Applicability of partial/duty exemption under HTSUS subheading 9802.00.50 to electrical appliances; irons; toaster ovens; repair; recondition; refurbish; Mexico; China

HQ 559197 September 1, 1995 CLA-2 R:C:S 559197 MLR CATEGORY: Classification TARIFF NO.: 9802.00.50 Mr. Eddie Wong Winford International Trading Corp. 61 Elderberry Road Syosset, New York 11791 RE: Applicability of partial/duty exemption under HTSUS subheading 9802.00.50 to electrical appliances; irons; toaster ovens; repair; recondition; refurbish; Mexico; China Dear Mr. Wong: This is in response to your letter of May 8, 1995, requesting a ruling regarding the applicability of subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), to electrical appliances. FACTS: You state that a U.S. manufacturer of household electrical appliances such as irons, toaster ovens, etc. plans to ship defective or damaged appliances to Mexico or China where they will be repaired, reconditioned, or refurbished. You state that the parts needed for the repair will be salvaged from the same appliances. The packing material will be provided either by the U.S. shipper or by the party where the service will be performed. The repaired appliances will then be returned to the U.S. ISSUE: Whether appliances repaired, reconditioned, or refurbished in Mexico or China will be eligible for entry under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), when they are 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 abroad by repairs or alterations may qualify for a partial duty exemption, or a duty exemption if performed in Mexico, 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 entitled to the partial duty exemption are dutiable only upon the cost or value of the foreign repairs or alterations when returned to the U.S., provided the documentary requirements of section 10.8, Customs Regulations (19 CFR 10.8), are satisfied (copy enclosed). If the operations are performed in Mexico, articles are entitled to a duty exemption provided the documentary requirements of section 181.64 of the North American Free Trade Agreement (NAFTA), Interim Regulations (19 CFR 181.64) are satisfied (copy enclosed). 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) 555819 dated October 11, 1991, up to 17 parts were replaced in combination telephone answering machines. Customs 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. Furthermore, Customs stated that where the foreign repair operations entail the complete disassembly of the exported article and numerous component parts of the article are replaced, the concept of essential identity may come into play. This concept is employed to insure that the article imported is the same as the article exported, and operates by identifying certain component parts of an exported article as embracing the essential identity of the particular article exported. Component parts so identified are to be maintained together throughout the repair operation as a matched set. It was held in HRL 555819, that under the circumstances of that case, the foreign operations constituted "repairs" within the meaning of subheading 9802.00.50, HTSUS. Therefore, we find that defective or damaged appliances made with U.S. or foreign parts that are repaired, reconditioned, or refurbished abroad will be eligible for entry under subheading 9802.00.50, HTSUS. The parts may be salvaged from the appliances; however, if there is a complete disassembly of an appliance, those parts which impart the essential identity of the appliance may not be replaced in order to be eligible for subheading 9802.00.50, HTSUS, treatment. Furthermore, if the operations are performed in China, the returned appliances will be dutiable only upon the cost or value of the foreign repairs or alteration, provided the documentary requirements of 19 CFR 10.8 are satisfied. If the operations are performed in Mexico, the appliances may be returned duty-free, provided the documentary requirements of 19 CFR 181.64, interim Regulations are satisfied. In addition, the non-reusable packing material (whether of U.S.- or foreign-origin), used for articles entitled to subheading 9802.00.50, HTSUS, treatment, are not subject to duty. HOLDING: On the basis of the information submitted, repaired, reconditioned, or refurbished electrical appliances will be eligible for entry under subheading 9802.00.50, HTSUS, provided that, if complete disassembly is involved, those parts which impart the essential identity of the appliance are not replaced. If the operations are performed in China, the returned appliances will be dutiable only upon the cost or value of the foreign repairs or alteration, provided the documentary requirements of 19 CFR 10.8 are satisfied. If the operations are performed in Mexico, the appliances may be returned duty-free, provided the documentary requirements 19 CFR 181.64, interim Regulations are satisfied. A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction. Sincerely, John Durant, Director Commercial Rulings Division Enclosures