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HQ 558648




January 12, 1995

CLA-2: CO:R:C:S 558648 BLS
TARIFF NO.: 9802.00.50
Mary E. Gill, Esq.
AT&T
P.O. Box 25000
Greensboro, NC 27420

RE: Eligibility of telephones and telephone answering systems imported from Mexico for duty-free treatment under 9802.00.50, HTSUS; 19 CFR 181.64; Foreign Trade Zone; continuous customs custody
Dear Ms. Gill:

This is in reference to your letter dated July 27, 1994, requesting a ruling that telephone sets and telephone answering systems repaired in Mexico and then returned to the U.S. under the described circumstances will be eligible for duty-free treatment under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS).

FACTS:

The following scenarios are described:

1) AT&T's Consumer Products Division ("AT&T") sends telephone sets (corded and cordless) and telephone answering systems to Mexico from the U.S. for repair. AT&T also imports electronic components from the Far East in bond to a Foreign Trade Zone ("FTZ") in San Antonio, Texas. The components are stored in the FTZ until they are needed in AT&T's four repair facilities in Mexico. They are then shipped in bond from the FTZ to the appropriate repair facility, to be used in the repair of the telephones and telephone answering systems.

2) In the second situation, the articles needing repair are inadvertantly sent to the wrong repair facility in Mexico. For example, a cordless telephone may be sent to a facility which repairs only telephone answering systems. When this occurs, the items are returned to the U.S. and entered into a FTZ. In most instances, the set or system returned from Mexico to the FTZ will be re-routed to the appropriate repair facility. In some instances, however, the set will be exported from the FTZ to another country (not Mexico), or sent for destruction.

LAW AND ANALYSIS:

Subheading 9802.00.50, HTSUS, provides duty-free treatment for articles returned to the U.S. from Mexico after having been exported to be advanced in value or improved in condition by means of repairs or alterations, provided the documentation requirements set forth under section 181.64(c), Customs Regulations ( 19 CFR 181.64(c)), are satisfied. Pursuant to this implementing regulation, certain declarations must be filed in connection with the entry of these goods returned from Mexico after having been exported for repairs or alterations and claimed to be duty-free, including the following:

(ii) A declaration by the owner, importer, consignee, or agent having knowledge of the pertinent facts in substantially the following form:
I, , declare that the (above)(attached) declaration by the person who performed the repairs or alterations abroad is true and correct to the best of my knowledge and belief; that the goods were not previously imported in bond or admitted into a foreign trade zone or imported in similar status; that such goods were exported from the United States for repairs or alterations from (port) on ,19 ; and that the goods entered in their repaired or altered condition are the same goods that were exported on the above date and that are identified in the (above)(attached) declaration. (Emphasis added.)

U.S. Note 1, Subchapter II, Chapter 98 ("U.S. Note 1 "), provides as follows:

1. Except for goods subject to NAFTA drawback, this subchapter shall not apply to any article exported:

(a) From continuous customs custody with remission, abatement or refund of duty;

(b) With benefit of drawback;

(c) To comply with any law of the United States or regulation of any federal agency
requiring exportation; or

(d) After manufacture or production in the United States under heading 9813.00.05.

Accordingly, if any one of these exclusions is applicable, the returned items in the instant case would not be eligible for duty-free treatment under subheading 9802.00.50, HTSUS, even if an acceptable repair or alteration was performed on the returned item.

Pursuant to section 81c, title 19, U.S.C. (19 U.S.C. 81c), foreign and domestic merchandise admitted into a FTZ shall not be considered to be in the customs territory of the U.S. (See also Part 146, Customs Regulations (19 CFR Part 146)). Therefore, while in a FTZ, merchandise (either foreign or domestic) is not considered to be in continuous customs custody.

Under the first scenario, although certain components were exported from an FTZ to Mexico to be used in the repair of telephones and telephone answering systems, the articles that were exported from the U.S. for repairs and returned from Mexico, telephones and telephone answering systems, were not "previously...admitted into a foreign trade zone .... "Therefore, under this situation, the exportation of these components from an FTZ to be used in the manner described would not preclude a declaration, pursuant to 19 CFR 181.64(c)(ii), that the goods were not previously admitted into an FTZ. Assuming all other statutory and regulatory requirements are satisfied, the returned telephones and telephone answering systems will be eligible for duty-free treatment under subheading 9802.00.50, HTSUS, upon return to the U.S.

Under the second scenario, we find that the telephones and telephone answering systems admitted into the FTZ are not exported 1 ) from continuous customs custody, 2) with benefit of drawback, 3) to comply with a U.S. law or regulation of any federal agency requiring exportation, or 4) after manufacture or production in the U.S. under heading 9813.00.05. Accordingly, the statutory exclusions under U.S. Note 1 are inapplicable to this situation. Under the circumstances, assuming all other statutory ind regulatory requirements are satisfied, the repaired telephones and telephone answering systems will be eligible for duty-free treatment under subheading 9802.00.50, HTSUS, upon return to the U.S.

The statement in the declaration of the owner, importer, consignee, or agent (quoted above) that the goods were not previously "admitted into a foreign trade zone" is pertinent only with respect to goods subject to NAFTA drawback. Based on the information provided, there appears to be no question that, under this scenario, the repaired telephones and telephone answering systems would not be subject to NAFTA drawback (See Subpart 181, Customs Regulations (19 CFR Subpart E, Part 181)). Therefore, under the second scenario, the fact that the articles needing repair were previously admitted into a foreign trade zone is irrelevant to a determination of the eligibility of the articles for subheading 9802.00.50, HTSUS, treatment.

HOLDING:

1 ) Components exported to Mexico from a foreign trade zone to be used in the repair of telephones and telephone answering systems are not the articles that were exported for repairs and returned. Therefore, the exportation of these components will not preclude
a declaration under 19 CFR 181.64(c)(ii), upon return of the repaired telephones and telephone answering systems, that the goods were not previously admitted into a foreign trade zone. Assuming all other statutory and regulatory requirements are satisfied, the repaired telephones and telephone answering systems will be eligible for duty-free treatment under subheading 980200.50, HTSUS, upon return to the U.S.

2) Under the facts presented, the exportation of telephones and telephone answering systems from a foreign trade zone to Mexico for repair operations does not in itself preclude eligibility of these goods for duty-free treatment under subheading 9802.00.50, HTSUS, upon return to the U.S., if all other statutory and regulatory requirements for such eligibility are satisfied.

A copy of this ruling 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 Durant, Director

Commercial Rulings Division


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