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 > 1997 HQ Rulings > HQ 559235 - HQ 559740 > HQ 559672

Previous Ruling Next Ruling
HQ 559672




December 17, 1996

CLA-2 RR:TC:SM 559672 MLR

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.50

Port Director
U.S. Customs Service
610 W. Ash St.
San Diego, CA 92188

RE: Internal Advice; applicability of duty exemption under HTSUS subheading 9802.00.50 to Kodak Model D copier; Mexico; 19 CFR 181.64(c)

Dear Sir/Madam:

This is in reference to a letter dated January 8, 1996, from Ross & Associates, requesting a ruling on behalf of Eastman Kodak Company ("Kodak"), concerning the applicability of subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), to photocopiers imported from Mexico. A meeting was held at the Office of Regulations & Rulings on April 22, 1996, and charts and photographs were submitted at that time.

FACTS:

It is stated that Kodak exported used model F copier-duplicators to Mexico, performed various processes to these copiers, and imported model D copier-duplicators to the U.S. It is claimed that the processes performed in Mexico were "repairs and alterations" and that the returned articles qualified for duty-free entry under subheading 9802.00.50, HTSUS. Before describing the processes performed to make a model F into a model D, counsel states that the processes performed were similar to those performed in converting a model B to a model D, which in turn are similar to the processes performed on a model B when it became a model C, and which involve those operations performed to the model B when it remained a model B.

The model B processes performed when there is no change in model number involve disassembling the copiers, cleaning them, and replacing worn parts. It is also stated that if there was an engineering enhancement, newer model parts were installed to replace old and outdated ones. The disassembled subassemblies were routed through subassembly work stations with unique identifiers so that the repaired subassemblies could be installed into the same copier during the reconditioning phase. According to counsel, the Mexican plant did not perform optical alignments; therefore, the reassembly process kept subassemblies together which had been mated at the time of original manufacture. The copier underwent a set-up and test process and the cabinetry was reinstalled. It is alleged that the reconditioned model B copier was returned to the U.S. without change to its essential components (the image capture system (lenses and film handling assembly)). Both of the copiers are stated to be referred to as "indirect process electrophotostatic copiers," and six Erasable Programmable Read-Only Memory chips ("EPROMS") were erased and reprogrammed to accommodate updated operating instructions.

Next, counsel presents the processes performed to convert a model B to a model C. It is stated that none of the operations sped up the photocopier or altered the type or size of paper the copier is able to process. Speed and paper size and type are stated by protestant to be the criteria in the marketplace to determine whether or not a copier has been upgraded. The only features which appeared on the model C which did not appear on the model B were the specific document feeder and the Pressure Assist Corona Transfer (PACT). The document feeder incorporates a semi-automatic positioning feature. The PACT modification keeps the paper flatter as it works its way through the imaging process but allegedly does not change the copier's function. When the document feeder was installed, it required a modification to the static eliminator harness in the duplex tray and the positioner interlock harness in the cabinetry as the remaining internal space was diminished. As a result, a new wire harness was inserted to make the static eliminator smaller.

Counsel also states that new circuit boards were substituted whether or not the processes resulted in a change in model number. However, the model C required different circuit boards. The existing EPROMS were reprogrammed and the input/output boards were modified by soldering an additional wire which allowed the machine to operate either as a model B or a model C. The EPROMS reprogramming supposedly arose to accommodate the new document feeder.

Counsel states that the additional steps taken which resulted in a model D from a model F were that the model B toning station was replaced with a new toning station which enhanced the image quality. The paper level indicators were added to the paper supply drawers to help customers determine the amount of paper in each supply drawer without having to stop copier operations. An upgraded trimodal document feeder was installed including an improved latch to allow for smoother operation. There was also a new trade dress.

