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HQ

561005

August
5, 1998
CLA-2 RR:TC:SM 561005 BLS

CATEGORY: CLASSIFICATION

TARIFF NO.: 9801.00.85

Mr. Bruce H. Leeds
Senior Export/Import Advisor
Hughes Space and Communications
Bldg. S41, M/S A373
P.O. Box 92919
Los Angeles, CA 90009-2919

RE: Subheading 9801.00.85; tools of trade; corporations; parent-subsidiary; Moberly v. United States; HRL 560256

Dear Mr. Leeds:

This is in reference to your letter dated May 13, 1998, concerning the applicability of subheading 9801.00.85, Harmonized Tariff Schedule of the United States (HTSUS), to certain articles used abroad to support the launch of commercial communications satellites.

FACTS:

Hughes Space and Communications (HSC) is involved in the launch of commercial communications satellites at certain sites abroad, including French Guiana, China and Kazakhastan. HSC will normally export the following groups of articles to the foreign launch site:

The satellite, fuel, and in some instances a rocket motor;
Critical spare parts of the satellite to cover any failures that may occur during final integration and mating to the launch vehicle; Special containers for the above;
Test and handling equipment and tools used by the HSC launch support personnel;
A battery operated forklift;
Consumables, including office supplies and miscellaneous spare parts of the satellite and equipment;

Equipment for the morale of the HSC personnel, such as TVs and VCRs.

You state that these articles are used exclusively by the HSC employees at the site. Many if not most of the articles are made in the U.S. However, a significant portion of the articles are either foreign or of unknown origin. If foreign or unknown origin you state they were acquired in the U.S. The articles are returned through various U.S. ports, depending on the launch site and the mode of transportation. The most commonly used ports are Los Angeles, Miami and New York.

For contractual reasons the exporter of record of the satellite and the accompanying articles is Hughes Space and Communications International, Inc. ("HSCII"), a wholly owned subsidiary of HSC. HSCII is the entity which contracts with the international customers and is responsible for shipping to the site and for placing the satellite in orbit. When the articles are returned to the U.S., entry is made in the name of HSC, the owner of the articles.

ISSUE:

Whether the articles exported and returned qualify for duty-free treatment under subheading 9801.00.85, HTSUS.

LAW AND ANALYSIS:

Subheading 9801.00.85, HTSUS, provides duty-free treatment for:

[p]rofessional books, implements, instruments, and tools of trade, occupation, or employment, when returned to the United States after having been exported for use temporarily abroad, if imported by or for the account of the person who exported such items.

Section 44 of the Miscellaneous Trade and Technical Corrections Act of 1996, Pub. L. No. 104-295, 110 Stat. 3514 (1996), added subheading 9801.00.85, HTSUS, to permit the duty-free entry of "tools of the trade" by corporations which previously could only be entered duty-free if they were exported and reimported by the same individual under subheading 9804.00.10, HTSUS. See Senate Report No. 104-393 dated October 1, 1996. See also Headquarters Ruling Letter (HRL) 223198 dated October 17, 1991, which provides that subheading 9804.00.10, HTSUS, is considered a personal exemption available only to individuals arriving in the U.S. from a foreign country, and that merchandise consigned to and entered by or for the account of a firm does not
qualify for this exemption.

Customs has previously approved a variety of articles which qualified as "professional equipment and tools of trade" for temporary entry free, under bond, under subheading 9813.00.50, HTSUS, for use by nonresidents sojourning temporarily in the United States. Such articles have included mobile shredding units used to shred documents (HRL 221702 dated December 27, 1989); cinematography equipment (HRL 222651 dated January 7, 1991); and a mobile X-ray unit with equipment (HRL 223970 dated September 22, 1992.) The equipment and tools of the trade provided for under subheading 9813.00.50 are intended to be necessary for the exercise of the calling, trade, or profession of a person visiting this country to perform a specific task.

While the requirements for entry under HTSUS subheading 9813.00.50 and subheading 9801.00.85 are different, the term, "tools of the trade", in both provisions has essentially the same meaning. Accordingly, the test as applied to the instant case is whether the articles exported and returned are necessary for the exercise of the trade or profession.

We find that the items used (or intended to be used) by HSC employees necessary for the exercise of their trade or profession include those items directly related to the satellite launch, i.e., spare parts of satellites, test equipment, forklift, fuel, etc., as well as items such as office supplies and miscellaneous parts used in support of the required task. However, televisions, VCRs, and other articles intended for the personal use of the HSC personnel, are not items necessary for the exercise of the particular trade or occupation. Accordingly, these articles would not be entitled to duty-free entry under subheading 9801.00.85, HTSUS.

Pursuant to new subheading 9801.00.85, as noted above, "... implements, instruments, and tools of trade, occupation, or employment..." may now be entered free of duty by a corporation, provided the returned articles are "imported by, or for the account of the person who exported such items."

It is a basic principle of corporate law that a corporation is a separate and distinct legal being. See Moberly v. United States, 4 Cust. Ct. 91, C.D. 294 (1940). Therefore, although HSC and HSCII are in a parent-subsidiary relationship, they are separate legal entities. See Tennessee Valley Authority v. Exxon Nuclear Co. , Inc., 753 F.2d
493, (6th Cir. 1985). Accordingly, as separate entities or "persons," importation by HSC of the merchandise exported by HSCII under these facts does not constitute an importation by or for the account of the person who exported such item. See Headquarters Ruling Letter (HRL) 560256 dated July 23, 1997, which held that
equipment used in the installation, maintenance, or repair abroad of other merchandise may be reimported duty-free under subheading 9801.00.85, HTSUS, provided the corporate owner exported the merchandise temporarily and the same merchandise is imported "by the same corporation or for its account." Emphasis added.

Consequently, under these facts, the items returned to the United States will not be entitled to duty-free treatment under the provisions of subheading 9801.00.85, HTSUS. HOLDING:

On the basis of the information submitted, it is our opinion that the equipment, fuel, parts and office supplies used or intended to be used directly or otherwise in support of the satellite launch abroad are "...implements, instruments, and tools of trade, occupation, or employment...," within the meaning of subheading 9801.00.85, HTSUS.
However, as these articles are not imported by or for the account of the exporter, HSCII, they will not be entitled to duty-free treatment upon return to the United States.

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

Commercial Rulings Division

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