CLA-2 CO:R:C:S 555754 GRV

Mr. Richard G. Seley
Rudolph Miles & Sons, Inc.
Customhouse Brokers
4950 Gateway East
P.O. Box 144
El Paso, Texas 79942

RE: Applicability of duty exemption under HTSUS subheading 9801.00.10 to reconditioned plastic spools from Mexico. Product of the U.S.; Upjohn Co; Border Brokerage Company; John V. Carr and Son, Inc.; returned to condition as exported; repairs; 067592; 071178; 054097; 554899; waiver of documents; Mi-Scott International Ltd; importer of record; T.D. 90-42; ownership interest

Dear Mr. Seley:

This is in response to your letter of September 20, 1990, on behalf of A @ M Enterprises, Inc., requesting, inter alia, a ruling on the applicability of subheading 9801.00.10, Harmonized Tariff Schedule of the United States (HTSUS), to plastic spools, used in the transport of bulk wire, that are reconditioned in Mexico and imported into the U.S.

FACTS:

You state that U.S. wire manufacturers bulk-package their merchandise by winding it onto reusable plastic spools of U.S.- origin. These spools are normally of two types; most (80%) are one piece, while the remainder consist of three pieces held together by bolts. When the wire is sold, the wire manufacturers retain title to the spools, and, in fact, the spools are marked "Property of _(manufacturer)_." Some of the wire sales are to customers that send the wire to facilities in Mexico.

Your client has contracted with some of these wire manufac- turers to collect these spools and recondition those that are reparable. (You indicate that approximately 20-25 % of the spools cannot be reconditioned, and that bad spools are nevertheless returned and sold for scrap to plastic molders). To this end, your client intends to place collection trailers at each of the Mexican plants, and, when the trailers are full of empty spools, to move them to a contractor's facility in Mexico where the spools will be repaired. The reconditioning operations entail: (1) hand-sanding away shallow cracks and chips, (2) removal of all labels with a putty knife, (3) washing of spools with soap and water, (4) tightening of bolts holding three-piece spools together, and (5) stamping of refurbishing date on the spool. The reconditioned (and irreparable) spools are then returned to the U.S.

You claim that the reconditioning operations merely put the reparable spools back in the condition they were in when shipped from the U.S. and do not constitute an advancement in value or improvement in condition. Thus, you maintain that the spools should qualify for duty-free entry as American goods returned. Should we disagree with your assessment of the foreign reconditioning operations, in the alternative, you request that we consider the applicability of HTSUS subheading 9802.00.50 to the returned merchandise and/or advise you of the proper classification of the two types of spools.

Two other aspects of this transaction are called to our attention for consideration: documentary waiver and capacity as the importer of record. Concerning documentary waiver, as the spools will be exported by many companies as "wire," without being registered on a Customs Form 3311, you indicate that there is no practical way to trace the returned merchandise as "spools." Accordingly, to render this transaction viable, you ask that we grant a waiver of the Form 3311 requirements under section 10.1, Customs Regulations (19 CFR 10.1). Concerning capacity as the importer of record, you state that your client will never be the owner or purchaser of the spools and inquire as to whether it will be allowed to make entry as the importer of record. In this regard, you reference T.D. 90-42, 24 Cust.Bull. 107 (1990), which you believe raises a question concerning your client's right to be the importer of record.

ISSUE:

Whether the U.S.-origin spools exported to Mexico are advanced in value or improved in condition by the reconditioning operations, so as to preclude their classification under HTSUS subheading 9801.00.10 when returned to the U.S.

LAW AND ANALYSIS:

HTSUS subheading 9801.00.10 provides for the duty-free entry of U.S. products that are exported and returned without having been advanced in value or improved in condition by any means while abroad, provided the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1), are met. While some change in the condition of the product while it is abroad is permissible, operations which either advance the value or improve the condition of the exported product render it ineligible for duty-free entry upon return to the U.S. See, Upjohn Co. v. United States, 9 CIT 600, 623 F.Supp. 1281 (1985).

In Border Brokerage Company, Inc. v. United States, C.D. 4052, 65 Cust.Ct. 50, 314 F.Supp. 788, 792 (1970), appeal dismissed, 58 CCPA 165 (1970), the court stated that:

the test to be applied in item 800.00 cases [the precursor tariff provision to HTSUS subheading 9801.00.10] is whether the merchandise of American origin has itself ... been the object of advancement in value or improvement in condition while abroad.

In John V. Carr & Son, Inc. v. United States, C.D. 4377, 69 Cust.Ct. 78, 347 F.Supp. 1390 (1972), aff'd, C.A.D. 1118, 61 CCPA 52, 496 F.2d 1225 (1974), the court added that:

absent some alteration or change in the articles themselves, [operations which do not effect an advancement in value or improvement in condition of the article exported], are not sufficient to preclude the merchandise from being classified as returned American products under item 800.00 of the tariff schedules.

In the present case, the spools exported to Mexico are in good condition, wound with wire. Once abroad, the wire is mechanically unwound from the spools and, as a result, some of the spools become damaged, requiring minor repairs to put them in the same condition they were in when exported. Thus, these operations do not serve to either advance in value or improve in condition the spools exported, but merely serve to restore the damaged spools back to the condition they were in before the foreign despooling operation. We have previously held under similar circumstances that the repaired articles are entitled to the tariff benefits of HTSUS subheading 9801.00.10. See, Headquarters Ruling Letters (HRLs) 054097 dated January 15, 1978 (repairs to automobiles); 067592 dated December 16, 1981 (repairs to military vehicles merely maintained them in their original serviceable condition); 071178 dated February 28, 1983 (cone crushers restored to their working condition while abroad); and 543150 dated February 14, 1984 (spooling wire onto smaller spools). Accordingly, provided the U.S. identity of the spools is maintained and the documentary requirements are satisfied, the spools returned to the U.S., whether repaired or not, will be entitled to duty-free treatment under HTSUS subheading 9801.00.10.

As the spools are found to be entitled to the tariff benefits of HTSUS subheading 9801.00.10, your inquiries regarding the spools eligibility under HTSUS subheading 9802.00.50 and their proper tariff classifications need not be addressed.

Concerning waiver of the documentary requirements of 19 CFR 10.1, it is well settled that compliance with mandatory regulations is a condition precedent to a claim for the duty-free entry of merchandise. See General Note 8, HTSUS, and Mi-Scott International Ltd., v. United States, 13 CIT 1046, Slip Op. 89-172 (1989). However, the district director at the port of entry may waive production of this documentation if he is reasonably satisfied that the circumstances and conditions of 19 CFR 10.1(d) are present and met. Thus, the decision to grant such a waiver rests solely with the district director.

With respect to the right to make entry, the relevant statute (19 U.S.C. 1484) limits that right to an owner, purchaser, or a properly appointed customhouse broker acting for a party-in- interest. The Customs Service, in implementing the statute, included within the traditional legal concept of ownership, persons who import goods for repair, alteration, or further fabrication. In your letter, you state that your client repairs the spools. Based on that statement, your client would appear to be an owner for the purpose of making entry.

HOLDING:

On the basis of the information presented, it is our opinion that the spools of U.S.-origin are not advanced in value or improved in condition as a result of being reconditioned abroad, as the damage to them occurs abroad and the reconditioning merely restores them to their exported condition prior to the foreign despooling operation. Accordingly, both the irreparable and the repaired spools are entitled to duty-free treatment under HTSUS subheading 9801.00.10 when returned to the U.S., provided the documentary requirements of 19 CFR 10.1 are satisfied, or the district director is reasonably satisfied that the circumstances and conditions of 19 CFR 10.1(d) have been met and he expressly waives the documentary requirements.

As your client, A @ M Enterprises, Inc., repairs the exported spools, he would appear to qualify as an owner for the purpose of making entry.

Sincerely,

John Durant, Director