In addition, counsel states that there were a few minor steps added to the normal reconditioning process. Holes were added to the mainframe to accommodate new harnesses. There was also the installation of a reprogrammed set of six EPROMS to allow the software to relate to all of the new functions, plus an additional energy saving feature was added to the software. The principle differences stated by counsel between the model F to model D process (the subject of this request), and the model B to model D process was that the paper supply was modified to allow for automatic duplexing which resulted in the addition, as well, of a duplex tray and the inclusion of duplex paper path assemblies; the copier speed was enhanced from 70 to 85 copies per minute by the replacement of three sprockets and a chain; and a noise reduction was achieved through the addition of a muffler in the vacuum system and a damper from the paper stop gate.

In addition, counsel states that some additional steps occurred during the model F to model D process. The registration assembly was altered to accommodate the addition of the PACT. Four new subassemblies were added to the new model configuration: document positioner hopper, paper supply cover, wireform and duplex tray. In the Logic and Control Unit, the EPROMS were erased and reprogrammed with the latest version of software, including an energy saving feature that puts the copier in stand-by mode. A 5-Volt regulator was also added for the stepper control circuitry. The developer station was replaced with a new high definition grain station which allows for superior image quality.
The Scuff bimodal document feeder was replaced with a new trimodal document feeder that incorporated a semi-automatic positioner. The copier main harness was replaced in order to accommodate the model D features. Components, such as the main drive motor sprocket, clutch and developer drive sprocket assembly were replaced to speed up the copier's performance. The vacuum system was also modified to incorporate the ability to automatically duplex, accommodate heavier paper sizes, and reduce noise levels through the addition of a muffler.

The chart of the model F to model D process indicates that in regard to the Imaging Assemblies, the film belt and worn components were replaced, and a new LED erase bar was installed in the photoreceptor belt and handling assembly; a new toner and developer assembly was installed; worn components were replaced in the charging assemblies; and an upgraded cleaning housing was added and a new scavenger was installed in the cleaning assembly.

On November 27 and December 6, 1996, counsel provided additional explanations of certain operations in response to our request. It is stated that the IQE station slider, plenum assembly build, backup slider assembly, and assembly drive roller were the worn components that were replaced in the photoreceptor belt and handling assembly. The IQE station slider basically allows the developer assembly to be removed from the machine without disassembling the machine. The new model of the plenum assembly build installed into the model D uses hoses and ducts instead of magnets to collect excess toner flakes and developer from the film loop. The backup slider assembly moves the image loop toward the developer roller when actuated. The assembly drive roller starts the movement of the image loop around the film core area, and it is stated that worn out rollers are replaced and the same rollers are used regardless of the resulting finished model.

In regard to the charging assemblies, the information received on December 6 indicates that the worn components replaced are those which naturally wear out during normal copier operations, such as the corona wires (provides the charge to the image loop), the primary (gives off the charge), and the grill (takes the charge from the corona wire and disburses it over the loop).

In regard to the toner and developer assembly, it is indicated that the major parts are a toner container, replenisher, developer, and magnet rollers, a gear box, sump casting and drive shaft plus a toner concentration monitor and miscellaneous gears, bearings and hardware. In some instances, it is stated that a scavenger is present. It is stated that the configuration and number changes depending on the specific finished copier model involved and that the function of the toner and developer assembly is to receive toner from a bottle and pass it to the image loop for transfer onto the paper on which the image results.

In regard to the cleaning housing, the information received December 6 indicates that its function is to eliminate contamination on the film path, and that its major part is a casting. The model F casting was plastic, while the model D casting is aluminum. In regard to the LED erase bar, it is indicated that it erases residual information on the image loop between copies.

In regard to the Optics Assemblies, the chart indicates that the platen glass was replaced and a new platen frame was installed in the platen glass and illumination housing; and worn components were replaced in the lens/mirror assembly. The information received on December 6 indicates that the worn components replaced in the lens/mirror assembly are mechanical ones, such as the timing belts and pulleys which slide the lens assembly on its guides by means of a high precision motor during the imaging process. It is also stated that if a lens/mirror is scratched or broken, the lens or mirror itself will be replaced.

