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HQ

559405

July
11, 1996

CLA-2 RR:TC:SM 559405 BLS

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.50

Susan Kohn Ross, Esq.
Ross & Associates
5777 West Century Blvd.
Los Angeles, CA 90045-1017

RE: Applicability of subheading 9802.00.50, HTSUS, to photocopying machines
HRL 556992; HRL 557530; EPROMS; Article 509

Dear Ms. Ross:

This is in reference to your letter dated October 5, 1995, and subsequent correspondence, on behalf of Eastman Kodak Company ("Kodak"), requesting a ruling that certain copiers shipped to Mexico will be eligible for the duty exemption under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), upon return to the U.S. Additional information was presented at a meeting with Customs personnel on April 22, 1996, and by a fax dated June 27, 1996.

FACTS:

Kodak intends to send to Mexico certain copiers ("Model A") which are no longer operational for repairs and modifications. When the operations are completed, the copiers will be returned to the U.S. ("Model B").

The process begins with evaluating the incoming copier and its subassemblies.
The unit is then partially disassembled, and the mainframe, parts, and subassemblies proceed to work stations where they are cleaned, worn parts are replaced or repaired, lubrication is applied, and any necessary testing is completed. The unit is modified to increase the rate at which it makes copies from 72 to 85 copies per minute, and a panel which displays updated operating messages is installed in place of the display panel found on the exported article. These changes are effected by replacing three sprockets and a chain on the mainframe, a pulley and a belt on the feeder, and the control panel assembly (to which a jumper cable is added to facilitate installation). Six Erasable Programmable Read-Only Memory
chips ("EPROMS") are erased and reprogrammed to accommodate the faster copying and the updated operating instructions. All copiers have their cabinetry repainted in Mexico, but parts will generally be repaired or replaced only as needed. In this regard, you state that in the interest of customer satisfaction and decreased cost, certain parts which may otherwise be replaced during field servicing of the machines, such as belts, bearings, developer loops and image loops, which have limited lives, are also replaced at this time. Upon completion of the repair and modification operations at the various workstations, the parts, subassemblies, and mainframe are moved to a functional checkout work station where the operator reassembles the copier and performs a complete functional test. Next, the copier goes to a quality audit work station to receive a quality performance test. Lastly, the copier is packed and returned to the U.S. for distribution.

You state that the partially disassembled copier has unique identifiers so that the parts can be reassembled with matched subassemblies after the reconditioning processes are completed. Therefore, the reassembly process keeps together subassemblies which have been "mated" at the time of original manufacture, and no commingling with parts of other copiers takes place.

You also advise that the operations that take place in Mexico do not include any sophisticated calibrations, and that major components are not replaced. For example, those components that will not be changed include the Lens Assembly (Optics), Fuser Frame (Image Fixing), Film Core Structure (Imaging) and Document Feeder Frame (Paper Handling). Parts that may be replaced include the Platen Glass (Optics); Fuser Roller (Image Fixing); Film Loop (Imaging); and Vacuum Selector Valve (Paper Handling).

ISSUE:

Whether the operations performed in Mexico, which include the reprogramming of the copier's control panel so that the copier can increase the rate at which the copier can make copies, constitute "repairs and alterations" under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS).

LAW AND ANALYSIS:

Subheading 9802.00.50, HTSUS, provides a complete or partial duty exemption for articles returned to the U.S. after having been exported to be advanced in value or improved in condition by means of repairs or alterations. Articles returned to the U.S. after having been repaired or altered in Mexico, whether or not pursuant
to a warranty, and goods returned after having been repaired or altered in Canada pursuant to a warranty, are eligible for duty-free treatment, provided the requirements of section 181.64, Customs Regulations (19 CFR 181.64), are satisfied. However, entitlement to this provision is precluded in circumstances where the operations performed abroad destroy the identity of the articles or create new or commercially different articles. See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956); Guardian Industries Corp. v. United States, 3 CIT 9 (1982). Tariff treatment under subheading 9802.00.50, HTSUS, is also precluded where the exported articles are incomplete for their intended use prior to the foreign processing. Guardian; Dolliff & Company, Inc. v. United
States, 81 Cust. Ct. 1, C.D. 4755, 455 F. Supp. 618 (1978), aff'd, 66 CCPA 77, C.A.D. 1225, 82, 599 F.2d 1015, 1019 (1979).

Repairs

In Press Wireless v. United States, 6 Cust. Ct. 102, C.D. 438 (1941), the Customs Court held that repairs are operations necessary to restore articles to their original condition, but cannot be so extensive as to destroy the identity of the exported article or create a new or different article. (See also 19 CFR 181.64, which defines "repairs or alterations" as the 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 U.S.)

In previous rulings, we have held that subheading 9802.00.50, HTSUS, will be applicable to articles subject to both partial and complete disassembly, where repairs are made and parts are replaced as long as the essential components and therefore the identity of the article remain intact throughout the repair process. See, e.g., Headquarters Ruling Letter (HRL) 557991 dated October 17, 1991.

We note that under Additional Note 5, Chapter 90, Harmonized Tariff Schedule of the United States (HTSUS), copier assemblies are grouped as follows: (a) Imaging assemblies; (b) Optics assemblies; (c) User control assemblies; (d) Image fixing assemblies; (e) Paper handling assemblies, and (f) Combination of the above specified assemblies. In our opinion, the order of the listed assemblies, ((a) through (e)), reflected in U.S. Note 5, is indicative of their significance to the copier.

In the instant case, major components of the Imaging, Optics, Image Fixing, and

Paper Handling systems such as the fuser frame, film core structure, and document feeder frame, are not replaced during the repair process. As a result, we find that the copiers will retain their identity upon return from Mexico, and that the operations performed in Mexico constitute "repairs" within the meaning of subheading 9802.00.50, HTSUS.

Alterations

In HRL 557530 dated December 15, 1993, copiers were sent to Mexico for reconditioning. The processing in Mexico included repairs and a change of the copier's paper speed from 70 to 85 copies per minute so that more copies could be made. This modification involved a change of four gears, three chains, and a CPU board. Three front center panels for the paper supplies were also painted, and a new nameplate was placed on the front cabinetry panel to reflect the new model number. In that case, we found that the modifications did not create a new or different article, but merely allowed the copiers to work more efficiently. Therefore, we held that the returned copiers were entitled to the benefits of subheading 9802.00.50, HTSUS. (See also HRL 556992 dated May 7, 1993, where a notebook computer was upgraded abroad by replacing its monochrome video display with an active-matrix color video display. In that case, we found that the upgrade did not change the commercial identity of the computer, and that, accordingly, the modification constituted an alteration within the meaning of subheading 9802.00.50, HTSUS.)

The operations to be performed in the instant case are analogous to the facts in HRL 557530. Thus, the unit is modified to increase the rate at which it makes copies from 72 to 85 copies per minute, and a panel which displays updated operating messages is installed in place of the display panel found on the exported article. These changes are effected by replacing three sprockets and a chain on the mainframe, a pulley and a belt on the feeder, and the control panel assembly (to which a jumper cable is added to facilitate installation). Six Erasable Programmable Read-Only Memory chips ("EPROMS") are erased and reprogrammed to accommodate the faster copying and the updated operating instructions, and the copiers have their cabinetry repainted. As in HRL 557530 and HRL 556992, we find that the commercial identity of the copiers do not change as a result of the upgrade, and that a new article is not created. The exported copier is returned, albeit with improved features to increase marketability.

HOLDING:

Based on the information provided, the operations performed in Mexico on the used copiers constitute repairs or alterations within the meaning of subheading 9802.00.50, HTSUS. Therefore, the copiers will be entitled to duty-free treatment under this provision, upon compliance with the documentation requirements of 19 CFR 181.64.

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 handling the transaction.

Sincerely,

John

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