CLA-2 RR:TC:SM 559672 MLR
Port Director
U.S. Customs Service
610 W. Ash St.
San Diego, CA 92188
RE: Internal Advice; applicability of duty exemption under
HTSUS subheading 9802.00.50 to Kodak Model D copier;
Mexico; 19 CFR 181.64(c)
Dear Sir/Madam:
This is in reference to a letter dated January 8, 1996,
from Ross & Associates, requesting a ruling on behalf of
Eastman Kodak Company ("Kodak"), concerning the
applicability of subheading 9802.00.50, Harmonized Tariff
Schedule of the United States (HTSUS), to photocopiers
imported from Mexico. A meeting was held at the Office of
Regulations & Rulings on April 22, 1996, and charts and
photographs were submitted at that time.
FACTS:
It is stated that Kodak exported used model F copier-duplicators to Mexico, performed various processes to these
copiers, and imported model D copier-duplicators to the U.S.
It is claimed that the processes performed in Mexico were
"repairs and alterations" and that the returned articles
qualified for duty-free entry under subheading 9802.00.50,
HTSUS. Before describing the processes performed to make a
model F into a model D, counsel states that the processes
performed were similar to those performed in converting a
model B to a model D, which in turn are similar to the
processes performed on a model B when it became a model C,
and which involve those operations performed to the model B
when it remained a model B.
The model B processes performed when there is no change
in model number involve disassembling the copiers, cleaning
them, and replacing worn parts. It is also stated that if
there was an engineering enhancement, newer model parts were
installed to replace old and outdated ones. The
disassembled subassemblies were routed through subassembly
work stations with unique identifiers so that the repaired
subassemblies could be installed into the same copier during
the reconditioning phase. According to counsel, the Mexican
plant did not perform optical alignments; therefore, the
reassembly process kept subassemblies together which had
been mated at the time of original manufacture. The copier
underwent a set-up and test process and the cabinetry was
reinstalled. It is alleged that the reconditioned model B
copier was returned to the U.S. without change to its
essential components (the image capture system (lenses and
film handling assembly)). Both of the copiers are stated to
be referred to as "indirect process electrophotostatic
copiers," and six Erasable Programmable Read-Only Memory
chips ("EPROMS") were erased and reprogrammed to accommodate
updated operating instructions.
Next, counsel presents the processes performed to
convert a model B to a model C. It is stated that none of
the operations sped up the photocopier or altered the type
or size of paper the copier is able to process. Speed and
paper size and type are stated by protestant to be the
criteria in the marketplace to determine whether or not a
copier has been upgraded. The only features which appeared
on the model C which did not appear on the model B were the
specific document feeder and the Pressure Assist Corona
Transfer (PACT). The document feeder incorporates a semi-automatic positioning feature. The PACT modification keeps
the paper flatter as it works its way through the imaging
process but allegedly does not change the copier's function.
When the document feeder was installed, it required a
modification to the static eliminator harness in the duplex
tray and the positioner interlock harness in the cabinetry
as the remaining internal space was diminished. As a
result, a new wire harness was inserted to make the static
eliminator smaller.
Counsel also states that new circuit boards were
substituted whether or not the processes resulted in a
change in model number. However, the model C required
different circuit boards. The existing EPROMS were
reprogrammed and the input/output boards were modified by
soldering an additional wire which allowed the machine to
operate either as a model B or a model C. The EPROMS
reprogramming supposedly arose to accommodate the new
document feeder.
Counsel states that the additional steps taken which
resulted in a model D from a model F were that the model B
toning station was replaced with a new toning station which
enhanced the image quality. The paper level indicators were
added to the paper supply drawers to help customers
determine the amount of paper in each supply drawer without
having to stop copier operations. An upgraded trimodal
document feeder was installed including an improved latch to
allow for smoother operation. There was also a new trade
dress.
In addition, counsel states that there were a few minor
steps added to the normal reconditioning process. Holes
were added to the mainframe to accommodate new harnesses.
There was also the installation of a reprogrammed set of six
EPROMS to allow the software to relate to all of the new
functions, plus an additional energy saving feature was
added to the software. The principle differences stated by
counsel between the model F to model D process (the subject
of this request), and the model B to model D process was
that the paper supply was modified to allow for automatic
duplexing which resulted in the addition, as well, of a
duplex tray and the inclusion of duplex paper path
assemblies; the copier speed was enhanced from 70 to 85
copies per minute by the replacement of three sprockets and
a chain; and a noise reduction was achieved through the
addition of a muffler in the vacuum system and a damper from
the paper stop gate.
In addition, counsel states that some additional steps
occurred during the model F to model D process. The
registration assembly was altered to accommodate the
addition of the PACT. Four new subassemblies were added to
the new model configuration: document positioner hopper,
paper supply cover, wireform and duplex tray. In the Logic
and Control Unit, the EPROMS were erased and reprogrammed
with the latest version of software, including an energy
saving feature that puts the copier in stand-by mode. A 5-Volt regulator was also added for the stepper control
circuitry. The developer station was replaced with a new
high definition grain station which allows for superior
image quality.
The Scuff bimodal document feeder was replaced with a new
trimodal document feeder that incorporated a semi-automatic
positioner. The copier main harness was replaced in order
to accommodate the model D features. Components, such as
the main drive motor sprocket, clutch and developer drive
sprocket assembly were replaced to speed up the copier's
performance. The vacuum system was also modified to
incorporate the ability to automatically duplex, accommodate
heavier paper sizes, and reduce noise levels through the
addition of a muffler.
The chart of the model F to model D process indicates
that in regard to the Imaging Assemblies, the film belt and
worn components were replaced, and a new LED erase bar was
installed in the photoreceptor belt and handling assembly; a
new toner and developer assembly was installed; worn
components were replaced in the charging assemblies; and an
upgraded cleaning housing was added and a new scavenger was
installed in the cleaning assembly.
On November 27 and December 6, 1996, counsel provided
additional explanations of certain operations in response to
our request. It is stated that the IQE station slider,
plenum assembly build, backup slider assembly, and assembly
drive roller were the worn components that were replaced in
the photoreceptor belt and handling assembly. The IQE
station slider basically allows the developer assembly to be
removed from the machine without disassembling the machine.
The new model of the plenum assembly build installed into
the model D uses hoses and ducts instead of magnets to
collect excess toner flakes and developer from the film
loop. The backup slider assembly moves the image loop
toward the developer roller when actuated. The assembly
drive roller starts the movement of the image loop around
the film core area, and it is stated that worn out rollers
are replaced and the same rollers are used regardless of the
resulting finished model.
In regard to the charging assemblies, the information
received on December 6 indicates that the worn components
replaced are those which naturally wear out during normal
copier operations, such as the corona wires (provides the
charge to the image loop), the primary (gives off the
charge), and the grill (takes the charge from the corona
wire and disburses it over the loop).
In regard to the toner and developer assembly, it is
indicated that the major parts are a toner container,
replenisher, developer, and magnet rollers, a gear box, sump
casting and drive shaft plus a toner concentration monitor
and miscellaneous gears, bearings and hardware. In some
instances, it is stated that a scavenger is present. It is
stated that the configuration and number changes depending
on the specific finished copier model involved and that the
function of the toner and developer assembly is to receive
toner from a bottle and pass it to the image loop for
transfer onto the paper on which the image results.
In regard to the cleaning housing, the information
received December 6 indicates that its function is to
eliminate contamination on the film path, and that its major
part is a casting. The model F casting was plastic, while
the model D casting is aluminum. In regard to the LED erase
bar, it is indicated that it erases residual information on
the image loop between copies.
