CLA-2 CO:R:C:V 555135 DBI

Mr. Alfred Roser
Roser Customs Service, Inc.
P.O. Box 48
Brownsville, Texas 78520

RE: Applicability of partial duty exemption of item 806.20, TSUS, to automobiles exported to Mexico to be disassembled, repaired and refurbished

Dear Mr. Roser:

This is in response to your letters of June 2 and August 20, 1988, on behalf of Mr. Mervin J. Yetley, concerning the applicability of item 806.20, Tariff Schedules of the United States (TSUS), to passenger automobiles exported to Mexico to be repaired and refurbished and then returned to the U.S.

FACTS:

You state that the process begins with an evaluation in the U.S. of the repairs to be made to each passenger automobile. After the necessary replacement parts are obtained for each automobile, the automobile and the parts will be exported from the U.S. to Mexico. All automobiles, parts, and supplies (oil, lubrication, welding rods, etc.) to be exported to Mexico will be of U.S. origin.

In Mexico, various major components will be removed as necessary and mechanical components will be disassembled to the extent required. After disassembly, the need for any additional required repairs will be noted, at which time arrangements will be made to purchase any additional parts from the U.S. and export them to Mexico.

Components, such as the engine and drivetrain as well as the steering and suspension, will be rebuilt and repaired in Mexico. Repairs will be made to other components, including the frame, shell, seats, etc., as needed. Disposable items, such as oil, brake shoes, tires and filters normally will be replaced. The frame, bumpers, and other body parts usually will be repaired by straightening and/or welding. In some cases replacement of these parts will be required. Items such as seats, headliners,

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carpets and dash items will be repaired when possible, but in most cases it is expected that these units will be replaced or will require some replacement parts. Defective windows, windshields, bulbs, lens covers and mirrors will be replaced. The automobile will be reassembled and painted and a protective undercoating may be added. Additional items, such as trim and decals, will be added as needed. The repaired/refurbished automobiles will then be returned to the U.S. for sale.

ISSUE:

Whether the described passenger automobiles, when returned to the U.S., will be eligible for the partial duty exemption in item 806.20, TSUS (9802.00.40, Harmonized Tariff Schedule of the United States (HTSUS)).

LAW AND ANALYSIS:

Item 806.20, TSUS, provides for the assessment of duty on the value of repairs or alterations performed on articles 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 (1957); Guardian Industries Corporation v. United States, 3 CIT 9, Slip Op. 82-4 (Jan. 5, 1982). Item 806.20, TSUS, treatment also is precluded where the exported articles are incomplete for their intended use and the foreign processing operation is a necessary step in the preparation or manufacture of finished articles. Dolliff and Company, Inc. v. United States, 66 CCPA 77, C.A.D. 1225, 599 F.2d 1015 (1979).

We have previously held that certain repairs performed abroad on U.S.-made automobiles are eligible for item 806.20, TSUS, treatment. For instance, we held in a ruling dated July 22, 1981 (HQ 542424), that U.S.-made automobiles exported to Japan for the purpose of converting the engine to incorporate emission systems were eligible for treatment under item 806.20, TSUS. The modifications made in Japan to the cylinder heads, intake and exhaust manifolds, carburetors and other parts were found not to create a new or commercially different automobile upon its return to the U.S.

In a ruling dated February 2, 1979 (HQ 058822), we held that U.S.-made automobiles exported to Mexico for installation of a replacement body were entitled to item 806.20, TSUS, treatment. We reasoned that the returned automobiles were the same completed articles of commerce dedicated to the same use with the described modifications. The foreign processing of the exported

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automobiles did not produce changes in the performance characteristics of the exported article that would alter its subsequent handling and uses over that which earlier prevailed.

In the present case, the described foreign repairs and refurbishments do not create a new or commercially different article. The automobiles that are returned are the same articles as those exported with the described modifications.

The cost or value of replacement parts, irrespective of origin, used in the repair or refurbishment of the returned automobiles are to be included in the value of the repairs performed abroad. Any part included in a returned automobile which was not a part of the automobile exported for repair is considered a replacement part.

HOLDING:

On the basis of the information submitted, it is our opinion that the foreign repairs and refurbishments may be considered a repair within the meaning of item 806.20, TSUS, and, therefore, the returned automobiles are entitled to tariff treatment under item 806.20, TSUS, upon compliance with section 10.8, Customs Regulations (19 CFR 10.8).

Sincerely,

John Durant
Director, Commercial
Rulings Division