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HQ 560022




February 12, 1998

CLA-2 RR:C:SM 560022 DEC

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.50

Robert E. Burke, Esq.
Barnes, Richardson & Colburn
200 East Randolph Drive
Suite 7920
Chicago, Illinois 60601

RE: Repairs/Alterations; HRL 554816; 19 CFR 181.64; HRL 554539; HRL 555443; HRL 556609; Daisy-Heddon, Div. Victor Comptometer Corp. v. United States, 600 F.2d 799, 66 CCPA 97, C.A.D. 1228 (1979)

Dear Mr. Burke:

This is in response to your letter dated August 12, 1996, on behalf of Cummins Engine Company, Diesel ReCon Division (Cummins), concerning the eligibility of fuel injection pumps for entry under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS). You specifically requested that we consider modifying Headquarters Ruling Letter (HRL) 554816, dated November 23, 1987. You supplemented your original ruling request with additional submissions dated January 15, 1997, and April 1, 1997, which provided supplementary information as a result of our January 15, 1997, meeting at our office. Samples of the various fuel pumps were submitted for our examination.

Pursuant to section 625, Tariff Act of 1930 (19 U.S.C. Modernization) of the North American Free Trade Agreement Implementation Act, Pub. L. 103-182, 107 Stat. 2057, 2186 (1993) (hereinafter section 625), notice of the proposed modification of HRL 554816 was published on January 7, 1998, in the Customs Bulletin, Volume 32, Number 1.

FACTS:

Cummins is a manufacturer of diesel engines and also "reconditions" used engine components such as fuel injection pumps. You state that Cummins ships used fuel pumps to their facilities in Mexico where parts are removed from the fuel pump's main housing which consists of a large machined casting. The main body is cleaned, inspected, and machined. If any parts that are removed are capable of reuse they may be used "as is" or subjected to machining or other processing so that they are capable of being reused. Subsequently, the fuel pump is assembled using both reconditioned and new parts.

Diesel ReCon Company (now the Diesel Recon Division of Cummins) received HRL 554816 which addressed the eligibility of certain types of fuel pumps for item 806.20, Tariff Schedules of the United States (TSUS) (the precursor to subheading 9802.00.50, HTSUS)), treatment. The types of pumps identified in HRL 554816 were the Bosch, Lucas, Stanadyne, and PT pumps. Counsel for Diesel ReCon Company indicated in that case that the housing, top cover, and fuel pump drive gear of the pumps were kept together throughout the reconditioning process so that the essential identity of the fuel pumps was maintained throughout the foreign processing. Customs agreed with counsel's position and held that provided the housing, top cover, and fuel pump drive gears were maintained in designated match sets throughout the foreign processing, the fuel pumps were subjected to qualifying repair operations and eligible for a partial duty exemption. See HRL 554816. You state that in HRL 554816 Customs inexplicably mandated that the housing, top cover, and fuel pump drive gear be maintained as a matched set throughout the repair operations even though some of the pumps at issue were not designed with a top cover or fuel pump drive gear.

In your August 12, 1996, correspondence, you indicated that no duty exemption under subheading 9802.00.50, HTSUS, is being requested with respect to the Stanadyne pump. This ruling request covers the In-Line, Rotary, and Cummins fuel pump models. The In-Line (Bosch) model includes the MW style, the P 7100 style, and the A style. The Rotary (Lucas) model includes the Lucas model and the VE model. The Cummins model includes the PT model.

ISSUE:

Whether the fuel injection pumps described above will be entitled to entry under subheading 9802.00.50, HTSUS, when imported into the U.S.

LAW AND ANALYSIS:

Subheading 9802.00.50, HTSUS, provides for the assessment of duty on the value of repairs or alterations performed on articles returned to the U.S. after having been exported for that purpose. However, the application of this tariff 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), aff'd, C.D. 1752, 36 Cust. Ct. 46 (1956); and Guardian Industries Corporation v. United States, 3 CIT 9 (1982). Subheading 9802.00.50, HTSUS, treatment is also precluded where the exported articles are incomplete for their intended use and the foreign processing operation is a necessary step in the preparation or manufacture of finished articles. See 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, 599 F.2d 1015 (1979). Articles entitled to this partial duty exemption are dutiable only upon the cost or value of the foreign repairs or alterations, provided the documentary requirements are satisfied.

Pursuant to section 181.64(a), Customs Regulations (19 CFR 181.64(a)), "repairs or alterations" are defined for purposes of importations from NAFTA countries as follows:

For purposes of this section, "repairs or alterations" means 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 United States.

For purposes of the duty allowance under subheading 9802.00.50, HTSUS, the replacement and/or addition of parts to restore products to their original condition may constitute repair operations, provided that the particular article does not lose its identity and the replacement and/or additions are not so extensive as to create a new or different article. Press Wireless, Inc. v. United States, 6 Cust. Ct. 102, C.D. 438 (1941). In Press Wireless, radio tubes were sent abroad for repairs which involved the use of heavier filament than that used in the original manufacture of the tubes. Also, the markings on the articles were erased, and new numbers were substituted to facilitate matching the tubes for use in transmitters. The court held that, as long as the article was not considered a new and different article of commerce or its identity was destroyed, the use of improved materials in the restoration was of no consequence.

Thus, application of this tariff provision is precluded where the foreign operation destroys the identity of the exported article or creates a new or different commercial article. In HRL 554539, dated August 25, 1987, we stated that:

So long as the identity of [the exported unit] is maintained throughout the disassembly and repair process, and there is a genuine repair of parts carried out during the foreign process, these units may be entered under the repairs provision of item 806.20, Tariff Schedules of the United States (TSUS) [the predecessor tariff provision to subheading 9802.00.50, HTSUS].

