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HQ 562514




January 14, 2003

CLA-2 RR:CR:SM 562514 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 559418; 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”) 559418, dated December 12, 1996, 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 these rulings, we have determined that the operations in Mexico performed on certain Kodak copiers (“Model B”) 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 559418.

FACTS:

In HRL 559418, dated December 12, 1996, the facts indicate that Kodak exported used model B copier-duplicators to Mexico, performed various processes to these copiers, and imported model D copier-duplicators to the U.S. It was claimed that the process performed in Mexico constituted “repairs or 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 D from a model B, counsel described the processes performed on a model B resulting in a model C (the subject of Headquarters Ruling Letter (HRL) 559483, dated October 17, 1996, concluding that the conversion from a model B to model C constituted acceptable repair or alterations), as it is stated that there were a number of similarities between the two types of processes. Further, counsel noted that the processes performed in the model B to model C conversion were almost identical to those performed in the refurbishing of the model B which 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 It was also stated that if there was an engineering enhancement, newer model parts were installed to replace old and outdated ones.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 were stated to be referred to as “indirect process electrophotostatic copier,” and six Erasable Programmable Read-Only Memory chips (“EPROM”) were erased and reprogrammed to accommodate updated operating instructions.

Next, counsel presented the processes performed to convert a model B to a model C. It was 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 counsel 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). These two features keep 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 stated 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 EPROM was 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 because there were changes to the operator control panel.

Counsel stated that the additional steps taken which resulted in a model D were that that 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 improved latch was added to the document feeder allowing for smoother operation. There was also a new trade dress in the form of different color stripes (aqua) on the front of the copier.

In addition, counsel stated 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 chart of the model B to model D process indicated 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 driver 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 acutated. The assembly driver roller starts the movement of the image loop around the film core area, and it is stated that worn out rollers were 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, 1996, 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 of changes depend on the specific finished copier model involved. Also, 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 on December 6, 1996, indicates that its function is to eliminate contamination on the film path, and that its major part is a casting. The model B 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 worn components were replaced in the lens/mirror assembly. The information received on December 6, 1996, 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 and incorporating a semi-automatic position feature; worn components were replaced and paper level indicators were added in the paper supply assembly; worn components were replaced and a PACT modification was added to the registration assembly; and worn components were replaced in the duplex paper path assembly, transport assemblies, and vacuum system. The information received on December 6 indicates that shafts, roller, wire form, 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 failed components were replaced and the EPROMS were reprogrammed to accommodate the semi-automatic position and paper level indicating features.

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 explained 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 the design flaws the new scavenger system was not used.

ISSUE:

Whether the operations performed in Mexico, as described above constitute “repairs or alterations” under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS).

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 a 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 B to D process in the instant case, Customs found in HRL 559418 that replacing the toner and developer assembly, installing a new LED erase bar, and adding an upgraded cleaning housing and a new vacuum scavenger in the cleaning assembly were significant changes to the imaging assemblies, which along with other changes in the paper handling assembly (paper level indicators), changed the copier’s essential identity.

It is now clearer that many of the replaced worn components 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.

For instance, in the imaging assemblies, the processing included the replacement of the film belt and worn components. A new LED erase bar was installed in the photoreceptor belt. It is stated that the IQE station slider, plenum assembly build, backup slider assembly, and assembly driver 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 driver roller starts the movement of the image loop around the film core area, and it is stated that worn out rollers were 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, 1996, indicated that the worn components replaced were those that 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).

Regarding optics assemblies, the platen glass was replaced and worn components were replaced in the lens/mirror assembly. The worn components include mechanical parts such as timing belts and pulleys which slide the lens assembly on its guides.

This processing of the two assemblies which are noted above as the two most important assemblies in a photocopier are in our view not ones which suffice as altering the essential character of the copier. Although certain parts of these assemblies 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 are not so extensive as to create a new or different article constitutes 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.

Accordingly, with regard to the Model B to D process, it is now our opinion that, although the foreign processing involved extensive reconditioning of numerous parts and replacement of a number of parts resulting in an enhancement of certain copier functions, the changes made are 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 B to 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 559418, dated December 12, 1996, is hereby revoked.

Sincerely,

Myles B. Harmon, Director
Commercial Rulings Division

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