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HQ 557929




November 14, 1994

CLA-2 CO:R:C:S 557929 MLR

CATEGORY: CLASSIFICATION

TARIFF NO.: 9801.00.20; 9801.00.25

District Director
4430 E. Adamo Drive
Suite 301
Tampa, Florida 33605

RE: Application for Further Review of Protest No. 1801-92-100030; Denial of duty exemption under HTSUS subheadings 9801.00.20 and 9801.00.25 to injection molding machines; transaction value

Dear Madam:

This is in reference to a protest and application for further review filed by Peter Herrick on behalf of Skaraborg Invest USA Inc. ("Skaraborg"), contesting the denial of the duty exemption under subheading 9801.00.20 or 9801.00.25, Harmonized Tariff Schedule of the United States (HTSUS), to injection molding machines.

FACTS:

The protestant claims that the injection molding machines should be duty-free under either subheading 9801.00.20 or 9801.00.25, HTSUS, or if dutiable, the appraised value should be $289,051.00. Customs denied the claim for duty-free treatment under subheading 9801.00.20, HTSUS, because insufficient documentation was provided to show that the machines were "exported under lease or similar use agreements", and that the machines were being "imported by or for the account of the person who imported it into, and exported it from, the United States."

The claim under subheading 9801.00.25, HTSUS, was denied because the requirements of 19 CFR 10.8a(a)(1) and (4), and 10.8a(b) were not satisfied, and the protestant did not show how the machines did not conform to sample or specification or provide any entries to prove these machines were previously imported into the U.S.

The protestant submits a letter from Ken Swanick, President of Skaraborg dated May 25, 1991, which states that the Husky machines S/N 8260 and 8261 were previously imported into the U.S. at the Port of Fort Erie, Buffalo, New York, in June 1985 (S/N 8260) and January 1986 (S/N 8261), by Data Packaging, Inc. of Somerset, Massachusetts, at which time duty was paid; the machines were exported from the U.S. at Port Everglades, Miami, Florida on July 25, 1989, by Precision Engineered Products, Inc. ("Precision"), of Canyon Lake, California, without benefit of drawback; and the articles were reimported by or for the account of Skaraborg.

Another letter from Carl-Erik Landen, President of CePe-Plast KB, Sweden, dated May 25, 1991, is submitted, which states that the machines were received from Precision, they were not advanced in value or improved in condition by any process of manufacture or other means, and they were returned to Skaraborg because they did not conform to the Ilsemann (European) specification; therefore, the machines could not be sold in the European marketplace. Specifically, the protestant states that Precision and CePe-Plast KB entered into an executory contract for the sale of the machines, and the machines were exported to Sweden to be used in a test demonstration. The protestant states that, if the machines could not be used, they would remain the property of Precision, and that title to the machines would not pass until the use of the machines in Europe was proven. Therefore, protestant alleges that this executory contract is a "similar use agreement."

After CePe-Plast KB determined that the machines did not meet specifications, the protestant states that CePe-Plast KB tried to cancel the agreement and return the machines to Precision; however, Precision refused to cancel the contract. Therefore, CePe-Plast KB filed a lawsuit in Sweden against Precision, and on or about September 11, 1990, obtained a judgment against Precision. Accordingly, the protestant claims that since the executory contract was cancelled and the machines were reimported to the U.S. for the account of Precision, CePe-Plast KB became the "alter ego" of Precision, which under the laws of Sweden and the Harmonized Code, is the same person as Precision. The protestant also requests a waiver of the documentary requirements of 19 CFR 10.8a.

If duty-free treatment is denied, the protestant claims that there is no transaction value for this merchandise under 19 U.S.C. 1401a(b)(1) because the merchandise was not sold for exportation to the U.S. The protestant claims that the pro forma invoice supplied with the entry was for the purpose of identifying the merchandise, and the reference to the "value for Customs USD 700,000" has no meaning. The protestant submits that the proper appraised value for this merchandise, determined pursuant to 19 CFR 152.107, is $289,051.00 as indicated in a letter from HUSKY Injection Molding Systems Ltd. dated December 18, 1991, which states that the two machines, serial number 8260 and 8261, have an approximate resale value of $80,000.00 and $90,000.00, respectively, and the Husky Stack Molds are worth approximately $50,000.00. The record also contains an invoice from Chicago Mold Engineering Co., Inc. dated February 26, 1985, setting the price of the tray mold at $79,051.00. The protestant also claims that under Generally Accepted Accounting Principles the tray mold would be eligible for a reduction in value based on depreciation.

ISSUES:

I. Whether the injection molding machines are eligible for the duty exemption under either subheading 9801.00.20 or 9801.00.25, HTSUS, when returned to the U.S.

