Alternators attached to engines and imported into the U.S.Alterations; new and different article; 9801.00.20; 9801.00.25. Burstrom; Guardian Industries

HQ 555932 April 2, 1991 CLA-2 CO:R:C:S 555932 KCC CATEGORY: Classification TARIFF NO.: 9802.00.50 Ms. Suzanne Smith Purchaser/Expediter Wartsila Diesel, Inc. Route 5, Box 116B Chestertown, Maryland 21620 RE: Alternators attached to engines and imported into the U.S.Alterations; new and different article; 9801.00.20; 9801.00.25. Burstrom; Guardian Industries Dear Ms. Smith: This is in response to your letter dated June 4, 1990, concerning the applicability of subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), to Japanese origin alternators imported into the U.S. for refurbishing, exported to Finland for attachment to engines, and then reimported into the U.S. as part of the engines. The portion of your request regarding the vessel repair statute was the subject of a separate response in Headquarters Ruling Letter (HRL) 111117 dated March 4, 1991. We regret the delay in responding to your request. FACTS: You propose to sell thirty-six engines to a U.S. flag carrier to be used in the repowering of their vessels. The vessels are currently powered by engines and alternators of Japanese origin. The repowering will require the purchase of new engines and refurbishing of the old alternators. The alternators will be removed from the engines and you will arrange to have the refurbishing completed in the U.S. After completion of the refurbishing operation, you intend to register the alternators on Customs Form 4455 (Certificate of Registration) and export them to Finland. In Finland, the alternators will be coupled with the new engines and tested. Once tested, the engines with the refurbished alternators will be returned to the U.S. for subsequent sale to the U.S. flag carrier. Thereafter, the engines with the refurbished alternators will be installed aboard the vessels at various U.S. ports by engineers of your firm. ISSUE: Whether the alternators attached to the engines will be entitled to the partial duty exemption available under subheading 9802.00.50, HTSUS, when imported into the U.S. LAW AND ANALYSIS: All articles imported into the U.S. are subject to duty unless specifically exempted therefrom under the HTSUS. It appears from your letter that you intend to reimport the alternators attached to the engines under subheading 9802.00.50, HTSUS. This tariff provision 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 for that purpose. 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 (1956), aff'd, C.D. 1752, 36 Cust.Ct. 46 (1956); and Guardian Industries Corporation v. United States, 3 CIT 9 (1982), Slip Op. 82-4 (Jan. 5, 1982). We are of the opinion that the attachment operation performed in Finland is not considered an alteration, and therefore, the alternators attached to the vessel engines will not be entitled to the partial duty exemption available under subheading 9802.00.50, HTSUS. Attaching the alternator to the engine creates a new and different article--the vessel engine. Contrary to the underlying premise of this tariff provision, the articles that are imported into the U.S. are not the same articles that were exported. Additionally, duty-free treatment is available for certain articles previously imported and duty paid pursuant to subheadings 9801.00.20 and 9801.00.25, HTSUS. Subheading 9801.00.20, HTSUS, provides for the free entry of articles previously imported and duty paid if, upon reimportation, the articles have not been advanced in value or improved in condition by any process of manufacture or other means while abroad, and the articles were exported under lease or similar use agreements. Subheading 9801.00.25, HTSUS, provides for the free entry of articles previously imported and duty paid if the articles were exported within three years after the date of such previous importation, reimported without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, and reimported for the reason that such articles do not conform to sample or specification. The alternators attached to the engines do not qualify for duty-free treatment under either of these subheadings because the foreign-origin alternators apparently are not exported to Finland under a lease or similar use agreement, and they are not reimported due to a lack of conformity with sample or specification. Additionally, the attachment operation would be considered to advance in value and improve in condition the foreign alternator. Therefore, upon return to the U.S., the alternators are dutiable as part of the value of the engines to which they are attached. HOLDING: On the basis of the information presented, it is our opinion that the attachment operation performed in Finland is not considered an alteration. Accordingly, the alternators are not eligible for the partial duty exemption available under subheading 9802.00.50, HTSUS. Therefore, the engines (including the alternators attached thereto) are dutiable on their full value when imported into the U.S. Sincerely, John Durant, Director Commercial Rulings Division