CLA-2 RR:TC:SM 559405 BLS
Susan Kohn Ross, Esq.
Ross & Associates
5777 West Century Blvd.
Los Angeles, CA 90045-1017
RE: Applicability of subheading 9802.00.50, HTSUS, to
photocopying machines
HRL 556992; HRL 557530; EPROMS; Article 509
Dear Ms. Ross:
This is in reference to your letter dated October 5, 1995,
and subsequent correspondence, on behalf of Eastman Kodak Company
("Kodak"), requesting a ruling that certain copiers shipped to
Mexico will be eligible for the duty exemption under subheading
9802.00.50, Harmonized Tariff Schedule of the United States
(HTSUS), upon return to the U.S. Additional information was
presented at a meeting with Customs personnel on April 22, 1996,
and by a fax dated June 27, 1996.
FACTS:
Kodak intends to send to Mexico certain copiers ("Model A")
which are no longer operational for repairs and modifications.
When the operations are completed, the copiers will be returned
to the U.S. ("Model B").
The process begins with evaluating the incoming copier and
its subassemblies.
The unit is then partially disassembled, and the mainframe,
parts, and subassemblies proceed to work stations where they are
cleaned, worn parts are
replaced or repaired, lubrication is applied, and any necessary
testing is completed. The unit is modified to increase the rate
at which it makes copies from 72 to 85 copies per minute, and a
panel which displays updated operating messages is installed in
place of the display panel found on the exported article. These
changes
are effected by replacing three sprockets and a chain on the
mainframe, a pulley and a belt on the feeder, and the control
panel assembly (to which a jumper cable is added to facilitate
installation). Six Erasable Programmable Read-Only Memory
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chips ("EPROMS") are erased and reprogrammed to accommodate the
faster
copying and the updated operating instructions. All copiers
have their cabinetry repainted in Mexico, but parts will
generally be repaired or replaced only as needed. In this
regard, you state that in the interest of customer satisfaction
and decreased cost, certain parts which may otherwise be replaced
during field servicing of the machines, such as belts, bearings,
developer loops and image loops, which have limited lives, are
also replaced at this time. Upon completion of the repair and
modification operations at the various workstations, the parts,
subassemblies, and mainframe are moved to a functional checkout
work station where the operator reassembles the copier and
performs a complete functional test. Next, the copier goes to a
quality audit work station to receive a quality performance test.
Lastly, the copier is packed and returned to the U.S. for
distribution.
You state that the partially disassembled copier has unique
identifiers so that the parts can be reassembled with matched
subassemblies after the reconditioning processes are completed.
Therefore, the reassembly process keeps together subassemblies
which have been "mated" at the time of original manufacture, and
no commingling with parts of other copiers takes place.
You also advise that the operations that take place in Mexico
do not include any sophisticated calibrations, and that major
components are not replaced. For example, those components that
will not be changed include the Lens Assembly (Optics), Fuser
Frame (Image Fixing), Film Core Structure (Imaging) and Document
Feeder Frame (Paper Handling). Parts that may be replaced
include the Platen Glass (Optics); Fuser Roller (Image Fixing);
Film Loop (Imaging); and Vacuum Selector Valve (Paper Handling).
ISSUE:
Whether the operations performed in Mexico, which include
the reprogramming of the copier's control panel so that the
copier can increase the rate at which the copier can make copies,
constitute "repairs and alterations" under subheading 9802.00.50,
Harmonized Tariff Schedule of the United States (HTSUS).
LAW AND ANALYSIS:
Subheading 9802.00.50, HTSUS, provides a complete or partial
duty exemption for articles returned to the U.S. after having
been exported to be advanced in value or improved in condition by
means of repairs or alterations. Articles returned to the U.S.
after having been repaired or altered in Mexico, whether or not
pursuant
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to a warranty, and goods returned after having been repaired or
altered in Canada pursuant to a warranty, are eligible for duty-free treatment, provided the requirements of section 181.64,
Customs Regulations (19 CFR 181.64), are satisfied. However,
entitlement to this 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 (1956);
Guardian Industries Corp. v. United States, 3 CIT 9 (1982).
