Applicability of partial duty exemption of item 806.20, TSUS, to certain copiers exported to Mexico to be cleaned and subassemblies overhauled

HQ 555046 August 5, 1988 CLA-2 CO:R:C:V 555046 DBI CATEGORY: Classification TARIFF NO.: 9802.00.40; 806.20 Mr. John P. Donohue Donohue and Donohue 421 Chestnut Street, Fifth Floor Philadelphia, PA 19106 RE: Applicability of partial duty exemption of item 806.20, TSUS, to certain copiers exported to Mexico to be cleaned and subassemblies overhauled Dear Mr. Donohue: This is in response to your letters of March 24 and June 6, 1988, (your file 519-01), in which you request a ruling concerning the applicability of item 806.20, Tariff Schedules of the United States (TSUS), to certain copier-duplicators manufactured in the U.S. and exported to Mexico for cleaning and removal of subassemblies for overhaul. FACTS: You advise that your client will ship U.S.-made copiers to Mexico where they will be cleaned and all major subassemblies will be examined in detail to determine configuration and need for repairs or alteration. If necessary, subassemblies will be removed from the mainframe for individual overhaul. You indicate that the following specific procedures will be performed: I. Cabinet A. Remove all cabinet panels B. Remove material from logic molding cover C. Repaint all cabinet panels D. Install a new top cover assembly with built-in stacker - 2 - II. Logic and Control Assembly A. Replace memory board, CPU (central processing unit) board, and Operator Control Board B. Update the input and output boards by soldering in new components C. Replace the EPROM (erasable programmable read only memory) on the zoom board D. Replace two fans II. Feeder Upgrade A. Remove and disassemble the feeder unit B. Modify copier frame to accept new feeder configuration C. Reassemble the feeder and add new document positioner feature IV. A. Remove 15 volt supply from fuser board B. Update wire harnesses C. Place one additional relay on relay board Following the above-described procedures, copier assemblies, parts and cabinet panels previously removed are fitted to the mainframe. In a telephone conversation dated June 29, 1988, an employee of your client spoke with a member of my staff and stated that the software on the memory board had to be reprogrammed in order to accommodate the new paper feeder and shuttle tray capabilities. You also indicated that the zoom board would be replaced in order to change physical mechanisms on the outside of the copier. Previously, the machine had three buttons, each pressed once to control reduction capabilities. Following replacement, the copier will have one button to be pressed three times. You stated that only the physical structure of the machine would change and not the reduction capabilities. You also stated that none of the new memory that resulted from the reprogramming would change the copier's capabilities, but rather, the new memory would only make the new physical structures possible, i.e., feeders, trays and buttons. - 3 - ISSUE: Whether the described copiers, when returned to the U.S., will be eligible for the partial exemption from duty in item 806.20, TSUS, (9802.00.40, Harmonized Tariff Schedule of the United States (HTSUS))? LAW AND ANALYSIS: Item 806.20, TSUS, 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 to be advanced in value or improved in condition by any process of manufacture or other means. 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 (1957); Guardian Industries Corporation v. United States, USITR 3 CIT 9, Slip Op. 82-4 (Jan. 5, 1982). We have previously held that the reprogramming of EPROMs and the central processing unit of a video game resulted in the creation of a new product which had a commercial importance significantly different from what was exported and, therefore, constituted more than a repair or alteration within the meaning of item 806.20, TSUS. C.S.D. 84-8, 18 Cust. Bull. 844 (1984). We have also held that the rationale of the Court of International Trade in Data General Corporation v. United States, 4 CIT 182, Slip Op. 82-93, (October 29, 1982), applied to support the opinion that the reprogramming of an EPROM resulted in a new and different article of commerce. C.S.D. 84-85, 18 Cust. Bull. 1044 (1984). In Data General, the court held that the programming of an imported PROM (programmable read only memory) in the U.S. constituted a substantial transformation so that the resulting programmed device became a product of the U.S. for the purposes of item 807.00, TSUS. The court specifically found that a PROM was a recognized article of commerce which was sold for the purpose of being programmed and that a programmed PROM was a different article having as its essence the pattern of interconnections or stored memory which was established by programming. We held in our ruling that the essence of an integrated circuit memory storage device was established by programming in both a PROM and an EPROM and, therefore, the reprogramming of an EPROM resulted in a new and different article of commerce. - 4 - Based on our previous rulings, we believe that the reprogramming of the memory board and EPROM constitute operations that exceed a repair or alteration. In support of our opinion we note that the returned copiers not only have such enhancements as a feeder, offset stacker and enhanced control panel, but these copiers also have a new model number, all of which contribute to the creation of a new and commercially different article. For these reasons as well, the operations performed abroad exceed an alteration or repair. HOLDING: On the basis of the information submitted, it is our opinion that the reprogramming of the memory board and EPROM and the addition of the feeder, stacker and enhanced control panel may not be considered an alteration as that term in used in item 806.20, TSUS. Therefore, tariff treatment of the returned copiers under the provisions of item 806.20, TSUS, is precluded. Sincerely, John Durant, Director Commercial Rulings Division 1cc: CO:R:C:V:DIZZO:LDC:7/21/88 Mr. John P. Donohue Donohue and Donohue 421 Chestnut Street, Fifth Floor Philadelphia, PA 19106