United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 1995 HQ Rulings > HQ 557841 - HQ 558673 > HQ 557924

Previous Ruling Next Ruling
HQ 557924




September 14, 1994

CLA-2 CO:R:C:S 557924 DEC

CATEGORY: CLASSIFICATION

Mr. Kent Paulsen
Cal Pacifico of California
1300 Quail Street - Suite 208
Newport Beach, California 92660-2777

RE: NAFTA; Article 307; Subheading 9802.00.50, HTSUS; Repair; 19 C.F.R. ?181.64

Dear Mr. Paulsen:

This is in response to your letter dated May 10, 1994, on behalf of Parpro, Incorporated, in which you seek a determination of the eligibility of certain repair and alteration activities to be performed in Mexico for duty free treatment.

FACTS:

Parpro is under contract to repair and restore various home video entertainment systems which have been returned by the purchaser. The original products consist of complete sets including such items as control decks, power supplies, hand controllers, manuals, informational material, and protective packaging. The returned merchandise includes damaged and defective products, products with blemished cases or accessories, and products found unsuitable by the end user.

Prior to shipment to Mexico, the packaging is removed from the returned merchandise and the various components are separated. In Mexico, the repairs and alterations consist of replacing damaged or defective components, reassembling the various parts into complete units and placing them in retail packaging. According to your letter, "[r]epair parts are only those used for repair purposes, and do not include all of the items which would be necessary to manufacture any new or different articles."

ISSUE:

Whether the exported video home entertainment systems that are subjected to various replacement and repair operations in Mexico are entitled to duty-free treatment under subheading 9802.00.50, Harmonized Tariff Schedule of the United States ("HTSUS"), when returned to the United States?

LAW AND ANALYSIS:

Articles returned to the United States after having been exported to Mexico to be advanced in value or improved in condition by repairs or alterations may qualify for duty-free treatment under subheading 9802.00.50, HTSUS, provided that the foreign operation does not destroy the identity of the exported articles or create new or different articles. Entitlement to this tariff treatment is also precluded where the exported articles are incomplete for their intended use prior to the foreign processing, Guardian Industries, Inc. v. U.S., 3 C.I.T. 9 (1982), or where the foreign operation constitutes an intermediate processing operation, which is performed as a matter of course in the preparation or the manufacture of the finished articles. Dolliff & Company, Inc. v. U.S., 455 F. Supp. 618 (C.I.T. 1978), aff'd, 599 F.2d 1015, (Fed. Cir. 1979).

Repairs are operations aimed at restoring articles to their original condition, but cannot be so extensive as to destroy the identity of the exported article or to create a new or different article. Press Wireless, Inc. v. U.S., C.D. 4386, Cust. Ct. 102 (1941). The replacement and/or addition of parts to restore products to their original condition may constitute repair operations for purposes of subheading 9802.00.50, HTSUS, if the particular product does not lose its identity and the replacements and/or additions are not so extensive as to create a new or different article. Customs finds that the repair operations at issue will not cause the product to lose its identity or create a new and different article. It is apparent that Parpro intends to repair the defective units and reintroduce them to the United States market as the same items that were previously found defective.
Consequently, when the merchandise is returned from Mexico after having been repaired, it will be entitled to duty-free treatment, assuming compliance with the documentation requirements under section 181.64(c), Customs Regulations (19 C.F.R. ?181.64(c)).

HOLDING:

The exported video home entertainment systems that are subjected to various replacement and repair operations in Mexico are entitled to duty-free treatment under subheading 9802.00.50, HTSUS, when returned to the United States provided the documentary requirements of section 181.64 are satisfied.

Sincerely,

John Durant

Previous Ruling Next Ruling

See also: