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HQ

559562
January 15,
1997
CLA-2 RR:TC:SM 559562 BLS

CATEGORY: CLASSIFICATION

U.S. Customs Service
Port Director
P.O. Box 1490
St. Albans, VT 05478

RE: Application for Further Review of Protest No. 0201-95-100384; FTZ; subheading 9801.00.10, HTSUS; General Note 3(d)

Dear Sir:

This is in reference to the above-captioned Application for Further Review, timely filed by A.N. Deringer, on behalf of Coblev Inc., protesting your decision to deny duty-free treatment under subheading 9801.00.10, Harmonized Tariff Schedule of the United States (HTSUS), to a 1995 Jeep Cherokee.

FACTS:

The Jeep Cherokee was entered on May 18, 1995 through the port of St. Albans and the entry was liquidated on September 8, 1995. The application for further review was timely filed on September 21, 1995.

The vehicle was imported from Canada, and duty-free entry was claimed under subheading 9801.00.10, HTSUS. In this regard, the protestant claims that the vehicle was not manufactured in a foreign trade zone (FTZ), and in support thereof, submits an explanation of the manufacturer's VIN system and a written statement from General Motors Corporation (GMC), dated March 7, 1995, which provides that GMC has not and does not intend to manufacture or assemble heavy, medium or light duty trucks in an FTZ using non-privileged foreign material or material on a non-duty paid basis.

The concerned import specialist correctly points out that "Jeep" vehicles are not GMC products, but are produced by Chrysler Corporation ("Chrysler") and therefore, the submitted statement is not supportive of the protestant's claim. Further, this customs officer states that insufficient evidence was submitted to support a claim under subheading 9801.00.10, HTSUS.

ISSUES:

1) Whether the Jeep Cherokee was produced in a FTZ, and if so, whether the vehicle is eligible for duty-free treatment under subheading 9801.00.10, HTSUS.

2) Whether the Jeep Cherokee qualifies for a duty based on its applicable foreign value content, as provided in General Note 3(d), HTSUS.

LAW AND ANALYSIS:

1) Subheading 9801.00.10

Based on the vehicle identification number (VIN) of the subject importation, we have received information from Chrysler that the vehicle is a Jeep "Grand Cherokee", manufactured in their Jefferson North (Detroit) plant in February 1995. Chrysler advises that the Jefferson North plant has been operating as an FTZ since August 1994, and accordingly, the subject vehicle was produced in a U.S. FTZ.

The sixth proviso to section 3 of the Foreign Trade Zones Act (FTZA) (19 U.S.C. 81c(a)), states as follows:

That articles produced or manufactured in a zone and exported therefrom shall on subsequent importation into the customs territory of the United States be subject to the import laws applicable to like articles manufactured in a foreign country, except that articles produced or manufactured in a zone exclusively with the use of domestic merchandise, the identity of which has been maintained in accordance with the second proviso of this section may, on such importation, be entered as American goods returned.

Subheading 9801.00.10, HTSUS, provides for the free entry of U.S. products that are exported and returned without having been advanced in value or improved in condition by any means while abroad, provided the documentary requirements of section 10.1 Customs Regulations (19 CFR 10.1), are met. Moreover, compliance with section 10.1(a) is mandatory and a condition precedent to recovery unless compliance has been waived or is impossible. Maple Leaf Petroleum, Ltd. V. United States, 25 CCPA 5, T.D. 48976 (1937). The basis of waiver of the required documentation is predicated upon the port director being satisfied by the production
of other evidence as to the U.S.-origin of the merchandise and its eligibility under subheading 9801.00.10, HTSUS.

Customs has interpreted the sixth proviso to section 3 of the FTZA to mean that any good which is exported from a zone without the payment of duty on the foreign merchandise incorporated into the good is fully dutiable upon any subsequent importation into the U.S. See C.S.D. 95-3, 29 Cust. Bull. 11 (February 8, 1995).

Moreover, a good which is produced in an FTZ will not be considered a good of U.S. origin unless the good is exported, duty paid from a zone, prior to being reimported into the U.S., or unless the good produced in the FTZ is comprised wholly of domestic materials. C.S.D. 95-3. (In that case, Customs also held that such vehicles do not qualify for duty-free treatment under the North American Free
Trade Agreement (NAFTA), since the exportation to Canada does not convert the vehicle made in an FTZ using foreign components into a Canadian-origin article merely by passing through that country.) See also Headquarters Ruling Letter (HRL) 558983 dated June 29, 1995.

Accordingly, as there is no evidence that the vehicle in the instant case was exported, duty-paid from the zone prior to being reimported into the U.S., or that it was produced solely from U.S.-origin components, the subject Jeep Grand Cherokee which is produced in the zone is not considered a good of U.S.-origin for purposes of eligibility under subheading 9801.00.10, HTSUS.

2) General Note 3

As determined above, automobiles produced in FTZs that are exported directly to Canada or Mexico and not formally entered for consumption in the U.S., generally are subject to duty on the full value (i.e., both foreign and domestic content) of the automobile when they re-enter the U.S. General Note 3(d), HTSUS, which was added by section 19 of the Miscellaneous Trade and Technical Corrections Act of 1996, Pub. L. 104-295, 110 Stat. 3514 (October 11, 1996), however, provides, in part, as follows with respect to the calculation of duties on the foregoing vehicles when appropriate information is presented:

[n]ot withstanding any other provision of law, the duty imposed on a qualified article shall be the amount determined by multiplying the applicable foreign value content of such article by the applicable duty rate for such article.

General Note 3(d)(ii), HTSUS, defines a "qualified article" as an article that is:

(A) classifiable under any of subheadings 8702.10 through 8704.90 of the [HTSUS],

(B) produced or manufactured in a foreign trade zone before January 1,
1996,

(C) exported therefrom to a NAFTA country (as defined in section 2(4) of the [NAFTA] Implementation Act (19 U.S.C. 3301(4)), and

(D) subsequently imported from that NAFTA country into the customs territory of the United
States--

(I) on or after the effective date of this subdivision, or

(II) on or after January 1, 1994, and before such effective date, if the entry of such article is unliquidated, under protest, or in litigation, or liquidation is otherwise not final on such effective date.

In this case, the article is a Jeep Grand Cherokee classified under 8703, HTSUS.
The entry documentation indicates that the vehicle was entered into the U.S. on May 18, 1995. As noted, the vehicle was produced in a U.S. FTZ. Therefore, provided protestant presents (within a specified period of time) sufficient information to establish the "applicable foreign value content" as well as "the FTZ percentage" required under General Note 3(d), duty is only payable on the foreign content contained in the vehicle. See Fact Sheet 7346071 dated December 11, 1996. To the extent that the vehicle at issue qualifies for the reduced duties under General Note 3(d), this protest should be granted,in part.

HOLDING:

The subject Jeep Grand Cherokee was produced by Chrysler Motors in an FTZ. Since there is no evidence that the vehicle was exported, duty-paid from the zone prior to being reimported into the U.S., or that it was produced solely from U.S. components, it is not entitled to duty-free treatment under subheading 9801.00.10, HTSUS. However, if sufficient information is presented to establish that the vehicle qualifies for reduced duties under General Note 3(d), as added by Pub. L. 104-295, 110 Stat. 3514 (October 11, 1996), duty is payable only on the applicable
foreign content contained in the vehicle, and this protest should be granted in part in accordance with the foregoing.

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 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, Freedom of Information Act and other public access channels.

Sincerely,

John

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