Source: https://www.customsmobile.com/rulings/docview?doc_id=559970
Timestamp: 2019-09-16 21:10:30
Document Index: 614960887

Matched Legal Cases: ['art 102', 'art 102', 'art 134', 'art 134', 'art 102', 'art 134', 'art 102']

Customs Ruling HQ 559970 - NAFTA; Article 307; Subheading 9802.00.50, HTSUS; Repair/Alteration;19 CFR 181.64; HRL 554539; Guardian Industries, Inc. v. U.S., 3C.I.T. 9 (1982); Dolliff & Company, Inc. v. U.S., 455 F. Supp.618 (C.I.T. 1978), aff'd, 599 F.2d 1015 (Fed. Cir. 1979); PressWireless, Inc. v. U.S., C.D. 4386, 6 Cust. Ct. 102 (1941); HRL555443; HRL 554568; HRL 555741; HRL 559197; 19 U.S.C. 1304;19 CFR Part 102
HQ 559970
Related: 554539; 555443; 554568; 555741; 559197
CLA-2 RR:TC:SM 559970 DEC
TARIFF NO: 9802.00.50
Mr. John Landay
RE: NAFTA; Article 307; Subheading 9802.00.50, HTSUS; Repair/Alteration; 19 CFR 181.64; HRL 554539; Guardian Industries, Inc. v. U.S., 3 C.I.T. 9 (1982); Dolliff & Company, Inc. v. U.S., 455 F. Supp. 618 (C.I.T. 1978), aff'd, 599 F.2d 1015 (Fed. Cir. 1979); Press Wireless, Inc. v. U.S., C.D. 4386, 6 Cust. Ct. 102 (1941); HRL 555443; HRL 554568; HRL 555741; HRL 559197; 19 U.S.C. 1304; 19 CFR Part 102
Dear Mr. Landay:
This is in response to your letter dated July 11, 1996, in which you seek a determination of the eligibility of certain power steering pumps which are remanufactured in Mexico for duty free treatment pursuant to Article 307 of the North American Free Trade Agreement (NAFTA).
Plews/Edelmann Division of Stant Corporation (Plews/Edelmann) intends to import power steering pumps to be used in the repair of automobiles. You state that Plews/Edelmann purchases defective power steering pumps in the U.S. and then sends those pumps to their wholly owned subsidiary in Mexico for processing into remanufactured power steering pumps. The operations will include the use of exported, defective power steering pumps and certain new parts of U.S. origin. The defective power steering pumps are obtained from customers or used parts brokers. The defective power steering pumps are collected in Plews/Edelmann's Chula Vista, California warehouse where they are sorted by brand name and type. The power steering pumps with obvious irreparable defects are discarded. The other power steering pumps are shipped to the Plews/Edelmann subsidiary in Mexico. In addition, new parts consisting of O-rings, gaskets, and seals are also shipped to the Mexican plant.
In Mexico, the defective power steering pumps are inspected, sorted, and then stored until needed. The defective power steering pumps are then taken from stock, disassembled, cleaned, and inspected. During the remanufacturing process, the components of each individual defective power steering pump will be kept together and reassembled in the same unit except for the worn or defective parts which are replaced. Replacement parts will include new and used parts. You note that all O-rings, gaskets, and seals are replaced with new parts. You state that the repaired units are identical to the units exported from the U.S. except for the cleaning and possible reconditioning or replacement of the defective or worn parts that will occur in the repair process. You state that reconditioning processes may include the machining of shafts to insure that they are within tolerances and the removal of dents in reservoirs.
After reassembly, the units will be tested to see if the remanufactured unit meets the applicable standards. Acceptable units will be painted and labeled "Remanufactured in Mexico." Each unit is then packed and shipped to the Plews/Edelmann Chula Vista facility for distribution.
You received Headquarters Ruling Letter (HRL) 554539, dated August 25, 1987. That ruling involved the complete disassembly of defective power steering pumps into constituent parts and the subsequent reassembly of power pumps -- two to three defective units were needed to produce one remanufactured unit. Customs determined that, under these facts, the remanufacture did not qualify as a repair or alteration because the identity of the individual units was not maintained throughout the remanufacturing operation.
Whether the power steering pumps as described above that are subjected to remanufacturing operations in Mexico are entitled to duty-free treatment under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), when returned to the United States.