Tariff treatment under subheading 9802.00.50, HTSUS, is also
precluded where the exported articles are incomplete for their
intended use prior to the foreign processing. Guardian; Dolliff
& Company, Inc. v. United
States, 81 Cust. Ct. 1, C.D. 4755, 455 F. Supp. 618 (1978),
aff'd, 66 CCPA 77, C.A.D. 1225, 82, 599 F.2d 1015, 1019 (1979).
Repairs
In Press Wireless v. United States, 6 Cust. Ct. 102, C.D.
438 (1941), the Customs Court held that repairs are operations
necessary to restore articles to their original condition, but
cannot be so extensive as to destroy the identity of the exported
article or create a new or different article. (See also 19 CFR
181.64, which defines "repairs or alterations" as the
restoration, addition, renovation, redyeing, cleaning,
resterilizing, or other treatment which does not destroy the
essential characteristics of, or create a new or commercially
different good from, the good exported from the U.S.)
In previous rulings, we have held that subheading
9802.00.50, HTSUS, will be applicable to articles subject to both
partial and complete disassembly, where repairs are made and
parts are replaced as long as the essential components and
therefore the identity of the article remain intact throughout
the repair process. See, e.g., Headquarters Ruling Letter (HRL)
557991 dated October 17, 1991.
We note that under Additional Note 5, Chapter 90, Harmonized
Tariff Schedule of the United States (HTSUS), copier assemblies
are grouped as follows: (a) Imaging assemblies; (b) Optics
assemblies; (c) User control assemblies; (d) Image fixing
assemblies; (e) Paper handling assemblies, and (f) Combination of
the above
specified assemblies. In our opinion, the order of the listed
assemblies, ((a) through (e)), reflected in U.S. Note 5, is
indicative of their significance to the copier.
In the instant case, major components of the Imaging,
Optics, Image Fixing, and
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Paper Handling systems such as the fuser frame, film core
structure, and document feeder frame, are not replaced during the
repair process. As a result, we find that the copiers will
retain their identity upon return from Mexico, and that the
operations performed in Mexico constitute "repairs" within the
meaning of subheading 9802.00.50, HTSUS.
Alterations
In HRL 557530 dated December 15, 1993, copiers were sent to
Mexico for reconditioning. The processing in Mexico included
repairs and a change of the copier's paper speed from 70 to 85
copies per minute so that more copies could be made. This
modification involved a change of four gears, three chains, and a
CPU board. Three front center panels for the paper supplies
were also painted, and a new nameplate was placed on the front
cabinetry panel to reflect the new model number. In that case,
we found that the modifications did not create a new or different
article, but merely allowed the copiers to work more efficiently.
Therefore, we held that the returned copiers were entitled to the
benefits of subheading 9802.00.50, HTSUS. (See also HRL 556992
dated May 7, 1993, where a notebook computer was upgraded abroad
by replacing its monochrome video display with an active-matrix
color video display. In that case, we found that the upgrade did
not change the commercial identity of the computer, and that,
accordingly, the modification constituted an alteration within
the meaning of subheading 9802.00.50, HTSUS.)
The operations to be performed in the instant case are
analogous to the facts in HRL 557530. Thus, the unit is
modified to increase the rate at which it makes copies from 72 to
85 copies per minute, and a panel which displays updated
operating messages is installed in place of the display panel
found on the exported article. These changes are effected by
replacing three sprockets and a chain on the mainframe, a pulley
and a belt on the feeder, and the control panel assembly (to
which a jumper cable is added to facilitate installation). Six
Erasable Programmable Read-Only Memory chips ("EPROMS") are
erased and reprogrammed to accommodate the faster copying and the
updated operating instructions, and the copiers have their
cabinetry repainted. As in HRL 557530 and HRL 556992, we find
that the commercial identity of the copiers do not change as a
result of the upgrade, and that a new article is not created.
The exported copier is returned, albeit with improved features to
increase marketability.
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HOLDING:
Based on the information provided, the operations performed
in Mexico on the used copiers constitute repairs or alterations
within the meaning of subheading 9802.00.50, HTSUS. Therefore,
the copiers will be entitled to duty-free treatment under this
provision, upon compliance with the documentation requirements of
19 CFR 181.64.
A copy of this ruling letter should be attached to the entry
documents filed at the time this merchandise is 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
Tariff
Classification Appeals Division