In regard to the User Control Assemblies, the chart indicates that worn components and a new display panel with a new color scheme were replaced in the operator control panel assembly. In regard to the Image Fixing Assemblies, the fuser and pressure roller and worn components were replaced in the fusing assembly.

In regard to the Paper Handling Assemblies, the chart indicates that a new document feeder/positioner assembly was made reusing some components, which incorporated an automatic duplexing and semi-automatic positioning feature; a new paper supply assembly was made reusing some components and an improved feeding system and paper level indicators were installed; worn components, PACT modification, and a multifeed detection was added to the registration assembly; a new duplex paper path assembly was added; worn components and the vacuum and upper transports were replaced in the transport assemblies; worn components were replaced in the vacuum system, and heavy duty blowers were converted to handle heavy weight paper, valves were replaced for automatic duplexing, and a muffler was installed to reduce noise. The information received December 6 indicates that shafts, rollers, wire forms, solenoids, and sensors (in the duplex tray) are replaced in the transport assemblies.

In regard to the logic and control unit, the chart indicates that the EPROMS were reprogrammed; the control unit was modified; and a stepper control was added to accommodate automatic duplexing. Additionally, change occurred to the color scheme, the top cover was modified, and a tray assembly and side hopper were installed to accommodate the positioner. Pulleys and sprockets were replaced to speed up the unit from 70 to 85 copies per minute.

As indicated above, the scavenger was replaced in the cleaning assembly with one of a more efficient design. In a letter dated December 21, 1994, counsel explains that the scavenger system is designed to remove any residual toner or carrier left on the image medium. Its purpose is to make clearer copies. At the time the letter was written, it was indicated that due to design flaws the new scavenger system was not used.

Since counsel noted that the processes in making a model D were similar to those in making a model C, your office's concerns over the model B to model C processes are noted. Your office states that the model B did not possess the necessary mechanical hardware, circuitry, document positioner, tri-modal feeder, auto-sizing capabilities, PACT and programming required for the model C to exist. Your office states that the model B was known as a copier-duplicator, while the model C was known as an offset copier-duplicator. The model C's tri-modal feeder takes normal paper weights and sizes automatically through the recirculating feeder, or it copies odd size and weight originals through the semi-automatic positioner, or it allows for manual copying. The auto-sizing capabilities reduce the image size of the original to fit the selected paper supply, and it is capable of offset stacking.

Thus, your office disagrees with counsel that the only features on the model C that were not on the model B copier, were the document feeder and PACT. Your office states that the PACT is not a simple mechanical device which holds a piece of paper in place to enhance the quality of the copy produced during the imaging process, but rather its purpose is to aid in preventing white spots on the second side of duplex copies in low humidity environments. This modification not only enhanced the second side transfer characteristics by adding hardware, a solenoid, circuit board, harness, and a mylar flap, but further contributed to the creation of the model C with its tri-modal feeder and new document positioner.

Your office states that the registration assembly (mechanical) was altered to accommodate the addition of the PACT, if the model B received from the U.S. did not already have this modification installed. Registration assembly was done by installing a new circuit board and wire harness in the main frame. A paper supply cover and a document positioner hopper were created to guide and capture originals because the model C is a tri-modal feeder. The EPROM reprogramming contained the latest software enhancements made to the model B software plus contained the additional feature of auto paper size reduction.

ISSUE:

Whether the conversion of a Kodak Model F copier to a Kodak Model D copier constituted a repair or alteration within the meaning of subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), thereby qualifying the returned Model D copier for the duty exemption under this tariff provision.

LAW AND ANALYSIS:

Articles exported from and returned to the U.S., after having been advanced in value or improved in condition by repairs or alterations in Mexico, may qualify for a duty exemption under HTSUS subheading 9802.00.50, provided the foreign operation does not destroy the identity of the exported articles or create new or commercially different articles through a process of manufacture. See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956), aff'g C.D. 1752, 36 Cust. Ct. 46 (1956); Guardian Industries Corp. v. United States, 3 CIT 9 (1982). Articles are entitled to this duty exemption provided the documentary requirements of section 181.64(c), Customs Regulations (19 CFR 181.64), are satisfied. In particular, the documentation required includes a declaration from the person who performed the repairs or alterations, which describes the operations performed and the value and cost of such operations and which includes a statement that "no substitution whatever has been made to replace any of the goods originally received."

