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HQ 556336


February 10, 1992

CLA-2 CO:R:C:S 556336 WAW

CATEGORY: CLASSIFICATION

TARIFF NO: 9801.00.10

U.S. Customs Service
District Director
Minneapolis, MN

RE: Application for Further Review of Protest No. 3501-1-100336 on the applicability of duty exemption available under HTSUSA subheading 9801.00.10 to printed circuit board assemblies and a Servo Encoder Assembly; 19 CFR 10.1(a); Border Brokerage Co.; A.E. Coppersmith

Dear Sir:

The above-referenced protest was forwarded to this office for further review. The protestant, DataCard Coporation (DCC), contests the denial of duty-free treatment under subheading 9801.00.10, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), to printed circuit board assemblies and a servo encoder assembly device. Our decision follows.

FACTS:

The protestant alleges that the printed circuit board assemblies (PCBA's) and servo encoder assembly subject to this protest are the growth, product, or manufacture of the U.S. which were exported from the U.S. to various foreign countries and then returned to the U.S. without having been advanced in value or improved in condition by any process of manufacture while abroad.

The protestant states that the PCBA's and servo encoder assembly were designed, developed and assembled by DCC in the U.S. DCC incoporated the PCBA's into its card personalizing equipment, which is primarily designed to emboss, encode and input data onto plastic cards. After the equipment was produced in the U.S., it was subsequently shipped to various foreign countries. However, due to defects in the PCBA's and servo encoder assembly, it was necessary to return these items to DCC's service organization in the U.S. for repair or replacement. ISSUE:

Whether the PCBA's and servo encoder assembly are entitled to duty-free treatment under subheading 9801.00.10, HTSUSA.

LAW AND ANALYSIS:

Subheading 9801.00.10, HTSUSA, provides for the free entry of U.S. products that are exported and returned without having been advanced in value or improved in condition by any means while abroad, provided the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1), are met. While some change in the condition of the product while it is abroad is permissible, operations which either advance the value or improve the condition of the exported product render it ineligible for duty-free entry upon return to the U.S. See Border Brokerage Company Inc. v. United States, 65 Cust. Ct. 50, C.D. 4052, 314 F. Supp. 788 (1970), appeal dismissed, 58 CCPA 165 (1970).

Compliance with section 10.1(a) is mandatory and a condition precedent to recovery unless compliance has been waived or is impossible. Maple Leaf Petroleum, Ltd. v. United States, 25 CCPA 5, T.D. 48976 (1937). The basis for waiver of the required documentation is predicated on the district director being satisfied by the production of other evidence as to the American origin of the merchandise and its eligibility under 9801.00.10, HTSUSA.

In the instant case, the record clearly shows that your office was not satisfied that the defective merchandise imported by DCC was of U.S. origin. Information submitted by your office indicates that on March 19, 1991, import specialists visited DCC at their premises to verify the country of origin of their merchandise and to examine the merchandise for classification purposes. Upon examination of the merchandise, the import specialists determined that a large quantity of the parts that DCC imported for the embossing machines were improperly classified under subheading 8473.30, HTSUSA, duty-free, rather than under subheading 8473.40, HTSUSA, dutiable at 3.9 percent. At the time of the meeting, the import specialists requested that DCC provide additional information necessary to classify the merchandise, as well as documentary evidence to support a claim for duty-free treatment under subheading 9801.00.10, HTSUSA. After a month passed with no response from DCC, the subject entries were rate advanced under the provision for parts of embossing machines under subheading 8473.40.40, HTSUSA, dutiable at 3.9 percent ad valorem. According to your office, the protest and attachments thereto constitute insufficient documentation to support a claim for duty-free treatment under subheading 9801.00.10, HTSUSA.
The record in this case does not reflect that the Certificate of Exportation required by 19 CFR 10.1(a)(3) was filed in connection with the entries covered by this protest. The courts have held that, to receive duty-free treatment under this tariff provision, the merchandise must be positively identified as having been previously exported American goods, and it must be shown that no allowance of drawback was made upon exportation. Border Brokerage Co. v. United States, 59 Cust. Ct. 289, C.D. 3143 (1967). Moreover, it has been held that merchandise is not entitled to free entry as American goods returned where the Certificate of Exportation has not been filed or its production waived or proved impossible and the evidence offered in substitution thereof is insufficient. A.E. Coppersmith v. United States, 50 Cust. Ct. 8, C.D. 2381 (1963).

In this case, compliance with the documentary requirements of 19 CFR 10.1(a) was not waived by your office, the protestant has not established impossibility of compliance, and the evidence submitted in support of the protest does not conclusively identify the merchandise as having been manufactured in the U.S. Therefore, we find that the PCBA's and servo encoder assembly are not entitled to free entry under subheading 9801.00.10, HTSUSA.

HOLDING:

In view of the insufficient evidence submitted by the protestant and the fact that the documentary requirements of 19 CFR 10.1 have not been satisfied nor waived, the PCBA's and servo encoder asembly devices do not qualify for the duty exemption available under subheading 9801.00.10, HTSUSA. Accordingly, the protest should be denied. A copy of this decision should be attached to Customs Form 19 and mailed to the protestant as part of the notice of action on the protest.

Sincerely,

John Durant, Director

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