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HQ 562513




January 14, 2003

CLA-2 RR:CR:SM 562513 TJM

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.50

Port Director
U.S. Customs Service
610 West Ash Street
San Diego CA 92188

RE: Revocation of HRL 560290; 9802.00.50 treatment to photocopiers; Kodak; essential identity; repair and alteration; 19 USC 1625(c);

Dear Port Director:

This letter is to inform you that Customs has reconsidered Headquarters Ruling Letter (“HRL”) 560290, dated May 10, 2000, addressed to you, concerning the classification and eligibility of photocopiers exported to Mexico from the U.S. and returned for duty exemption provided under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS). After review of this ruling, we have determined that the operations in Mexico performed on certain Kodak copiers (“Model A”) resulting in “Model D” qualify as “repairs or alterations” as provided under 9802.00.50, HTSUS. For the reasons that follow, this ruling revokes HRL 560290.

FACTS:

In HRL 560290, dated May 10, 2000, the facts indicated that Kodak or one of its customers exported used “model A” copier-duplicators which were no longer operational to Mexico, performed various processes to these copiers, and imported model D copier-duplicators to the U.S. It was claimed that the processes performed in Mexico were "repairs or alterations" and that the returned articles qualified for duty-free entry under subheading 9802.00.50, HTSUS. Other copier decisions Customs has issued include Headquarters Ruling Letter (HRL) 559405 dated July 11, 1996; HRL 559418 dated December 12, 1996; HRL 559483 dated October 17, 1996; HRL 559485 dated October 17, 1996; HRL 559672 dated December 17, 1996; HRL 559770 dated January 10, 1997; and HRL 560006 dated March 21, 1997.

The various submissions from your office and Kodak indicated that the conversion from a model A to a model D involved the following operations:

1. The toning station (also referred to as the developer station) was replaced with a new toning station to provide enhanced image quality. Kodak stated that the toning station on the model D operates more efficiently by repositioning the developer roller closer to the image loop, incorporating an internal scavenger which attracts the developing solution, and changing the rotation of the toning roller with respect to the direction of the image loop. The new toning station also permitted the use of an improved developer and more refined toner.

2. Paper level indicators were added to the paper supply drawers to help the customer determine the amount of paper in each drawer without having to stop operations. These are stated to simply be a series of LEDs mounted on the outer front panel which receive electrical signals from the various paper supplies indicating the amount of paper remaining in each drawer.

3. A new tri-modal document feeder was added, including an improved latch, allowing for smoother operation.

4. New trade dress was applied.

5. The copier speed was enhanced from 70 to 85 copies per minute by replacing three sprockets and a chain.

Noise was reduced by adding a muffler in the vacuum system and a damper from the paper stop gate.

In addition, the following description of some of the operations performed at various stations was provided:

Station 10: Cabinetry and feeder removal:

The top hopper, feeder cover, and logic molding covers were replaced with new panels. All other panels were reused but painted a different color.

Station 30: Tear down, main frame alterations and cleaning:

Drilling operations were performed to the main frame to accommodate harness modifications and unique components of the model D.

Subassemblies:

The registration assembly was altered to accommodate the addition of the Pressure Assist Corona Transfer (PACT) modification. The PACT modification was stated to keep the paper flatter as it works its way through the imaging process, but allegedly does not change the copier's function. Two new subassemblies were added, a document positioner hopper and a paper supply cover. In the logic and control assembly, the EPROMs were erased and reprogrammed with new software, including an energy saving feature that puts the copier in stand-by mode. The developer station was totally replaced with a new high definition grain station, which allows for superior image quality. The document feeder was replaced with a trimodal feeder that incorporates a semi-automatic positioner.

Station 35: Wiring:

The copier main harness was modified to accommodate the model D new features.

