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HQ 557536




January 7, 1994

CLA-2 CO:R:C:S 557536 WAS

CATEGORY: CLASSIFICATION

TARIFF NO.: 9801.00.20

Mr. Arthur Cherry
Arthur Cherry Associates
1315 Walnut Street
Suite 807
Philadelphia, PA 19107

RE: Eligibility of certain machines for duty-free treatment under subheading 9801.00.20, HTSUS; lease agreement.

Dear Mr. Cherry:

This is in response to your letter dated June 8, 1993, on behalf of General Electric Company and its subsidiary, GE Rental/Lease, Inc., concerning the eligibility of certain machines for duty-free treatment under subheading 9801.00.20, Harmonized Tariff Schedule of the United States (HTSUS). Your letter was forwarded to us from the New York Seaport, National Import Specialist Division, for a response.

FACTS:

You state that GE Rental/Lease is in the business of providing data processing and other equipment on short-term leases, frequently to foreign customers. The leased equipment may be of domestic or foreign origin, and may be acquired by GE Rental/Lease directly from manufacturers, distributors, or in used condition from third parties. In some cases, the country of origin of the leased equipment is not known to GE Rental/Lease, and in some cases, even though the country of origin is known or believed to be U.S., the documentation necessary to demonstrate U.S. origin for classification under subheading 9801.00.10, HTSUS, is unavailable. Consequently, you state that at the end of a lease to a foreign customer, GE Rental/Lease often is required to enter the articles as foreign and deposit the appropriate duty. In the case of foreign articles, GE Rental/Lease ordinarily was not the importer of the first importation of the articles into the U.S., but is the importer in subsequent importations while the articles are owned by GE Rental/Lease. You state that the articles are both exported and reimported by or for the account of GE Rental/Lease. The articles are reimported without having been advanced in value or improved in condition by any process of manufacture or other means while abroad.

ISSUE:

Whether a company who is not the original importer of an article and pays duty upon the first reimportation of the leased machine can qualify the machine for duty-free treatment under subheading 9801.00.20, HTSUS, upon subsequent returns to the U.S.

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, . . . if [the articles are] (1) reimported, without having been advanced in value or improved in condition by any process of manufacture or other means 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."

We have previously held that, pursuant to 801.00, Tariff Schedules of the United States (TSUS) (the precursor to subheading 9801.00.20, HTSUS), merchandise must be reimported by or for the account of the person who imported it into, and exported it from the U.S., and also the merchandise must have been leased to a foreign manufacturer. In HRL 067920 dated August 31, 1982, a crane company placed a purchase order for a crane with an American-based company who accepted the order and in turn passed the order to an affiliated factory in Sweden. The foreign-made crane was then entered into the U.S. by and for the account of the American-based company and, after sale, was forwarded to the crane company's jobsite in the U.S. The crane company subsequently exported the crane under a lease agreement to a Mexican firm. The crane was later returned to the U.S. by and for the account of the crane company. We held that although the crane may have been imported for the crane company because of a purchase agreement, the entry documents show that the American-based company was the importer of record and duty was paid by that firm. Generally, Customs has held that the term "importer" means "the person primarily liable for the payment of any duties on the merchandise, or an authorized agent acting on his behalf." In HRL 067920, we found that the american-based company was the designated importer of record and paid customs duties for which it was primarily liable. The company was a separate business entity and failed to show that it was acting as agent "by or for the account" of the exporter, and re-importer of the crane.

In HRL 553676 dated February 28, 1986, a mold was imported from Portugal into the U.S., and subject to duty-free treatment under the Generalized System of Preferences (GSP) by Max Klein Company of Wisconsin. The mold was subsequently exported to a Canadian manufacturer under a lease agreement by Bow Plastics Ltd in an exclusive right and license agreement, which gave Bow Plastics the authority for the transportation of the mols back and forth and the payment of duties. The Max Klein Company stated that the described mold was being leased to Bow Plastics and the lease agreement was considered valid. The mold was imported into the U.S. by Bow Plastics from Canada, and duty paid. The mold was later returned to Bow Plastics in Canada for a second production run and again reimported by Bow Plastics. Duty-free treatment was granted because the mold was imported into the U.S. on both occasions from Canada by the Customs agent acting on behalf of his principal, Bow Plastics, who in turn was responsible for the transportation of the molds, back and forth, and given the llicense to make and sell planters produced from the mold and to pay the duty.

Moreover, in a recent case interpreting item 801.00, Tariff Schedules of the United States (TSUS) (the precursor provision to subheading 9801.00.20, HTSUS), the Court of International Trade stated that the purpose of this provision is "to eliminate an assessment of duty which has the appearance of double taxation." See Werner & Pfleiderer Corp., v. United States, Slip Op. 93-166. The court in Werner also stated that "the provision concerning goods exported under lease, in particular, is not 'the sort of exemption from duties which must be narrowly construed.'"

In the instant case, it is clear that the machine satisfies the first requirement under subheading 9801.00.20, HTSUS. The machine is reimported into the U.S. without having been advanced in value or improved in condition abroad by any process of manufacture or other means, and the machine is exported under a lease agreement. In addition, consistent with HRL's 067920 and 553676, the second requirement under this provision is satisfied, since GE Rental/Lease is the same entity who imported the equipment into the U.S. and paid the applicable duty, exported it under lease and then reimported the machinery. Nothing in subheading 9801.00.20, HTSUS, requires a party to be the original importer into the U.S. in order for the article to be eligible for duty-free treatment under this provision. The requirements are simply that the article must have been previously imported duty-paid, exported by the same party, and then reimported by the same party after lease, without having been advanced in value or improved in condition while abroad. These conditions are met by GE Rental/Lease since, although it is not the original importer, the information shows that they have imported the equipment into the U.S., paid the applicable duty, exported the article to a foreign company under a lease agreement, and subsequently reimported the same article into the U.S. Accordingly, we are of the opinion that the equipment is eligible for duty-free treatment under subheading 9801.00.20, HTSUS, when reimported into the U.S. by GE Rental/Lease.

In addition, articles which may be of U.S. origin but which cannot be documented as such would also be entitled to duty-free treatment under subheading 9801.00.20, HTSUS, if applicable duties are paid upon their initial importation and the other statutory requirements are met.

HOLDING:

Based upon the information provided, we are of the opinion that equipment (whether U.S. or foreign) which is previously imported with full payment of duty by GE Rental/Lease, subsequently exported by the same party under a lease agreement and then reimported by the same party into the U.S. without having been advanced in value or improved in condition while abroad, is eligible for duty-free entry into the U.S. under subheading 9801.00.20, HTSUS, provided the documentation requirements of section 10.1(a), Customs Regulations (19 CFR 10.1(a)), are satisfied.

Sincerely,

John Durant, Director

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