II. Whether the articles should be appraised on the basis of transaction value.

LAW AND ANALYSIS:

I. Subheadings 9801.00.20 and 9801.00.25, HTSUS

Subheading 9801.00.20, HTSUS, provides duty-free treatment for:

[a]rticles, previously imported, with respect to which the duty was paid upon such previous importation or which were previously free of duty pursuant to the Caribbean Basin Economic Recovery Act or Title V of the Trade Act of 1974, if (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.

Section 10.108, Customs Regulations (19 CFR 10.108), provides, in relevant part, that free entry shall be accorded under subheading 9801.00.20, HTSUS, whenever it is established to the satisfaction of the district director that the article for which free entry is claimed was duty paid on a previous importation, and is being reimported by or for the account of the person who previously imported it into, and exported it from the U.S.

In Headquarters Ruling Letter (HRL) 557193 dated July 19, 1993, Customs determined that forklift trucks originally imported into the U.S. by Caterpillar Inc., leased by Hawthorne Lift Systems, California, to Hyundai de Mexico, and imported by Hyundai Precision America, Inc., were not eligible for subheading 9801.00.20, HTSUS, since there was no indication that either Hyundai Precision America, Inc. or Hawthorne Lift Systems was acting on behalf of Caterpillar when the forklifts were exported and reimported. Therefore, because the trucks were not reimported by or of the account of the person who imported them into, and exported them from the U.S., subheading 9801.00.20, HTSUS, was inapplicable.

Similarly, in this case, no documentation has been submitted to show that the machines were reimported by or for the account of Data Packaging, Inc., the previous importer of the protested merchandise. It is clear from the regulations that the decision to grant duty-free treatment is dependent upon the district director being satisfied that the requirements of 19 CFR 10.108 are met. Since the protestant has failed to provide the documentation necessary to satisfy the district director, we find that the machines are ineligible for duty-free treatment under subheading 9801.00.20, HTSUS.

Subheading 9801.00.25, HTSUS, 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 documentary 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 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 10.8a(b).

In this case, the record reflects that the machines were previously imported into the U.S. by Data Packaging, Inc. at the Port of Fort Erie, Buffalo, New York, in June 1985 (S/N 8260) and January 1986, and that the machines were exported from the U.S. at Port Everglades, Miami, Florida, on July 25, 1989, by Precision. This does not meet the first requirement under subheading 9801.00.25, HTSUS, that the articles are exported within three years after the date of such previous importation. Nor is the fourth requirement satisfied, that the machines were reimported by or for the account of the person who imported them into (i.e., Data Packaging, Inc.), and exported them from, the U.S.

In addition, the documentary requirements of 19 CFR 10.8a were not satisfied. The protestant requests a waiver of these documentary requirements. As provided by 19 CFR 10.8a(c):

[i]f the district director concerned is reasonably satisfied because of the nature of the articles or production of other evidence that the requirements of subheading 9801.00.25, [HTSUS], and the related section and the additional U.S. notes have been met, he may waive the production of the documents provided for in paragraph (b) of this section.

Accordingly, since the district director did not waive the documentary requirements, the claim for subheading 9801.00.25, HTSUS, should be denied.

II. Transaction Value

Merchandise imported into the U.S. is appraised in accordance with section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. 1401a). The preferred method of appraisement under the TAA is transaction value, defined as "the price actually paid or payable for the merchandise when sold for exportation to the United States", plus certain statutorily enumerated additions. 19 U.S.C. 1401a(b)(1).

In the instant case, the protested merchandise was appraised under the transaction value method based on a commercial invoice presented with the entry which identified the value of the merchandise as being $700,000. Section 141.86(a)(5)-(6), Customs Regulations {19 CFR 141.86(a)(5)-(6)}, provides that each invoice of imported merchandise shall set forth the purchase price of each item, or the value of each item if the merchandise was not shipped pursuant to a purchase or an agreement to purchase. There is nothing on the commercial invoice to indicate that the protested merchandise was shipped otherwise than pursuant to a purchase or agreement to purchase.

Protestant contends that the protested merchandise was not the subject of a sale and, therefore, cannot be appraised under transaction value; however, protestant has not submitted any documentation to support this claim. Accordingly, it is our position that the protested merchandise was correctly appraised as entered on the basis of transaction value.

HOLDING:

On the basis of the information submitted, the protested merchandise is not eligible for duty-free treatment under subheading 9801.00.20 or 9801.00.25, HTSUS, because the articles were not reimported by or for the account of the person who previously imported them into, and exported them from the U.S. Furthermore, the protested merchandise was correctly appraised as entered on the basis of transaction value. Accordingly, the protest should be denied in full.

In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065 dated August 4, 1993, Subject: Revised Protest Directive, this decision should be attached to Customs Form 19, Notice of Action, and be mailed by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act and other public access channels.

Sincerely,

John Durant, Director

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