Station 40: Main frame reassembly:

Some main frame components were replaced such as the main drive motor sprocket, clutch, and developer drive sprocket assembly to speed up the copier's performance. The vacuum system is modified to incorporate the ability to automatically duplex, accommodate heavier paper sizes, and reduce noise levels through the addition of a muffler. Two circuit boards were replaced on the operator control panel to include new features of the model D.

Because of design changes, new parts like a solenoid, wire harness, and circuit boards were tested for electrical safety.

Station 120: Functional set up and testing:

Set-up and testing were performed to verify the function of the document positioner, wireform, duplex tray, and new developer station assemblies.

On January 15, 1998, two videos and a "key attributes matrix" were submitted showing the two models side-by-side and breaking down a copier into 185 attributes Kodak has identified as key to a copier. The similarities and differences between the two models were explained by focusing on the key subassemblies referred to in Additional Note 5, Chapter 90, HTSUS. The matrix showed many of the features to be the same. The differences included a change in copy speed. In the Imaging Assemblies, the changes were the removal of one electrically conductive magnetic roller, and a change in the bias voltage applied to the development mechanism. A change in voltage and magnetic rollers was done to improve development of half tones and image resolution. Although this change altered and improved the imaging process, it was stated that the majority of the imaging technology and hardware remained the same. In the cleaning/erasing assembly, there was a new LED front side interframe erase bar, and a new vacuum magnetic scavenger roller assembly. A distinction between the two models was that in the model A, the bar was located to illuminate the back side of the film loop, whereas on the model D, the bar is located on the front side of the film loop. Both features serve the same function. Relocation in the model D was necessary to make space for the modified developer station. In the charging assembly, the original transfer was not pressure assisted so a PACT (Pressure Assisted Corona Transfer) was added. No differences were claimed between the two models in the Optics or Image Fixing Assemblies. In the User Control assemblies, there was one difference, the color of the LEDs. In the paper handling assemblies, the only difference between the two models was that model A had no paper level indicators. What is unique to the model A was its trade dress and the height of the operator control panel. Otherwise, it was stated that the two models were the same in terms of their features and characteristics. Of the 185 characteristics listed, 174 were stated to be the same, 11 were new in the model D, and 2 were unique to the model A.

In previous Kodak submissions, it was indicated that the major parts in the toner and developer assembly are the toner container, replenisher, developer, and magnet rollers, a gear box, sump casting, drive shaft plus a toner concentration monitor and miscellaneous gears, bearings and hardware, 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 the meeting on January 27, 1998, Customs also requested more details concerning the repairs performed, as prior Kodak submissions indicated the replacement of "worn parts." Customs specifically requested a list of the parts that are replaced 100 percent of the time during the repair process.

In a letter from counsel for Kodak, dated March 10, 1998, it was stated that there are approximately 3,100 parts making up a copier and they are separated into three categories: A parts costing more than $11.00 each; B parts costing between $2.50 and $11.00; and C parts costing less than $2.50. Of the parts that are replaced 100 percent of the time, it was stated that there were 143 parts replaced with a value over $2.50; the C parts were entirely omitted. Of the 143 parts, 9 parts were listed: wire harnesses, muffler boxes, fuser assemblies, paper supplies, IQE stations, blowers, cabinetry, logic control units, and registrations. After Customs request for a more detailed list, on April 7, 1998, it was stated that 124 out of a total of 877 A and B parts were replaced, and the following parts were listed: solenoids, filters, switches, sensors, brushes, actuators, paper feed rollers, clutches, chains, bearings, brackets, pulleys, belts, valves, hoses, guide plates, circuit boards, labels, motors, casters, panels, and springs. On April 20, 1998, a complete list of all 124 A and B parts replaced was submitted, in what the letter referred to as "engineering short-hand." Customs also requested information regarding whether a particular part was a consumable; however, this information was not provided. While the model A has a magnetic scavenger, when it was converted to the model D, the roller was replaced with a vacuum scavenger for the purpose of the reduction in image quality defects. The last difference between the two models was the addition of a document positioner. It allows the operator to feed single originals across the platen glass for imaging.

