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 > 1996 HQ Rulings > HQ 225368 - HQ 226074 > HQ 225668

Previous Ruling Next Ruling
HQ 225668




June 12, 1995

CON-9-04 CO:R:C:E 225688 TLS

CATEGORY: ENTRY

Ms. Alison Leavitt
Chase, Leavitt (CHB), Inc.
Ten Dana Street
Portland, Maine 04112

RE: Ruling request concerning the possible use of a temporary importation bond (TIB) or unused merchandise drawback claim; Harmonized Tariff Schedule of the United States Annotated (HTSUSA) 9813.00.05; 19 U.S.C. §1313(j)(3); 19 CFR §191.141; C.S.D. 81-222; C.S.D. 82-135; Customs ruling HQ 225467 (October 7, 1994).

Dear Ms. Leavitt:

This office has received the above-referenced request for a ruling as provided for under Customs regulations. We have considered the request and have made the following decision.

FACTS:

The merchandise involved here is shoes. The shoes are to be imported from Canada in various states of condition. The bulk of the imports are just slightly worn or scuffed, some are considerably worn and require some repair, and some are not fit for the market. The shoes are to be graded upon importation and then either exported or destroyed, depending on the condition of the shoes. In some cases, they will be commingled with domestic merchandise. Those that are marketable but in need of repair are to be repaired after exportation. The shoes will not be altered in any way while in the customs territory. None of the shoes will be marketed in this country.

ISSUE:

Whether the proposed transaction may be done under a TIB or in the alternative, as a same condition drawback claim.

LAW AND ANALYSIS:

Subheading 9813.00.05, HTSUSA, provides for temporary duty-free entry, under bond, for merchandise imported into the United States for the purpose for repair, alteration or processing. The subheading is found under Subchapter XIII, where U.S. Note 2 requires the following:

Merchandise may be admitted into the United States under heading 9813.00.05 only on condition that: (a) Such merchandise will not be processed into an article manufactured or produced in the United States if such an article is: (I) Alcohol, distilled spirits, wine, beer or any dilution or mixture of any or all of the foregoing; (ii) A perfume or other commodity containing ethyl alcohol (whether or not such alcohol is denatured); or (iii) A product of wheat; and
(b) If any processing of such merchandise results in an article (other than an article described in (a) of this U.S. note) manufactured or produced in the United States: (I) A complete accounting will be made to the Customs Service for all articles, wastes and irrecoverable losses resulting from such processing; and (ii) All articles and valuable wastes resulting from such processing will be exported or destroyed under customs supervision within the bonded period; except that in lieu of the exportation or destruction of valuable wastes, duties may be tendered on such wastes at rates of duties in effect for such wastes at the time of importation.

The proposal as submitted suggests that the imported merchandise is not to be processed at all. The merchandise is imported only for the purpose of sorting and grading it into separate categories and packaging it for the export market. Subheading 9813.00.05 is clearly intended for merchandise that will be processed in some way, presumably with the intention of improving the merchandise's marketability. That is not the case here. We therefore cannot allow the proposed transaction to be done under subheading 9813.00.05 See Customs Ruling HQ 223728 (March 18, 1992). This finding also applies to merchandise that would be designated for destruction since it could not be considered valuable waste resulting from processing.

Unused merchandise drawback eligibility is provided for under 19 U.S.C. §1313(j)(1), which reads as follows:

(j) Unused merchandise drawback

(1) If imported merchandise, on which was paid any duty, tax, or fee imposed under Federal law because of its importation-- (A) is, before the close of the 3-year period beginning on the date of importation-- (I) exported, or
(II) destroyed under customs supervision; and (B) is not used within the United States before such exportation or destruction; then upon such exportation or destruction 99 percent of the amount of each duty, tax, or fee so paid shall be refunded as drawback. The exporter (or destroyer) has the right to claim drawback under this paragraph, but may endorse such right to the importer or any intermediate party. (Emphasis added.)

The drawback laws were substantively amended by section 632, title VI - Customs Modernization Act, Public Law 103-182, North American Free Trade Implementation Act (107 Stat. 2057) enacted December 8, 1993. Title VI of that Act amended 19 U.S.C. §1313(j). As noted above, the proposal at issue would have the merchandise being imported for sorting, grading, and packaging. A previous ruling noted that a definition of the term used merchandise was not provided in the language of the new act. Customs ruling HQ 225467 (October 7, 1994). As HQ 225467 also noted, C.S.D. 81-222 and C.S.D. 82-135 found that an article is used when it is employed for the purpose for which it was manufactured and intended. The performance of certain "incidental operations" (such as testing, cleaning, and inspecting) on the imported item, not amounting to a manufacture or production, is not treated as a use of the merchandise. 19 U.S.C. §1313(j)(3). Thus, the only question here is whether the merchandise will be exported or destroyed within 3 years of the importation date. Of course, only the actions of the exporter can answer that question. Presuming all other requirements will be met, we find that the proposed transaction would be conditionally eligible for unused merchandise drawback under 19 U.S.C. §1313(j)(1).

HOLDING:

The proposed transaction is not eligible to be done under a temporary importation bond. It is conditionally eligible for drawback under 19 U.S.C. §1313(j)(1), provided all requirements for such are met.

Sincerely,

John Durant, Director
Commercial Rulings Division

Previous Ruling Next Ruling

See also: