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HQ 556429


March 24, 1992

CLA-2 CO:R:C:S 556429 RAH

CATEGORY: CLASSIFICATION

TARIFF NO.: 9801.00.25

Mr. Patrick D. Gill, Esquire
Rode & Qualey
295 Madison Avenue
New York, New York 10017

RE: Applicability of duty exemption under HTSUS subheading 9801.00.25 to certain articles of wearing apparel returned to the United States from Canada

Dear Mr. Gill:

This is in response to your letter of November 22, 1991, requesting a ruling on the applicability of subheading 9801.00.25, Harmonized Tariff Schedules of the United States (HTSUS), to articles of wearing apparel returned to the United States from Canada. You also inquire about visa and quota requirements for such articles.

FACTS:

You state that your client is a well-known retailer which distributes various articles of merchandise, principally wearing apparel, by catalog and in retail stores.

The retailer has a program for the return of merchandise purchased through its U.S. store's catalog and shipped to customers in Canada. Under this program, when customers in Canada return merchandise because it does not conform to specification, they must complete a store form which identifies the returned article, reason for the return and the names of the individual customers. The various articles are consolidated for return to the United States. The consolidated packages contain forms for all articles being returned.

ISSUES:

(1) Whether merchandise returned from customers in Canada who purchased it from a U.S. store's catalog is eligible for a duty exemption under subheading 9801.00.25, HTSUS.

(2) Whether merchandise returned in consolidated packages from customers in Canada who purchased it from a U.S. store's catalog is subject to visa and quota requirements.

LAW AND ANALYSIS:

HTSUS subheading 9801.00.25 provides for the duty-free entry of:

[a]rticles, previously imported, with respect to which the duty was paid upon such previous importation if (1) exported within three years after the date of such previous importation, (2) reimported without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, (3) reimported for the reason that such articles do not conform to sample or specification, and (4) reimported by or for the account of the person who imported them into, and exported them from the United States.

Articles satisfying each of the above requirements are entitled to duty-free treatment, assuming compliance with the documen- tary requirements of section 10.8a, Customs Regulations (19 CFR 10.8a). This regulation contains the same criteria found in subheading 9801.00.25, HTSUS. The documents required are declarations by the person abroad who received and is returning the merchandise and by the owner or importer (or consignee or agent). Each declaration must include a description of the articles, and the latter declaration must set forth information relative to the original importation of the merchandise, such as port and date of importation, entry number, and name and address of the importer at the time the duty was paid. (19 CFR

In the instant case, we find that the second and third requirements of subheading 9801.00.25 are clearly met. Mer- chandise returned from a customer in Canada to a store in the United States from which it was ordered is not advanced in value or improved in condition. Furthermore, such merchandise is reimported into the United States from Canada because it does not conform to sample or specification.

However, there is insufficient evidence to determine whether the first and fourth requirements of subheading 9802.00.25, HTSUS, are met. Nevertheless, the information necessary to determine if those elements are satisfied (the merchandise will be exported within three years after the date of its previous importation; and the merchandise is reimported by or for the account of your client who originally imported it into the United States) is contained in the documents which must be submitted with the formal entry of the merchandise. If those requirements are satisfied, the merchandise may be returned free of duty under subheading 9801.00.25, HTSUS.

With regard to the quota and visa requirements, we refer to the ABI administrative message cited in your letter (ABI Administrative Message, dated October 17, 1991, SPE-CO:T:R:T: RA- 2290051). It provides in part:

Effective immediately textile merchandise manufactured in a third country subject to quota/visa requirements that are returned to a U.S. company by a foreign resident or consumer because the article does not meet specifications, are not subject to any applicable quota/visa requirements. The foreign resident or consumer returning an article to the U.S. must not be a commercial enterprise.

It further provides that "companies who consolidate returns in a third country are to have each return individually packed with the foreign residents name and address on the outside of the package."

You claim that it would be impractical to individually pack each of the many articles returned. You further assert that because the forms identify the articles, the reasons for the return, and the names of the individual customers, that these are not returns by commercial enterprises of the type contemplated in the cited directive and that the policy underlying the directive would not be undermined if your client is allowed to consolidate these returns in packages containing all the required information.

Under the facts presented, as long as the consolidated packages contain a separate form for each of the returned articles, they do not have to be individually packaged. Under these circumstances, the articles will not be subject to visa and quota requirements.

HOLDINGS:

(1) Merchandise not conforming to specification which is returned from customers in Canada who purchased it from a U.S. store's catalog is eligible for the duty exemption under subheading 9801.00.25, HTSUS, provided it is exported within three years after its previous importation, it is reimported by or for the account of your client who originally imported the merchandise, and the documentary requirements of section 10.8a, Customs Regulations (19 CFR 10.8a), are satisfied.

(2) The return of merchandise in a consolidated package from customers in Canada who purchased it from a U.S. store's catalog is not subject to visa and quota requirements, provided the package contains a separate form for each article which identifies it, states the reason for the return and lists the names of the individual customers.

Sincerely,

John Durant, Director
Commercial Rulings Division

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