Where, as here, the foreign repair operation entails the complete disassembly of the exported article and numerous component parts of the article are replaced, the concept of "essential identity" becomes relevant. This concept is employed in interpreting this tariff provision to ensure that the article imported is the same as the article exported and operates by identifying certain component parts of an exported article as embracing the essential identity of the particular article exported. Component parts so identified are to be maintained together throughout the repair operation as a matched set. Thus, replacing any one of these essential components would violate the uniqueness of the matched set and result in a new article of commerce, thereby precluding eligibility for the duty exemption under subheading 9802.00.50, HTSUS. See HRL 555443, dated November 30, 1990, and rulings cited therein.

In HRL 554816, dated November 23, 1987, Customs addressed the eligibility of certain types of fuel pumps for item 806.20, TSUS, treatment. The types of pumps at issue were the Bosch, Lucas, Stanadyne, and PT pumps. In that ruling, counsel for Diesel ReCon Company indicated that the housing, top cover, and fuel pump drive gear of the pumps were kept together throughout the reconditioning process so that the essential identity of the fuel pumps was maintained throughout the foreign processing. Customs agreed with counsel's position and held that provided the housing, top cover, and fuel pump drive gears were maintained in designated match sets throughout the foreign processing, the fuel pumps were eligible for a partial duty exemption.

You now seek a finding from Customs that the fuel pump housing alone imparts the "essential identity" to the fuel pumps at issue and request a modification or revocation of HRL 554816. You contend that the fuel pump housing alone imparts the essential identity of the fuel pumps because it is the largest and most integral component of the finished pump. In addition, you contend that the fuel pump housing represents the general profile of the finished article. You state that HRL 554816 requires modification or revocation also because it requires in all cases that the pump's housing, top cover, and fuel pump drive gear be maintained as a matched set throughout the repair process when some of the models at issue in HRL 554816 were not designed with a top cover nor a fuel pump drive gear.

Finally, you cite Daisy-Heddon, Div. Victor Comptometer Corp. v. United States, 600 F.2d 799, 66 CCPA 97, C.A.D. 1228 (1979), which is a case interpreting whether an article is unfinished for general classification purposes, suggesting that Customs extend this concept to the subheading 9802.00.50, HTSUS, context. You argue that since the pump housing is really an unfinished fuel pump and that the omission of a part essential to its use (e.g., the top cover or fuel pump drive gear) would not preclude its classification as the particular article (fuel pump), then Customs should conclude that the fuel pump housing constitutes the essential character of the article.

While we agree that the housing component represents the "essential identity," whether or not it represents the "essential character" of the finished fuel pumps on the basis of the Daisy-Heddon rationale is not relevant to subheading 9802.00.50, HTSUS, determinations. Daisy-Heddon is a tariff classification case which addressed whether the absence of a part essential to the use of the article precludes the classification of the unfinished article in the same provision as the completed article. Whether an article undergoes qualifying repairs/operations pursuant to subheading 9802.00.50, HTSUS, presents a separate inquiry from whether an unfinished article is properly classified as the finished article for classification purposes under General Rule of Interpretation 2(a), HTSUS. The requirement of preserving an article's "essential identity" for purposes of qualifying for subheading 9802.00.50, HTSUS, treatment exists so that already completed articles do not undergo various processes which serve to destroy the identity of the article, but rather only undergo processes that serve only to repair or alter the article. The Daisy-Heddon decision addressed the issue of how complete an article must be before it is classified as the finished article, while subheading 9802.00.50, HTSUS, eligibility is determined upon an examination of the extent to which the identity of the article in question is compromised as a result of the repairs/alterations at issue. Accordingly, Customs finds that Daisy-Heddon is completely inapplicable to subheading 9802.00.50, HTSUS, eligibility.

In HRL 556609, dated July 23, 1992, Customs considered the "essential component" of steering gear assemblies or "core" units exported to Mexico for repair. In that case, the housing of the assemblies, which constituted 80% of the value of the assembly, was not interchangeable but was specific to each model. Because new housings were not readily available for purchase on the open market, the core assembly was deemed worthless unless the housing was repairable. Customs concluded that the housing was the "essential component" of the cores, and held that, notwithstanding the replacement of non-essential parts, where the housing was not replaced in the repair process but remained segregated from the components of other cores, the steering gear assemblies were entitled to the duty exemption under subheading 9802.00.50, HTSUS.

Similarly, we find that the operations performed on the fuel pump housings at issue in this ruling are considered repairs within the meaning of subheading 9802.00.50, HTSUS. The cleaning, inspecting, and machining of the housings so that they can be reused to produce reconditioned fuel pumps do not result in the creation of a new article, but serve to restore the article to its original condition, purpose and application. Accordingly, so long as the essential identity of the fuel pumps is maintained (e.g., the housing), the use of other non-essential components which may be reused "as is," reconditioned and then used, or replaced with new parts is permissible and will not serve to disqualify the reconditioned fuel pumps from entering under subheading 9802.00.50, HTSUS, provided Cummins complies with the documentary requirements of 19 CFR 181.64.

HOLDING:

Based upon the information presented and our examination of the samples that were submitted with this ruling request, the returned fuel pumps qualify for entry under subheading 9802.00.50, HTSUS, provided the documentary requirements of 19 CFR 181.64 are met. HRL 554816 is hereby modified.

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.

In accordance with 19 U.S.C. 1625(c)(1), this modification of HRL 554816 will become effective 60 days after its publication in the Customs Bulletin. Publication of rulings or decisions pursuant to 19 U.S.C. 1625(c)(1) does not constitute a change of practice or position in accordance with section 177.10(c)(1), Customs Regulations (19 C.F.R. 177.10(c)(1)).

Sincerely,

John Durant, Director
Commercial Rulings Division

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