"Repairs or alterations" are defined in 19 CFR 181.64 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.

Since counsel has indicated that the processes involved in the conversion of a model B to a model C are similar to those when a model F is made into a model D, your office's concerns over the model B to model C process are noted. Your office contends that rulings allow for programming and reprogramming of an article's PROMs and EPROMs under 9802.00.50, HTSUS, where the article's performance characteristics upon foreign processing are upgraded and enhanced, and do not alter the exported article's handling and uses over that which earlier prevailed. It is your view that these rulings are distinguishable from the copier at issue since the foreign processing of the model B altered its handling and uses over that which earlier prevailed, and the replacement and reprogramming of the EPROMS created a new and different article of commerce with attributes and functions that are unique to the model C.

We note that under Additional Note 5, Chapter 90, 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. We note that the major components of a typical high-volume photocopier include the photoconductor, a primary charger, and systems for exposure, toning, transfer, erasing, and cleaning. McGraw Hill Encyclopedia of Science & Technology, Vol. 13 (1987). We also note that cartridges and developer, fuser rollers and oil, the photoconductor belt, and cleaning brush are consumables which are replaced approximately every 300,000 copies (except for the cartridges which are replaced about every 10,000 copies). Therefore, for purposes of our determination of eligibility for subheading 9802.00.50, HTSUS, treatment, we have focused upon the effect of the operations performed abroad upon the above copier assemblies.

Repairs are operations aimed at restoring articles to their original condition, but cannot be so extensive as to destroy the identity of the exported article or to create a new and different article. Press Wireless, Inc. v. United States, 6 Cust. Ct. 102, C.D. 438 (1941). In Press Wireless, the court found that radio tubes or valves replaced with heavier filaments, allowing heavier amperage, were "repaired" within the meaning of paragraph 1615, Tariff Act of 1930 (a precursor provision of subheading 9802.00.50, HTSUS). Additionally, the court found that the identical tubes were returned in a "condition of restoration to their original efficiency", and noted that an automobile repaired with materials of a heavier and superior quality than the worn-out parts would still be the same automobile, and that a fur coat relined with a superior material would still be the same coat. The court held that the use of improved materials in the restoration was immaterial, as long as the article was not considered a new and different article of commerce or its identity was destroyed. However, in C.J. Tower & Sons of Niagara, Inc. v. United States, C.D. 2208, 45 Cust. Ct. 111 (1960), cotton drills were exported and subjected to multiple operations, including dyeing and finishing. The cotton cloth returned to the U.S. was denied the partial duty exemption as the court determined that the merchandise exported was changed in color, width, length, porosity, in the distribution of the threads in the weave, in weight, tensile strength, and suppleness by the foreign processing. In holding that the foreign processing constituted more than an alteration, the court found that the returned merchandise was a new and different article having materially different characteristics and a more limited and specialized use.

In previous rulings, we have held that subheading 9802.00.50, HTSUS, will be applicable to articles disassembled for repairs, where repairs are made and parts are replaced as long as the essential components and, therefore, the identity of the article remains intact throughout the repair process. See HRL 557991 dated October 17, 1991.

