Applicability of duty exemption under HTSUS subheading 9802.00.50 to automobiles; mechanical repairs; body work; repainting; reupholstery

HQ 557890 August 19, 1994 CLA-2 CO:R:C:S 557890 MLR CATEGORY: Classification TARIFF NO.: 9802.00.50 Mr. Conrad R. Schudel Schudel & Associates 132 N. El Camino Real Ste. 303 Encinitas, CA 92024 RE: Applicability of duty exemption under HTSUS subheading 9802.00.50 to automobiles; mechanical repairs; body work; repainting; reupholstery Dear Mr. Schudel: This is in reference to your letter of April 7, 1994, requesting a ruling regarding the implications on automobiles exported to Mexico where body work, mechanical reparations, repainting, and reupholstery work will be performed. FACTS: You state that you wish to form a company that will export automobiles to Mexico where body work, mechanical reparations, repainting, and reupholstery work will be performed. ISSUE: Whether the automobiles subjected to body work, mechanical reparations, repainting, and reupholstery work in Mexico will qualify for the duty exemption under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), when returned to the U.S. LAW AND ANALYSIS: Articles exported from and returned to the U.S., after having been advanced in value or improved in condition by repairs or alterations in Mexico, may qualify for a duty exemption under HTSUS subheading 9802.00.50, provided the foreign operation does not destroy the identity of the exported articles or create new or commercially different articles through a process of manufacture. See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956), aff'g C.D. 1752, 36 Cust. Ct. 46 (1956); Guardian Industries Corp. v. United States, 3 CIT 9 (1982). Accordingly, entitlement to this tariff treatment is precluded where the exported articles are incomplete for their intended purpose prior to the foreign processing. Guardian; Dolliff & Company, Inc. v. United States, 455 F.Supp. 618 (CIT 1978), aff'd, 599 F.2d 1015 (Fed. Cir. 1979). Articles are entitled to this duty exemption provided the documentary requirements of section 181.64, of the North American Free Trade Agreement (NAFTA), Interim Rules (T.D. 94-1), set forth at 58 Fed. Reg. 69483 (December 30, 1993) (copy enclosed), are met. In Headquarters Ruling Letter (HRL) 555135 dated October 18, 1988, Customs considered passenger automobiles exported to Mexico where components such as the engine and drivetrain, steering and suspension were rebuilt and repaired. The frame, bumpers, and shell of the automobiles were also straightened and/or welded. The seats, headliners, carpets, dash items, oil, brake shoes, tires, filters, defective windows, windshields, bulbs, lens covers, and mirrors were also repaired or replaced. After the automobiles were reassembled, they were painted and returned to the U.S. It was held that these foreign repairs and refurbishments did not create a new or commercially different article, and that the automobiles returned were the same articles as those exported. Consequently, the foreign repairs and refurbishments were considered a repair within the meaning of item 806.20, Tariff Schedules of the United States (TSUS) (now subheading 9802.00.50, HTSUS). Similarly, in the instant case, although you do not provide specific details on the mechanical repairs to be made, we find that automobiles exported to Mexico and subjected to mechanical reparations, operations which repair the body, repainting, and reupholstery work, will qualify for the full duty exemption under subheading 9802.00.50, HTSUS, when returned to the U.S., provided the documentary requirements of section 181.64 are satisfied. Regarding the documentation and insurance required to use automobile trailers, we suggest you contact the State of California and the Mexican Government. HOLDING: On the basis of the information submitted, it is our opinion that automobiles subjected to mechanical reparations, operations which repair the body, repainting, and reupholstery work in Mexico, will qualify for the full duty exemption under subheading 9802.00.50, HTSUS, when returned to the U.S., provided the documentary requirements of section 181.64 (T.D. 94-1) are satisfied. Sincerely, John Durant, Director Commercial Rulings Division