In regard to the previous Kodak submissions, your office stated that the exported copiers did not possess the necessary mechanical hardware, circuitry, document positioner, tri-modal feeder, auto-sizing capabilities, PACT and programming required by the imported copier. Your office stated that the 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. The PACT is also 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. Your office stated that the registration assembly (mechanical) was altered to accommodate the addition of the PACT. 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.

ISSUE:

Whether the conversion of a Kodak “Model A” copier to a Kodak “Model D” copier constitutes a repair or alteration within the meaning of subheading 9802.00.50, HTSUS, thereby qualifying the returned Model D copier for the duty exemption under this tariff provision.

LAW AND ANALYSIS:

Subheading 9802.00.50, HTSUS, provides a complete or partial duty exemption for articles returned to the U.S. after having been exported to be advanced in value or improved in condition by means of repairs or alterations. Articles returned to the U.S. after having been repaired or altered in Mexico, whether or not pursuant to warranty, are eligible for duty-free treatment, provided the documentation requirements of section 181.64, 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, describing the operations performed and the value and cost of such operations, and including a statement that “no substitution whatever had been made to replace any of the goods originally received.”

Entitlement to the benefits of subheading 9802.00.50, HTSUS, are 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); Guardian Industries Corp. v. United States, 3 CIT 9 (1982). Tariff treatment under subheading 9802.00.50, HTSUS, is also precluded where the exported articles are incomplete for their intended use prior to the foreign processing. Guardian; Dolliff & Company, Inc. v. United States, 81 Cust. Ct. 1, C.D. 4755, 455 F. Supp. 618 (1978), aff’d, 66 CCPA 88, C.A.D. 1225, 82, 599 F.2d 1015, 1019 (1979).

In Press Wireless v. United States, 6 Cust. Ct. 102, C.D. 438 (1941), the Customs Court held that repairs are operations necessary to restore articles to their original condition, but cannot be so extensive as to destroy the identity of the exported article or create a new or different article. (See also 19 CFR § 181.64, which defines “repairs or alterations” 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.).

In previous rulings, we have held that subheading 9802.00.50, HTSUS, will be applicable to articles subject to both partial and complete disassembly, where repairs are made and parts are replaced as long as the essential components and therefore the identify of the article remain intact throughout the repair process. For example, in HRL 554731, dated February 2, 1989, Customs considered fuel injectors which involved the replacement of parts and cleaning after disassembly. Customs determined that the fuel injectors qualified for subheading 9802.00.50, HTSUS, treatment, as long as the adapter and retainer of the fuel injector were not replaced and remained together as a matched set, as these constituted the essential identity of the fuel injector.

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 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 scrapped. Next, the fuser, developer houser 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 removed from the hulk frame during the repair 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 in that case that the essential components of the copiers remained intact throughout the repair process, and did not lose their identify as result of the Mexican operations.

In HRL 558858/558859, 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 EPROMS, which upgraded the copiers to conform to current industry standard, Customs determined that this did not change the identify of the exported articles, but rather improved the product and advanced its value. Accordingly, Customs found in that case that the copiers qualified for subheading 9802.00.50, HTSUS, treatment.

We note that in HRL 558858/558859, Customs stated that subheading 9802.00.50, HTSUS, is applicable to articles subject to both partial and complete disassembly, where parts are replaced, as long as the essential components and therefore the identity of the article remains intact throughout the repair operation. As determined in HRL 558858/558859, the copiers were found not to have lost their identity as a result of the foreign operations. We note that in HRL 555819, dated October 11, 1991, it was stated that the replacement and/or addition of parts to restore products to their original condition may constitute repair operations for purposes of subheading 9802.00.50, HTSUS, if the particular article does not lose its identity and the replacements and/or additions are not so extensive as to create a new or different article. In HRL 555117, dated December 22, 1988, the essential components were also required to be tagged as a matched set.

