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HQ 559720




August 30, 1996

CLA-2 RR:TC:SM 559720 MLR

CATEGORY: CLASSIFICATION

TARIFF NO.: 9801.00.10

Mr. H. Dale Slayton
Delta Machine Products
P.O. Box 648
759 Hurricane Shoals Road
Lawrenceville, GA 30245

RE: Applicability of duty exemption under HTSUS subheading 9801.00.10 to Delta DT-240 Track Mount Cable Plow

Dear Mr. Slayton:

This is in reference to your letter of March 1, 1996, requesting a ruling regarding the applicability of subheading 9801.00.10, Harmonized Tariff Schedule of the United States (HTSUS), to a Delta DT-240 track mount cable plow. Additional information was provided on June 28, 1996.

FACTS:

It is stated that a D6E-PS short tractor is purchased through Caterpillar, Inc. Peoria, Illinois, from Brazil. The unit only consists of a frame and track roller assembly, and it does not contain an engine, transmission, radiator hydraulics, or a bulldozer blade. Rather, it must be pulled from the trailer. Upon receipt, the short tractor contains a "Made in Brazil" metal plate.

At your facility, it is stated that a drive train is added which consists of a Caterpillar 3306 engine, a radiator, an oil heat exchanger, an engine pump adapter, five hydraulic pumps, three motors, a two-speed drop box, a hydraulic hose, and fittings which are all stated to be manufactured in the U.S. Additionally, a U.S.-origin vibratory plow assembly (rear section) is added which consists of a heavy plate fabrication and machined components. The cable reel (front section), also of U.S.-origin, consists of tubular steel fabricated components and is also added at your facility. It is stated that the addition of this U.S. content adds over 175 percent over the cost of the D6E-PS short tractor. After these components are assembled together, the finished article is referred to as a Delta DT-240 cable plow which is a vibratory plow for plowing communications cable. In a telephone conversation with a member of my staff, you stated that the cable plow may be shipped abroad for lease and, subsequently, returned to the U.S.

ISSUE:

Whether the Delta DT-240 cable plows will qualify for the duty exemption available under subheading 9801.00.10, HTSUS, when returned to the U.S.

LAW AND ANALYSIS:

Subheading 9801.00.10, HTSUS, provides for the free entry of products of the U.S. that have been exported and returned without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, provided the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1), are met. While some change in the condition of the product while it is abroad is permissible, operations which either advance the value or improve the condition of the exported product render it ineligible for duty-free entry upon return to the U.S. Border Brokerage Company, Inc. v. United States, 314 F. Supp. 788 (1970), appeal dismissed, 58 CCPA 165 (1970).

For an article to be eligible for duty-free entry under subheading 9801.00.10, HTSUS, it must first be a "product of" the U.S. Accordingly, the Brazilian D6E-PS short tractor imported into the U.S. must be substantially transformed into a new and different article, or have been merged into a new and different article.

A substantial transformation occurs when, as a result of manufacturing process, a new and different article emerges, having a distinct name, character or use, which is different from that originally possessed by the article or material before being subjected to the manufacturing process. See Texas Instruments, Inc. v. United States, 69 C.C.P.A. 142, 681 F.2d 778 (1982).

In Headquarters Ruling Letter 731568 dated July 31, 1989, Customs considered the country of origin of automobiles assembled in Malaysia using an engine and transmission from Japan, plastic parts from Australia, electrical parts from the United Kingdom, textile and related products from the U.S., lamps and seatbelts from Korea, and most or all of the other remaining parts from Malaysia. Noting the sophistication of modern automobiles, it was held that the assembly of the components in Malaysia rendered the subject automobiles products of Malaysia since the manufacturing process in Malaysia caused the component automobile parts to lose their separate identities.

In HRL 733266 dated August 15, 190, Customs considered the country of origin marking of diesel engines which were manufactured in Brazil and sold in the U.S. for use in the manufacture of agricultural tractors and electrical generating sets. It was determined that the foreign engines were substantially transformed in the U.S. into different articles of commerce.

In this case, the foreign article imported into the U.S. is the short tractor which is combined with a U.S. drive train, vibratory plow assembly, and cable reel. Similar to HRL 731568, we find that the short tractor is substantially transformed into a new and different article of commerce in the U.S. The imported article undergoes a change in name from a short tractor to a telephone cable plow machine. Additionally, the short tractor undergoes a change in use from a unit consisting only of a frame and a track roller, which could be made into a number of machines, into a dedicated telephone cable plow by the addition the vibratory plow assembly and cable reel. The short tractor also undergoes a change in character in the U.S. since it is inoperable and receives its identity as a plow machine by the addition of the U.S. drive train. Accordingly, it is our opinion that the telephone cable plow machine is a "product of" the U.S.

It is stated that the telephone cable plow machine may be exported for lease and, subsequently, returned to the U.S. The use of the plow machine is not an operation which either advances the value or improves the condition of the exported product. Therefore, it will be eligible for duty-free entry upon return to the U.S. under subheading 9801.00.10, HTSUS.

HOLDING:

On the basis of the information submitted, it is our opinion that the short tractor imported into the U.S. is substantially transformed into a dedicated telephone cable plow machine, the "product of" the U.S. The use of the plow machine under a lease abroad is not an operation which either advances the value or improves the condition of the exported product. Therefore, it will be eligible for duty-free entry under subheading 9801.00.10, HTSUS, upon return to the U.S., provided the documentary requirements of 19 CFR 10.1 are satisfied.

A copy of this ruling letter should be attached to the entry documents filed at the time the goods are 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 Durant, Director

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