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HQ 225301




August 19, 1994

CON-9-04 CO:R:C:E 225301 TLS

CATEGORY: ENTRY

Steven W. Baker, Esq.
Bellsey and Baker
100 California Street Suite 670
San Francisco, California 94111

RE: Ruling request concerning the commingling of merchandise entered under a temporary importation bond (TIB) with merchandise entered for consumption; C.S.D. 86-16 (December 9, 1985); C.S.D. 88-1 (June 29, 1987); Harmonized Tariff Schedule of the United States Annotated (HTSUSA) subheading 9813.00.0520.

Dear Mr. Baker:

This office has received the above-referenced request for a ruling as provided for under Customs regulations. We have considered the request and have made the following decision.

FACTS:

Your client wishes to import kits containing parts used to manufacture merchandise, some of which will be sold domestically and some exported for sale. You propose that some of the imported kits be entered for consumption and some under TIB with the intent to export. It is further proposed that both the kits entered under TIB and the kits entered for consumption be commingled for the purposes of manufacturing the end product. The TIB parts would be accounted for using the first-in/first-out (FIFO) accounting method.

ISSUE:

Whether the parts entered under TIB may be commingled with identical parts entered for consumption, with the TIB parts accounted for upon export using the FIFO accounting method.

LAW AND ANALYSIS:

Articles entered under HTSUSA subheading 9813.00.05 must meet the following requirements to be eligible for duty-free treatment:

1) The article must not be imported for sale or sale on approval and must be exported or destroyed within one year from the date of importation. (The bond period may be extended, upon application for one or more further periods which may not exceed a total of three years.)

2) Must be an article to be repaired, altered, or processed (including processes which result in articles manufactured or produced in the United States);

3) The article(s) produced must not be a product described as any one of the following: a) alcohol, distilled spirits, wine, beer, or any dilution or mixture of any or all of the foregoing; b) a perfume or other commodity containing ethyl alcohol (whether or not such alcohol is denatured); or c) a product of wheat;

4) If the article as processed results in an article manufactured in the United States, the following must be adhered to: a) a complete accounting must be made to the Customs Service for all articles, wastes, and irrecoverable losses resulting from such processing; and b) all articles and valuable wastes resulting from such processing will be exported or destroyed under customs supervision within the bonded period; except that in lieu of the exportation or destruction of valuable wastes, duties may be tendered on such wastes at rates of duties in effect for such wastes at the time of importation. See HTSUSA
Chapter 98, Subchapter XIII, U.S. Notes 1(a),

In the present case, the merchandise will be manufactured in this country and some will be exported from the customs territory. The merchandise will be accounted for using FIFO. The TIB merchandise will not be used to produce any alcoholic beverage products, perfumes containing ethyl alcohol, or wheat products. This proposed transaction appears to be much like that in C.S.D. 86-16 (December 9, 1985). In that case, the importer commingled merchandise entered under TIB with domestic merchandise to be used to manufacture a third product. Some of the finished product was exported according to TIB requirements and some was entered for domestic consumption. We ruled in that case that the FIFO accounting method may be used to account for the merchandise entered and subsequently exported under TIB.

The ruling noted that we had approved of such a transaction in the past. See C.S.D. 84-12 (June 23, 1983). It was also expressly noted in 86-16 that the importer would have on hand at all times sufficient merchandise to cancel all open TIB entries. Thus, we maintain that such will be required in this transaction as well.

Consistent with FIFO guidelines required in earlier rulings, the commingling to take place under the proposed transaction should be done on a part-to-part, merchandise-to-merchandise basis. See C.S.D. 88-1 (June 29, 1987). Thus, each set of parts must be identified and accounted for separately according to TIB requirements. We have enclosed a copy of C.S.D. 88-1 for your convenience. It should provide more details of what we consider valid FIFO practices under customs transactions.

HOLDING:

The commingled merchandise in the proposed transaction must be identified and accounted for on a part-by-part basis and the exported merchandise may be accounted for using the "first-in, first-out" (FIFO) accounting method. The importer must have on hand at all times sufficient parts to cover all open TIB entries.

Sincerely,

John Durant, Director

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