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HQ 557991




October 17, 1994

CLA-2 CO:R:C:S 557991 WAS

CATEGORY: CLASSIFICATION

John N. Peterson, Esq.
80 Broad Street
Suite 3400
New York, N.Y. 10004

RE: Applicability of subheading 9802.00.50, HTSUS, to photocopier drum cartridges; repairs; alterations; NAFTA; Article 509; Article 307; section 181.64

Dear Mr. Peterson:

This is in response to your letter dated June 30, 1994, on behalf of your client, Katun Corporation, concerning the applicability of subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), to used photocopier drum cartridges from Mexico. You have included a brochure depicting the merchandise in question for our review.

FACTS:

You state that Katun Corporation will gather used drum cartridges in the U.S. which are specially designed for use with particular models of Canon plain paper electrostatic photocopiers. You further state that each cartridge consists of a photoreceptor drum -- the primary component of the drum unit -- which is installed into a specially designed plastic housing. According to your submission, the housing also features a corona wire assembly, which electrically charges the drum, and a drum cleaning blade. You claim that the cartridges will be exported to Mexico, where they will be repaired, altered, and restored to their original operating condition, and returned to the U.S.

The operations in Mexico are as follows:

(1) In Mexico, the used cartridges will be partially disassembled, to a pre-determined level, for examination, cleaning and repair;
(2) The handle will be removed from the drum unit, and the fastener holding the corona assembly will be undone; (3) The waste toner hopper and drum cleaning blade will also be disassembled from the cartridge; (4) After disassembly, the cartridge frame will be inspected for damage and cleaned thoroughly;
(5) Foam seals and mylar blades will be inspected for damage, notches and defects;
(6) End blocks of the corona wire assemblies will be inspected for cracks, damage and "burns" caused by high temperature operation;
(7) The corona wire will be replaced;
(8) All labels will be removed and replaced; (9) Individual components will be replaced or repaired, as necessary;
(10) A new photoreceptor drum will be inserted into the cartridge housing;
(11) A new cleaning blade will be installed, other components of the cartridge will be reassembled, and the refurbished cartridge will be inspected and packed for shipment to the U.S. in a protective sealed foil bag (which protects the light-sensitive photoreceptor).

You state that where parts are removed during the disassembly and cleaning process, Katun will ensure that the subcomponents are inventoried in the correct machine model application parts bins and labeled accordingly. In this way, you submit that the identity of each of the cartridges exported for repair and alteration will be maintained. A part which is removed from one cartridge will generally be returned to another cartridge of the same model number (although not necessarily the exact same cartridge from which removed).

You claim that the extent to which particular parts of these cartridges will be replaced will depend upon the condition of each individual cartridge. However, you state that the following components will be replaced in 100% of all cases:

Cartridge Model Part Origin
Canon 1010 Photoreceptor drum U.S.
Drum cleaning blade U.S.
Corona wire Japan
Mylar sealing tape U.S.

Canon 1215 Photoreceptor drum U.S.
Drum cleaning blade Japan
Corona wire Japan
Mylar sealing tape U.S.

Canon 2020 Photoreceptor drum U.S.
Drum cleaning blade Japan
Corona wire Japan
Mylar sealing tape U.S.

It is your opinion that the refurbished cartridges will have the same physical specifications and capabilities as the cartridges exported for repair had when new. You state that the refurbished cartridges will be returned to the U.S. and sold as replacement aftermarket copier parts and supplies.

ISSUE:

Whether the used copier drum cartridges which are refurbished in Mexico will qualify for the duty exemption available under subheading 9802.00.50, HTSUS, when returned to the U.S.

LAW AND ANALYSIS:

Articles returned to the U.S. after having been exported to be advanced in value or improved in condition by repairs or alterations may qualify for the partial or complete duty exemption under subheading 9802.00.50, HTSUS, provided the foreign operation does not destroy the identity of the exported articles or create new or commercially different articles through a process of manufacture. See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956), aff'd C.D. 1752, 36 Cust. Ct. 46 (1956); Guardian Industries Corp. v. United States, 3 CIT 9 (1982). Accordingly, entitlement to this tariff treatment is precluded where the exported articles are incomplete for their intended purpose prior to the foreign processing and the foreign processing operation is a necessary step in the preparation or manufacture of finished articles. Dolliff & Company, Inc. v. United States, 455 F. Supp. 618 (CIT 1978), aff'd, 599 F.2d 1015 (Fed. Cir. 1979).