Articles returned to the United States after having been exported to Mexico to be advanced in value or improved in condition by repairs or alterations may qualify for duty-free treatment under subheading 9802.00.50, HTSUS, provided that the foreign operation does not destroy the identity of the exported articles or create new or different articles. Entitlement to this tariff treatment is also precluded where the exported articles are incomplete for their intended use prior to the foreign processing, Guardian Industries, Inc. v. U.S., 3 C.I.T. 9 (1982), or where the foreign operation constitutes an intermediate processing operation, which is performed as a matter of course in the preparation or the manufacture of the finished articles. Dolliff & Company, Inc. v. U.S., 455 F. Supp. 618 (C.I.T. 1978), aff'd, 599 F.2d 1015 (Fed. Cir. 1979).
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 or different article. Press Wireless, Inc. v. U.S., C.D. 438, 6 Cust. Ct. 102 (1941). 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. Where the foreign repair operation entails 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 under this tariff provision 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. Thus, replacing any one of these essential components would violate the uniqueness of the matched set and result in a new article of commerce, thereby precluding eligibility for the partial duty exemption under subheading 9802.00.50, HTSUS. See Headquarters Ruling Letter (HRL) 555443, dated November 30, 1990, and rulings cited therein. In HRL 554568, dated August 25, 1987, Customs stated that:
In view of the many court cases and established precedents holding that the returned article must be merely a changed version of the exported product but in a repaired or altered condition and the change must not destroy the identity, it would be difficult to regard the total breakdown of the exported starters and alternators into their multiple parts, with random indiscriminate reassembly into new, remanufactured units, as a mere repair of the exported articles. The result is not a repaired version of exported units but a collection of new, remanufactured units that are sold in the automotive after-market.
The information provided to us in this case, however, indicates that the exported defective power steering pumps are completely disassembled in Mexico and reassembled with parts that are kept together in the same unit with salvageable components which are reconditioned and other parts that are replaced (O-rings, gaskets, and seals).
We agree that the cases you have cited to in your submission are applicable to the operations at issue in this case. See HRL 555741, dated February 25, 1991, where Customs held that certain consumer electronic products completely disassembled, 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, if the essential identity of the article exported was retained, and HRL 559197, dated September 1, 1995, where Customs determined that electronic appliances disassembled and reassembled with salvageable parts were eligible for entry under subheading 9802.00.50, HTSUS. Accordingly, the articles at issue are eligible for duty-free treatment under subheading 9802.00.50, HTSUS, provided the documentary requirements in section 181.64, Customs Regulations (19 CFR 181.64), are satisfied.
You indicated that you intend to mark the power steering pumps to be imported into the U.S. as "Remanufactured in Mexico." Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), requires that, unless excepted, every article of foreign origin (or its container) imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or its container) will permit in such manner as to indicate to the ultimate purchaser the English name of the country of origin of the article. The regulations implementing the requirements and exceptions to 19 U.S.C. 1304 are set forth in Part 134, Customs Regulations (19 CFR Part 134).
The country of origin marking requirements for goods of a NAFTA country are determined in accordance with Annex 311 of the North American Free Trade Agreement, as implemented under the North American Free Trade Agreement Implementation Act ("NAFTA") (Pub. L. 103-182, 107 Stat. 437 (December 8, 1993)). The rules used for determining whether a good is a good of a NAFTA country ("NAFTA Marking Rules") are contained in regulations set forth in 19 CFR Part 102. The marking requirements for these goods are set forth in various provisions of Part 134, Customs Regulations.
Consistent with the foregoing, the country of origin of the remanufactured power steering pumps that will be sent from the U.S. to Mexico for processing and returned will be determined pursuant to the NAFTA Marking Rules. If pursuant to the NAFTA Marking Rules, the pumps are determined to be goods of the U.S., they will not be subject to the country of origin marking requirements, and Customs will have no objection to marking the returned pumps, "Remanufactured in Mexico." On the other hand, if the returned pumps are determined under the NAFTA Marking Rules to be of Mexican origin or a product of another foreign country, they must be marked clearly to indicate that country of origin.
The power steering pumps that are exported for disassembly, reconditioned, and subjected to various replacement and repair operations in Mexico as described above will not become new and different articles and are entitled to duty-free treatment under subheading 9802.00.50, HTSUS, and 19 CFR 181.64 when returned to the United States.
NAFTA; Article 307; Subheading 9802.00.50, HTSUS; Repair/Alteration;19 CFR 181.64; HRL 554539; Guardian Industries, Inc. v. U.S., 3C.I.T. 9 (1982); Dolliff & Company, Inc. v. U.S., 455 F. Supp.618 (C.I.T. 1978), aff'd, 599 F.2d 1015 (Fed. Cir. 1979); PressWireless, Inc. v. U.S., C.D. 4386, 6 Cust. Ct. 102 (1941); HRL555443; HRL 554568; HRL 555741; HRL 559197; 19 U.S.C. 1304;19 CFR Part 102