Internal Advice Request No. 31/94; Applicability of duty exemption under HTSUS subheading 9802.00.50 to gas turbine engine sub-assemblies; disassemble; machine; replace parts;

HQ 557969 October 14, 1994 CLA-2 CO:R:C:S 557969 MLR CATEGORY: Classification TARIFF NO.: 9802.00.50 District Director U.S. Customs Service San Diego, CA 92101 RE: Internal Advice Request No. 31/94; Applicability of duty exemption under HTSUS subheading 9802.00.50 to gas turbine engine sub-assemblies; disassemble; machine; replace parts; Dear Sir: This is in response to your memorandum of March 22, 1994, seeking internal advice at the request of Stein, Shostak, Shostak & O'Hara, P.C., and Mesa Gateway Greitzer Brokers, Inc. on behalf of Solar Turbines, Inc. ("Solar"), regarding the applicability of subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), to gas turbine engine sub-assemblies. FACTS: At issue are two Mexican operations: the plasma repair of a bearing housing, and a weld repair of a turbine nozzle assembly. The operations performed to the No. 2 Bearing Housing Support basically consist of match marking the essential parts (which are identified as the outer support and the inner support), disassembling the seals, cleaning by sand blasting, inspecting, machining to remove damaged material, plasma spraying, assembling replacement parts with the matched parts, finish machining to the original dimensions, and painting to original specifications. The operations performed to the 1st State Nozzle Assembly basically consist of disassembly, cleaning by sand blasting, inspecting, conducting a pre-welding heat treatment, removing cracks by grinding, welding cracks, grinding to reestablish the original contour, conducting a post-welding heat treatment, machine drilling new holes, and reassembly. The essential part of the 1st State Nozzle Assembly is identified as the nozzle case. The record also contains declarations from Turbotec in Mexico, stating that a bearing housing and turbine nozzle assembly were received from Solar and a plasma repair and weld repair were conducted. Two other declarations are submitted stating that the same goods exported from San Diego were entered. ISSUE: Whether the operations performed to the gas turbine engine sub-assemblies constitute repairs within the meaning of subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), thereby qualifying the returned sub-assemblies for the duty exemption under this tariff provision. 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). 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), which were published December 30, 1993 (58 Fed. Reg. 69483) (effective January 1, 1994) are met. Repairs are operations aimed at restoring articles to their original condition, but cannot be so extensive as to destroy the identity of the exported article or to create a new and different article. Press Wireless, Inc. v. United States, 6 Cust. Ct. 102, C.D. 438 (1941). In Press Wireless, radio tubes were sent abroad for repairs which involved the use of heavier filament than that used in the original manufacture of the tubes. Also, the markings on the articles were erased, and new numbers were substituted to facilitate matching the tubes for use in transmitters. The court held that the use of improved materials in the restoration was immaterial, as long as the article was not considered a new and different article of commerce or its identity was destroyed. In Headquarters Ruling Letter (HRL) 556452 dated April 4, 1992, Customs considered gas producers. The four "essential identity" parts, namely the air inlet housing, compressor stator case, combustor housing, and nozzle support case, were first serialized, then the units were disassembled, cleaned, grit blasted, machined, non-essential components were replaced, and the units were reassembled. It was held that since the "essential identity" of the exported gas producers was preserved, the repaired gas producers qualified for the partial duty exemption under subheading 9802.00.50, HTSUS. In HRL 554952 dated March 14, 1989, Customs held that used casting molds re-formed by an "explosive forming" process which consisted of removing the chrome surface, grinding away defects, fitting a mandrel into the used mold, wrapping a plastic explosive around the casting, immersing the unit into water, and detonating the explosive merely restored the exported casting molds to their original condition, and therefore, constituted a repair. In HRL 554731 dated February 2, 1989, Customs considered fuel injectors which were disassembled and cleaned, and certain parts were replaced. 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 555741 dated February 25, 1991, Customs held that certain consumer electronic products tested and subjected to repair operations, consisting of the replacement of malfunctioning component parts and/or the addition of missing parts were entitled to the partial duty exemption under subheading 9802.00.50, HTSUS. Similarly in case, we find that the operations performed in Mexico, consisting of disassembly, cleaning by sand blasting, machining, welding, grinding, painting, and reassembly, constitute "repairs", as the essential components of the sub-assemblies are retained. Furthermore, it appears that the documentary requirements of section 181.64 are met; therefore, the sub-assemblies qualify for the full duty exemption under subheading 9802.00.50, HTSUS. HOLDING: On the basis of the information submitted, it is our opinion that the Mexican operations enumerated above constitute "repairs" since the essential components of the sub-assemblies are retained. It also appears that the documentary requirements of section 181.64 are met. Therefore, the sub-assemblies qualify for the full duty exemption under subheading 9802.00.50, HTSUS. This decision should be mailed by your office to the internal advice requester no later than 60 days from the date of this letter. On that date, the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act and other public access channels. Sincerely, John Durant, Director Commercial Rulings Division