Article 307 of the North American Free Trade Agreement (NAFTA) and Annex 307.1 of the Agreement provide, that articles exported from the U.S. to Mexico for "repairs or alterations" may, upon their return, enter into the U.S. free of duty.

Article 307 of NAFTA provides in pertinent part as follows:

1. Except as set out in Annex 307.1, no Party may apply a Customs duty to a good, regardless of its origin, that re-enters its territory after that good has been exported from its territory to the territory of another Party for repair or alteration, regardless of whether such repair or alteration could be performed in its territory.

Section 181.64, Customs Regulations (19 CFR 181.64) defines "repairs or alterations" for purposes of NAFTA as follows:

For purposes of this section, "repairs or alterations" means restoration, addition, renovation, redyeing, cleaning, resterilizing, or other treatment which does not destroy the essential characteristics of, or create a new or commercially different good from, the good exported from the United States.

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, provided that the particular article does not lose its identity and the replacement and/or additions are not so extensive as to create a new or different article. In Press Wireless, Inc. v. United States, C.D. 438 (1941), worn-out radio tubes were sent abroad for the replacement of filaments damaged through use and for other necessary repairs designed to restore the tubes to a condition which prolonged the use for which they were originally designed. The court held that the tubes returned to the U.S. were identical to the tubes exported for repairs. The court further stated that the fact that they had been restored to their original efficiency so as to prolong their usefulness was of no consequence.

In HRL 556992 dated May 7, 1993, Customs held that the replacement of a monochrome display on a computer with an active-matrix color display qualified as an acceptable repair or alteration within the meaning of subheading 9802.00.50, HTSUS. In addition, in HRL 555084 dated November 29, 1988, Customs held that the replacement of a worn down abrasive surface in a triangular grinding piece used in grinding machinery constituted a repair as that term is used in subheading 9802.00.40, HTSUS. Moreover, in HRL 554922 dated June 13, 1988, Customs held that the replacement of defective components of a fuel nozzle in Mexico constituted an acceptable repair operation. In that case, the nozzle body (or body assembly) and the check valve was kept together as a matched set throughout the repair operation. We held that as long as the identity of the matched sets of nozzles and check valves exported from the U.S. was maintained throughout the repair process, other defective parts could be replaced and the repaired complete units were eligible for the partial duty exemption under subheading 9802.00.50.

In HRL 555819 dated October 11, 1991, Customs found that the replacement of 17 defective parts (i.e., resistors, capacitors, diodes, transistors, crystals, switches, integrated circuits, potentiometers, speakers, microphones, batteries, antennas, and cords) of cordless telephones, answering machines, and combination cordless telephone/answering machines in Mexico constituted a genuine repair operation. In this case, it was noted that in replacing these parts, the integrity of each unit was maintained, i.e., there was no commingling of disassembled parts with other like parts from other units.

In the instant case, we are of the opinion that the product that will be returned - photoreceptor drum cartridge - is the same as the product that will be exported for repairs. Although the photoreceptor drum, cleaning blade, corona wire and mylar sealing tape will be replaced in all three types of cartridges, the identity of the article will not be destroyed and the replacement of these components will not create a new or different commercial article. According to the reasoning in Press Wireless and the above-cited cases, the fact that the photoreceptor drum cartridges will be restored to their original efficiency will not preclude the article from receiving duty-free treatment under subheading 9802.00.50, HTSUS.

HOLDING:

Based on the information provided, the operations performed in Mexico to the used photocopier drum cartridges are considered "repairs" within the meaning of subheading 9802.00.50, HTSUS, and therefore, the photocopier drum cartridges will be entitled to duty-free treatment under this provision, upon compliance with the documentation requirements of 19 CFR 181.64.

Sincerely,

John Durant, Director

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