In HRL 558858/558859 dated March 11, 1996, Customs considered seven models of used copier "hulks" which were repaired, upgraded, and/or modified in Mexico. In each case, the frame of the "hulk" remained intact, and the components such as the wiring harnesses, optics assemblies, printed circuit boards, and other electronic subassemblies remained assembled to the hulk at all times. The operations performed in Mexico involved removing the covers, feeder assembly, fuser, developer houser, xerographic motor, control panel, bypass, platen glass, coroton, copy cartridge and bypass tray assembly. The covers were sanded and painted, and the platen glass and other non-repairable parts were scraped. Next, the fuser, developer housing and bypass were sent to subassembly stations for repair. The partially torn-down hulk was then sent to an assembly and repair area where the enabler, low and high voltage power supplies, power cord, main printed wiring board assemblies (pwba), paper size pwba, feeder motor, copy cartridge, counter solenoid, counter, balance spring, half rate cartridge, and front/rear rail were removed, repaired, and reassembled along with the previously removed parts.

During the period of 1992-1993, in HRL 558858/558859, the frames, optics, wiring harnesses, optical control boards, optical drive motor, noise filter, fans, blower, discharge lamp, lower cover base, paper feeder motor, ac driver and sensor pwbas, and the low and high voltage power supplies were left intact on the hulk. During the period of 1993-1995, the paper feeder motor, ac driver and sensor pwbas and the low and high voltage power supplies were removed from the hulk frame during the repair and assembly process. However, such parts were identified by bar code, and new parts were either used if required, or the used repaired parts were returned to the same model number. It was found that the essential components of the copiers remained intact throughout the repair process, and did not lose their identity as a result of the Mexican operations.

In HRL 5558858/558859, the EPROMS contained in the copier's control panel were replaced or reprogrammed so that the copier could perform upgraded tasks, such as operating a noise reduction package or an automatic stapler. In regard to the replacement or reprogramming of the EPROMS, which upgraded the copiers to conform to current industry standards, in HRL 558858/558859, it was determined that this did not change the identity of the exported articles, but rather improved the product and advanced its value. Accordingly, the copiers qualified for subheading 9802.00.50, HTSUS, treatment.

As noted above, the major components in this case include the photoconductor, a primary charger, and systems for exposure, toning, transfer, erasing, and cleaning. There are numerous changes, not only to the Paper Handling Assemblies, but a completely new toner and developer assembly, new LED erase bar, and an upgraded cleaning housing along with a scavenger were installed. It is our opinion that these are substantial changes to the Imaging Assemblies. Accordingly, we find, especially in conjunction with the other changes made to each of the major systems of the photocopier, that the identity of the exported photocopier was destroyed and that a new and different photocopier was created. While the use of the returned photocopier is the same, i.e., to make copies, it possesses a different name (model D) and characteristics (especially noteworthy, better copy quality as counsel indicates), which targets the model D towards a different market. Additionally, the copier D is able to produce two-sided copies. The fact that the returned photocopier may be classified in the same HTSUS provision is not determinative of whether the essential identity remains the same. See Dolliff & Company, Inc. v. United States, 599 F.2d 1015, 66 C.C.P.A. 77, 83 (1979). Accordingly, it is our opinion that since the essential identity of the exported model F copiers has not been maintained in the returned model D copiers, they are not eligible for duty-free treatment under subheading 9802.00.50, HTSUS. We also note that the record does not contain any of the documents required by 19 CFR 181.64(c).

In this case it was also indicated that numerous "worn components" were replaced. As we have already determined that the model D copiers are not eligible for subheading 9802.00.50, HTSUS, treatment, we do not need to address whether the replacement of these worn components changes the identity of the returned copiers. It is also our opinion, however, that the replacement of numerous components in each major assembly of the model copier in this case has the cumulative effect of changing the identity of the returned copier to such an extent that they would not be eligible for subheading 9802.00.50, HTSUS, treatment even if these operations were the only ones performed abroad.

HOLDING:

On the basis of the information submitted, it is our opinion that the Mexican operations enumerated above do not constitute "repairs or alterations" since the essential identity of the copiers was not retained. Therefore, the model D copiers are not eligible for the full duty exemption under subheading 9802.00.50, HTSUS.

This decision should be mailed by your office to the internal advice requester no later than 60 days from the date of this letter. On that date 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 Durant, Director

Previous Ruling Next Ruling

See also: