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HQ 556790


January 13, 1993

CLA-2 CO:R:C:S 556790 WAW

CATEGORY: CLASSIFICATION

TARIFF NO.: 8802.40.0090

District Director
U.S. Customs Service
423 Canal Street
New Orleans, LA 70130

RE: Application for Further Review of Protest No. 2002-92- 100070; 19 CFR 10.183; General Note 3(c)(vi); Civil Aircraft Agreement

Dear Sir:

This is a decision on an Application for Further Review of the above-referenced protest, filed by Federal Express Corp., concerning the eligibility of a DC-10-10 which has been modified in Portugal for duty-free treatment pursuant to the Civil Aircraft Agreement (Title VI of Public Law 96-39), upon entry into the U.S. The entry the subject of this protest is dated December 7, 1990.

FACTS:

The merchandise at issue in this protest consists of an aircraft, referred to as Model No. N68058, SN 46705, McDonnell Douglas DC-10 Series 10. Federal Express protests the value advance of $1,859,240.55, and commingling of the aircraft modification parts on this entry under subheading 8481.30.20, Harmonized Tariff Schedule of the United States (HTSUS), dutiable at 8 percent. The value advance and classification change in the entry resulted in an additional duty due of $148,739.28. Federal Express claims that the cost of all modification parts and labor charges should be included as part of the value of the duty-free Civil aircraft under subheading 8802.40.0090, HTSUS.

The subject aircraft was purchased by Federal Express from McDonnell Douglas Corp., and flown to Portugal where additional equipment was added and certain modifications were made on the plane by TAP Air Portugal. Among some of the modifications made in Portugal was the installation of a "weight increase" using parts of U.S.-origin purchased by Federal Express and valued at $418,000. Aircraft design weights were increased as part of a passenger to freighter modification contract between Federal Express and McDonnell Douglas and was accomplished by TAP Air Portugal during the period from August 31, 1990 to December 6, 1990. During this same period, a structural modification to the wing pylons was performed by TAP. The cool pylon modification consists of a structural modification to the fixture which holds a turbine engine pod to the wing of the aircraft.

The aircraft was returned to the U.S. for a Zero B/C maintenance check at a vendor in Alabama. Certain unserviceable spare parts of U.S.-origin valued at $100,000 were also returned with the aircraft. The cost of the Portugese labor and Portugese origin parts used in the installations and modifications was calculated at $482,000. At the time of entry, the returned unserviceable parts of U.S.-origin were entered under HTSUS subheading 9801.00.10. The aircraft and the U.S.-origin furnished parts were entered under HTSUS subheading 9802.00.40. The remaining $482,000 which comprised the Portugese-origin materials and labor were entered under HTSUS subheading 8803.30.00104/Free as parts of civil aircraft.

In a letter of September 18, 1991, in response to a Request for Information, the protestant stated that, in addition to the above modifications on the aircraft, another charge of $586,692.12 was incurred for extra materials provided by TAP that were not anticipated prior to the initiation of the stated modification work. These charges were not known to exist at the time of entry and consequently were not made part of the entry package. Protestant has provided an exhibit of charges and work performed at the TAP Lisbon, Portugal facility for the subject aircraft.

It is Federal Express' position that the operations performed in Portugal serve to modify the N68058 aircraft into a standard Federal Express DC-10 Series 10 freighter configuration. The resulting aircraft is identical to all DC-10-10F aircraft which are now in operation with Federal Express. Federal Express claims that the work performed and the parts used in the modification process enhance the basic capability of the aircraft and are an integral part of the unit itself. Protestant claims that the final product is virtually identical in form and function to the aircraft prior its conversion into a cargo aircraft. Furthermore, protestant maintains that the aircraft should be entered under subheading 8802.40.0090, HTSUS, which encompasses "Airplanes and other aircraft, of an unladen weight exceeding 15,000 kg. . . Used or rebuilt: . . . Other aircraft." This provision provides in the Special subcolumn for the duty-free treatment of products qualifying under the Agreement on Trade in Civil Aircraft. Thus, protestant claims that the cost of all labor, modifications, and associated parts should be entered under subheading 8802.40.0090, HTSUS, and entitled to duty-free treatment under the Agreement in trade on civil aircraft.

ISSUE:

Whether the DC 10-10 aircraft and parts of the aircraft which are imported from Portugal into the U.S. are entitled to duty-free treatment under the Agreement on Trade in Civil Aircraft.

LAW AND ANALYSIS:

The Agreement on Trade in Civil Aircraft was implemented by Title VI, "Civil Aircraft Agreement" of the Trade Agreements Act of 1979 (Sec. 601, P.L. 96-39, 93 Stat. 144, 96th Cong., 1st Sess. 1979), effective January 1, 1980. On June 7, 1984, 19 CFR Part 10 was amended to include section 10.183, which provides for duty- free admission of civil aircraft and parts for civil aircraft certified for use in accordance with the provisions of General Note 3(c)(vi) of the HTSUS. Section 10.183 of the Customs Regulations (19 CFR 10.183) and General Note 3(c)(iv), HTSUS, provide the authority under which articles may be eligible for the duty-free treatment pursuant to the Agreement on Trade in Civil Aircraft when entering the Customs territory.

Section 10.183 further provides that the importer must file with the appropriate Customs officer a statement that the imported article has been imported for use in a civil aircraft and will be so used. Additionally, the article(s) specifically identified in the entry summary require approval for use in the civil aircraft by the Administrator of the Federal Aviation Administration ("F.A.A.") or an airworthiness authority in the country of exportation. This approval by the country of exportation is recognized by the F.A.A. as an acceptable substitute for F.A.A. approval.

General Note 3(c)(vi), HTSUS, defines the term "civil aircraft" as all aircraft other than aircraft purchased for use by the Department of Defense or the United States Coast Guard. Parts imported in the described circumstances would qualify under this definition.

Section 10.112, Customs Regulations (19 CFR 10.112), provides that documentation for free entry that was not filed at the time of entry may be filed at any time prior to liquidation or before liquidation becomes final. However, 19 CFR 10.183 specifically states that the failure to provide the certification at the time of filing the entry summary or to have an approved blanket certification on file with the district director in the district where the entry summary is filed shall result in a dutiable entry. There is no requirement placed upon the importer at the time of entry summary to prove end use of the merchandise. There is, however, a requirement that the importer certify that the parts have been imported for use in a civil aircraft. The certification represents a statement of intent by the importer that the merchandise will be put to the qualifying use.

In this case, the importer claims that the aircraft in its current configuration is a total entity and, based on the tariff schedule, the modified DC-10-10 should be entered in accordance with subheading 8802.40.0090, HTSUS. It has been established that the protestant retains a blanket Civil Aircraft Agreement with the District Director of Customs in New Orleans, Louisiana, as provided by 19 CFR 10.183. Based on the documents provided by protestant, it is our opinion that the protestant has provided sufficient evidence that the imported article and any parts imported with the aircraft have been imported for use in civil aircraft; they will be so used and that the articles have been approved for such use by the Federal Aviation Authority (FAA) or an airworthiness authority in the country of exportation. Therefore, we are of the opinion that the aircraft and any parts imported with the aircraft are entitled to duty-free treatment pursuant to the Civil Aircraft Agreement. Accordingly, based on the foregoing analysis, consideration of subheading 9802.00.40, HTSUS, as an alternative classification is not necessary. This conclusion is consistent with Headquarters Ruling Letter 071734 dated April 24, 1984, which concerned the same importer.

HOLDING:

Based upon the information provided, we are of the opinion that the imported aircraft and parts will be used in a qualifying manner under the Agreement in Trade in Civil Aircraft, and will be entitled to duty-free treatment under this agreement. Therefore, the protest should be granted. A copy of this decision should be attached to the CF 19, Notice of Action, and sent to the protestant to satisfy the notice requirement under the regulations.

Sincerely,

John Durant, Director

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