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HQ 558894




March 22, 1995

CLA-2-5-CO:R:C:S 558894 DEC

CATEGORY: CLASSIFICATION

TARIFF NO.: 9801.00.25

Area Director of Customs
JFK Airport Area
Building 178
Jamaica, New York 11430

RE: Decision on Application for Further Review of Protest No.1001-2-104136; Rayon twill woven fabric; HRL 553027; HRL 558746

Dear Sir:

This is a decision on a protest timely filed on June 22, 1992, against your decision in the classification and liquidation on May 1, 1992, of certain rayon twill woven fabric that was entered on July 17, 1991.

FACTS:

Printmaker International, Ltd. (Printmaker), imported various woven fabrics from Germany in November, 1990. In April, 1991, Printmaker sold certain rayon twill woven fabrics to Maggy Boutique Limited of New York who sold this fabric to Gentledon, Ltd. (Gentledon) of Hong Kong. Printmaker shipped the merchandise directly to Gentledon. Subsequently, the merchandise that is the subject of this protest was returned to the United States. In an undated note to U.S. Customs, Maggy Boutique states that one carton of merchandise was returned to Printmaker for failure to conform to the sample or specifications as ordered. In addition, the note states that the merchandise was not advanced in value or improved in condition by any process while abroad. On March 10, 1995, however, Customs learned that the order to purchase this particular fabric was canceled, but the fabric was already en route. Since this fabric order was canceled, the fabric was returned. The entry documents indicate that the importer of record on the re-importation of the returned merchandise was Printmaker.

ISSUE:

Whether the canceled order for merchandise that is returned from a customer in Hong Kong to the United States is entitled to duty-free treatment under subheading 9801.00.25, Harmonized Tariff Schedule of the United States (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 specifications, 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 10.8a(b)). However, the district director may waive the documentary requirements if he/she is satisfied that the requirements of that subheading are met. 19 CFR 10.8a(c). In addition, in order 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."

In this case, the importer, Printmaker, has submitted various documents with respect to the merchandise's original importation, the sale, the return, and the re- importation. Notwithstanding the fact that the merchandise was transferred to Maggy Boutique prior to export, the proper classification of the returned merchandise is not under subheading 9801.00.25, HTSUS. While the submitted documents clearly indicate that Printmaker was the original importer of the subject merchandise and that Printmaker exported the merchandise, the record also indicates that the return of the merchandise was due to the cancellation of the order, rather than the merchandise's failure to conform to sample or specification.

Accordingly, we find that the return of merchandise due to a canceled order does not constitute a failure "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 as it did not conform to sample or specification.

We note that failure to conform to a sample or specification merits duty-free treatment under subheading 9801.00.25, HTSUS, provided the other requirements of the tariff provision are met. Failure of a specific product to merely meet a buyer's expectation is not a justifiable basis for entry under this tariff provision (see Headquarters Ruling Letter (HRL) 553027, dated July 19, 1984, and HRL 558746, dated January 6, 1995). The failure to cancel an order in time to prevent its shipment also does not meet this requirement of the tariff provision. We have no evidence that the fabric did not conform to the requirements of the original order.

HOLDING:

The return of merchandise to the United States due to the cancellation of an order after the merchandise is en route to the buyer is not a failure to conform to a sample or specification as provided for in subheading 9801.00.25, HTSUS. Therefore, this 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 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 the 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, LEXIS, Freedom of Information Act and other public access channels.

Sincerely,

John Durant
Director, Commercial Rulings Division

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