protest contests your denial of duty- free treatment under subheading 9801.00.20, Harmonized Tariff Schedule of the United States (HTSUS), to a machine tool reimported into the U.S. from Germany.

FACTS:

Amoco Chemical Corporation (herein referred to as "protestant") separately entered a thermoforming machine and a machine tool from Germany through the Minneapolis port of entry on April 3, 1990, under subheading 8543.80.9080, HTSUS. On July 27, 1990, the entries were liquidated under subheading 8543.80.9080, HTSUS, with duty assessed on the full value of the articles at the rate of 3.9% ad valorem.

After liquidation, the protestant "discovered" that subheading 9801.00.20, HTSUS, may be applicable to the machine tool, and, on October 25, 1990, counsel for the protestant filed this protest contesting the tariff classification of the article.

The machine tool is a German manufactured 10 cavity Deli- Bowl form tool. Protestant claims it originally imported the machine tool and paid all necessary duties in 1980 or 1981 but no supporting documentation to that effect has been submitted. Protestant states that it exported the machine tool to Gabler Machinery in Luebeck, Germany, for the purpose of testing a Thermoforming Machine Model F-743, which it had ordered from Gabler, and to train engineers. Prior to the tool's export from the U.S., the protestant registered the article with Customs on Customs Form 4455. Once the operation was approved and the training complete, the machine tool and the thermoforming machine were separately imported into the U.S.

Protestant contends that the use of the machine tool by the foreign manufacturer constitutes a "similar use agreement" within the meaning of subheading 9801.00.20, HTSUS. The protestant states that as a result of the shipment of the tool to Gabler, a "bailment" existed between the two parties. According to Black's Law Dictionary (1979), "bailment" is defined as follows:

A delivery of goods or personal property, by one person to another, in trust for the execution of a special object upon or in relation to such goods, beneficial to either the bailor or bailee or both, and upon a contract, express or implied, to perform the trust and carry out such object, and thereupon either to redeliver the goods to the bailor or otherwise dispose of the same in conformity with the purpose of the trust.

Gabler did not lease the tool, but merely used it free of charge. Protestant states that it and Gabler benefited from the testing as both companies stood to gain from the proper operation of the machine. Protestant contends that this bailment is a type of "similar use agreement" covered by this tariff provision. Protestant contends that the purpose of the addition of "similar use agreement" language to item 801.00, Tariff Schedules of the United States (TSUS) (the precursor provision to subheading 9801.00.20, HTSUS), was to codify Custom's practice of permitting the use of this tariff provision when no actual monetary consideration was exchanged.

ISSUE:

Whether the machine tool is entitled to duty-free treatment under subheading 9801.00.20, HTSUS.

LAW AND ANALYSIS:

Subheading 9801.00.20, HTSUS, provides duty-free treatment for:

Articles, previously imported, with respect to which the duty was paid upon such previous importation or which were previously free of duty pursuant to the Caribbean Basin Economic Recovery Act or Title V of the Trade Act of 1974, if (1) reimported, without having been advanced in value or improved in condition by any process of manufacture or othermeans while abroad, after having been exported under lease or similar use agreements, and (2) reimported by or for the account of the person who imported it into, and exported it from, the United States (emphasis added).

Free entry under item 801.00, TSUS, was originally restricted to articles that had been exported under lease to a foreign manufacturer. The Trade and Tariff Act of 1984 (Public Law 98-573) amended this provision by extending the exemption to situations where the articles had been exported under lease or similar use agreements to entities other than foreign manufacturers.

Section 10.108, Customs Regulations (19 CFR 10.108), provides, in relevant part, that free entry shall be accorded under subheading 9801.00.20, HTSUS, whenever it is established to the satisfaction of the district director that the article for which free entry is claimed was duty paid on a previous importation, and is being reimported by or for the account of the person who previously imported it into, and exported it from the U.S.

The protestant has failed to submit any documentation which shows that the machine tool was previously imported and that it was previously imported by or for its account. It is clear from the regulations that the decision to grant duty-free treatment is dependent upon the district director being satisfied that the requirements of 19 CFR 10.108 are met. Since the protestant has failed to provide the documentation necessary to satisfy the district director, we find that the machine tool is ineligible for duty-free treatment under subheading 9801.00.20, HTSUS.

HOLDING:

On the basis of the record presented, it is our opinion that the machine tool may not be accorded duty-free treatment under subheading 9801.00.20, HTSUS. Accordingly, you are directed to deny the protest in full. A copy of this decision should be attached to the Form 19 to be sent to the protestant.

Sincerely,

John Durant, Director
Commercial Rulings Division

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