On the issue of enhanced copier quality, we note that the Court in Royal Bead Novelty Co., Inc. v. United States, 68 Cust. Ct. 154, C.D. 4353 (1972) and Customs in HRL 559648 dated May 20, 1996, concluded that a change in the quality of an article resulting from further processing does not preclude application of 9802.00.50. See also HRL 557024, dated June 30, 1993 (involving the enhancement of stock computers in Canada), HRL 560245, dated April 4, 1997 (installation of Mobile satellite communications tracking system on trucks in Canada).

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.

The drum is the “heart” of the copier and almost every step involved with making a copy takes place around the drum. Kuaimoku, Photocopier Maintenance and Repair Made Easy (1st Ed. 1994). There are eight main steps in the copy process all of which involve the imaging assemblies: (1) charging, (2) exposing, (3) developing, (4) transferring, (5) separating, (6) fusing, (7) cleaning, and (8) erasing. The charging corona unit applies the charge on the drum. The exposing step illuminates the document and projects the image on the drum and involves the platen glass, exposure lamp, reflectors, aperture, and manual exposure control. Also involved in exposure is the projection of the image onto the drum’s surface which involves the mirrors, scanner carriage, solid lens and drums of the optical system. The developer section involves the developer (toner and carrier mix); bucket roller; magnetic roller, bias circuit, toner-carrying screw, and developer section body. The transfer step removes the toner image from the drum and places it onto the copy paper by applying a strong electrical charge from the transfer corona to the back side of the copy paper.

With regard to the Model A to D process in the instant case, Customs found in HRL 560290 that replacing the toner and developer assembly was a significant change to the imaging assemblies, which along with other changes in the paper handling assembly (e.g., paper level indicators), LED erase bar, cleaning housing, and scavenger changed the copier’s essential identity.

It is now Customs view that the essential identity of the copiers was retained when processed in Mexico. The record reflected that Kodak tracked which parts and subassemblies are removed from a given carcass through the use of unique inventory control numbers. With regard to the Model A to D process, the differences between the toner and developer assembly and cleaning/erase assemblies of Model A and Model D resulted in a more efficient presentation of the toner to the latent image.

The processing of the two assemblies which are noted above as the two most important assemblies (i.e. imaging and optical assemblies) in a photocopier are in our view not ones which suffice as altering the essential identity of the copier. Although certain parts of these were replaced, the processing did not destroy the essential identity of the copier. As we noted in HRL 555819, replacement and/or addition of parts that were not so extensive as to create a new or different article constitute repair operations for purposes of subheading 9802.00.50, HTSUS. Also, as mentioned in HRL 558858/558859, subheading 9802.00.50, HTSUS, is applicable to articles subject to partial and/or complete disassembly as long as the essential components and the identity of the article remain intact.

It is now clear that many of the replaced parts are parts that can be serviced in the field, and that they are more akin to what we would consider to be “consumables”, or parts that wear out with time and need to be repaired or replaced to ensure the continued functioning of the photocopier.

Accordingly, with regard to the Model A to D process, it is now our opinion that, although the processing involved extensive reconditioning of numerous parts and replacement of a number of parts resulting in an enhancement of certain copier functions, the changes were not so extensive as to destroy the essential identity of the exported photocopier or create a new or commercially different article. Furthermore, the fact that many of the parts are identified as being able to be replaced in the field, indicates that the replacement of such parts restore the products to their original condition and, therefore, may be considered “repairs” within the meaning of subheading 9802.00.50, HTSUS.

HOLDING:

On the basis of the information submitted, it is our opinion that the Mexican operations enumerated above with regard to the conversion of Model A to Model D constitute “repairs or alterations” since they did not destroy the identity of the exported copiers or create new or commercially different articles. Therefore, the imported Model D copiers are eligible for the full duty exemption under subheading 9802.00.50, HTSUS. Consistent with this ruling, HRL 560290, dated May 10, 2000, is hereby revoked.

Sincerely,

Myles B. Harmon, Acting Director
Commercial Rulings Division

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