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HQ 562516




January 14, 2003

CLA-2 RR:CR:SM 562516 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 559672; 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”) 559672, dated December 17, 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 this ruling, we have determined that the operations in Mexico performed on certain Kodak copiers (“Model F”) 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 559672.

FACTS:

In Headquarters Ruling Letter (“HRL”) 559672, dated December 17, 1996, the facts indicate 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 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 F into a model D, counsel stated 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 was no change in model number involved 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 It was also stated that if there was an engineering enhancement, newer model parts were installed to replace old and outdated ones.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 was 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 copiers," and six Erasable Programmable Read-Only Memory chips ("EPROMS") 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 were 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 incorporated a semi-automatic positioning feature. The PACT modification kept the paper flatter as it works its way through the imaging process but allegedly did 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, model C required different circuit boards. The existing EPROMS as 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 stated that the additional steps taken which resulted in a model D from a model F were that the model F 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 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 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 stated that some additional steps occurred during conversion of model F to model D. 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 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 was 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 model D photocopiers used 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 was stated that worn out rollers were replaced and the same rollers were 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 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 was indicated that the major parts were 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 was stated that a scavenger is present. It was stated that the configuration and number of changes depended on the specific finished copier model involved and that the function of the toner and developer assembly was 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, indicated 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 was indicated that it erases residual information on the image loop between copies.

In regard to the Optics Assemblies, the chart indicated 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, 1996, indicated that the worn components replaced in the lens/mirror assembly were 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 was also stated that if a lens/mirror was scratched or broken, the lens or mirror itself was replaced.

In regard to the User Control Assemblies, the chart indicated 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 indicated 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 indicated that shafts, rollers, wire forms, solenoids, and sensors (in the duplex tray) were replaced in the transport assemblies.

In regard to the logic and control unit, the chart indicated 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 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 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 stated 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 stated 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.

ISSUE:

Whether the conversion of Kodak “Model F” copiers to a Kodak “Model D” copiers constituted “repairs or alteration” 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 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 toe 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. The regulatory requirements of not destroying the identity of the exported articles, however, are clear. Court decisions pertaining to this statute also set forth this requirement; however, none of the decisions appear to have addressed complex machinery and extensive parts replacement.

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: (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 F to D process in the instant case, Customs ruled in HRL 559672 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.

With regard to the Model F to D process, the difference between the toner and developer assembly and cleaning/erase assemblies of the Model F and Model D, as well as the changes to the bias voltage, magnetic roller, LED erase bar, and vacuum scavenger, result in a more efficient presentation of the toner to the latent image.

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 identity of the copier. Although certain parts of these assemblies are replaced, the processing does 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 F 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. The partial disassembly, also consistent with HRL 558858/558859 does not disqualify the application of 9802.00.50, HTSUS, to the instant case.

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 F 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 559672, dated December 16, 1996, is hereby revoked.

Sincerely,

Myles B. Harmon, Director
Commercial Rulings Division

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