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HQ 558746




January 6, 1995

CLA-2 CO:R:C:S 558746 DEC

CATEGORY: CLASSIFICATION

TARIFF NO: 9801.00.25

Mr. Patrick Barrett
Arizona Customs Brokers
2602 South Twenty-fourth Street - Suite 101 Phoenix, Arizona 85034

RE: Alarm and security equipment; Sample or specification;

Dear Mr. Barrett:

This is in response to your letter dated August 15, 1994, on behalf of Quorum International, in which you seek a determination of the eligibility of alarm and security equipment for duty-free treatment pursuant to subheading 9801.00.25, Harmonized Tariff Schedule of the United States (HTSUS).

FACTS:

Quorum International imports alarm and security equipment from various countries including China, Great Britain, Malaysia, Taiwan, and Canada. This merchandise is held at a United States distribution point for order processing to various branch offices of Quorum International. A large amount of equipment is shipped to Canada where it is distributed to salesmen through Quorum International's branch offices. Equipment that arrives in an inoperable state due to jarring and mishandling in transit is returned to Quorum International in the United States for repair, exchange or refund.

ISSUE:

Whether alarm and security equipment rendered defective due to mishandling while in transit from the United States to Canada may be reimported duty-free into the United States for repair, exchange, or refund under subheading 9801.00.25, HTSUS.

LAW AND ANALYSIS:

Dutiable merchandise imported and afterwards exported, even though duty thereon may have been paid on the first importation, is liable to duty on every subsequent importation into the Customs territory of the United States, unless exempt by law. Section 141.2, Customs Regulations (19 CFR 141.2).

One such exemption is set out in subheading 9801.00.25, HTSUS, which 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 the latter declaration must set forth 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

Assuming that Quorum International presents Customs with the documents required pursuant to section 10.8a, Customs agrees that the first, second, and fourth criteria of subheading 9801.00.25, HTSUS, will be satisfied. However, in order for Quorum International to qualify for duty-free treatment under subheading 9801.00.25, HTSUS, there must be some tangible evidence that the returned merchandise does not conform to "specification." The scope of that term, however, is not limited to physical specifications or sample comparison. Evidence of failure to meet specification can be evidenced by the written contract, or if oral, by the declarations required under 19 CFR 10.8a(b).

In this case, the alarm and security equipment is returned to the United States because it is defective due to mishandling while in transit. Accordingly, we find that merchandise which is delivered in a defective condition and which is rejected for that
reason by the person to whom it is shipped qualifies as merchandise which fails "to conform to sample or specification" for purposes of subheading 9801.00.25, HTSUS. That subheading was intended for situations in which merchandise was exported and rejected because it was not satisfactory to the person to whom it was shipped. Such intention is evidenced by a report of the Senate Finance Committee dated December 16, 1970 (S. Report No. 91-1467, 91st Sess, 2nd Sess. (1970) reprinted in U.S. CODE CONG. & AD. NEWS 5717, which provides, in part, that:

The committee was informed that in at least one instance a shipment of articles was imported and the normal duty was paid. Thereafter the articles were sold and exported to a customer in a foreign country, who subsequently rejected them for the reason that they did not conform to specification. Upon return to the United States, the articles were again subject to duty under U.S. tariff law. The committee is of the opinion that the laws should be changed, as proposed in H.R. 9138, to prevent a recurrence of double liability for duty in imported article under similar circumstances.

We note that only failure to conform to a sample or specification merits duty-free treatment under subheading 9801.00.25, HTSUS. Failure to merely meet a specific product's expectation is not a justifiable basis for entry under this tariff provision. HRL 553027, dated July 19, 1984.

HOLDING:

Alarm and security equipment rendered defective or inoperable due to mishandling while in transit from the United States to Canada, and rejected for that reason by the person to whom the equipment is shipped, may be reimported duty-free into the United States under subheading 9801.00.25, HTSUS, upon compliance with the documentary requirements of 19 CFR 10.8a.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer.

Sincerely,

John Durant

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