In regard to the Optics Assemblies, the chart indicates
that the platen glass was replaced and a new platen frame
was installed in the platen glass and illumination housing;
and worn components were replaced in the lens/mirror
assembly. The information received on December 6 indicates
that the worn components replaced in the lens/mirror
assembly are mechanical ones, such as the timing belts and
pulleys which slide the lens assembly on its guides by means
of a high precision motor during the imaging process. It is
also stated that if a lens/mirror is scratched or broken,
the lens or mirror itself will be replaced.
In regard to the User Control Assemblies, the chart
indicates that worn components and a new display panel with
a new color scheme were replaced in the operator control
panel assembly. In regard to the Image Fixing Assemblies,
the fuser and pressure roller and worn components were
replaced in the fusing assembly.
In regard to the Paper Handling Assemblies, the chart
indicates that a new document feeder/positioner assembly was
made reusing some components, which incorporated an
automatic duplexing and semi-automatic positioning feature;
a new paper supply assembly was made reusing some components
and an improved feeding system and paper level indicators
were installed; worn components, PACT modification, and a
multifeed detection was added to the registration assembly;
a new duplex paper path assembly was added; worn components
and the vacuum and upper transports were replaced in the
transport assemblies; worn components were replaced in the
vacuum system, and heavy duty blowers were converted to
handle heavy weight paper, valves were replaced for
automatic duplexing, and a muffler was installed to reduce
noise. The information received December 6 indicates that
shafts, rollers, wire forms, solenoids, and sensors (in the
duplex tray) are replaced in the transport assemblies.
In regard to the logic and control unit, the chart
indicates that the EPROMS were reprogrammed; the control
unit was modified; and a stepper control was added to
accommodate automatic duplexing. Additionally, change
occurred to the color scheme, the top cover was modified,
and a tray assembly and side hopper were installed to
accommodate the positioner. Pulleys and sprockets were
replaced to speed up the unit from 70 to 85 copies per
minute.
As indicated above, the scavenger was replaced in the
cleaning assembly with one of a more efficient design. In a
letter dated December 21, 1994, counsel explains that the
scavenger system is designed to remove any residual toner or
carrier left on the image medium. Its purpose is to make
clearer copies. At the time the letter was written, it was
indicated that due to design flaws the new scavenger system
was not used.
Since counsel noted that the processes in making a
model D were similar to those in making a model C, your
office's concerns over the model B to model C processes are
noted. Your office states that the model B did not possess
the necessary mechanical hardware, circuitry, document
positioner, tri-modal feeder, auto-sizing capabilities, PACT
and programming required for the model C to exist. Your
office states that the model B was known as a copier-duplicator, while the model C was known as an offset copier-duplicator. The model C's tri-modal feeder takes normal
paper weights and sizes automatically through the
recirculating feeder, or it copies odd size and weight
originals through the semi-automatic positioner, or it
allows for manual copying. The auto-sizing capabilities
reduce the image size of the original to fit the selected
paper supply, and it is capable of offset stacking.
Thus, your office disagrees with counsel that the only
features on the model C that were not on the model B copier,
were the document feeder and PACT. Your office states that
the PACT is not a simple mechanical device which holds a
piece of paper in place to enhance the quality of the copy
produced during the imaging process, but rather its purpose
is to aid in preventing white spots on the second side of
duplex copies in low humidity environments. This
modification not only enhanced the second side transfer
characteristics by adding hardware, a solenoid, circuit
board, harness, and a mylar flap, but further contributed to
the creation of the model C with its tri-modal feeder and
new document positioner.
Your office states that the registration assembly
(mechanical) was altered to accommodate the addition of the
PACT, if the model B received from the U.S. did not already
have this modification installed. Registration assembly was
done by installing a new circuit board and wire harness in
the main frame. A paper supply cover and a document
positioner hopper were created to guide and capture
originals because the model C is a tri-modal feeder. The
EPROM reprogramming contained the latest software
enhancements made to the model B software plus contained the
additional feature of auto paper size reduction.
ISSUE:
Whether the conversion of a Kodak Model F copier to a
Kodak Model D copier constituted a repair or alteration
within the meaning of subheading 9802.00.50, Harmonized
Tariff Schedule of the United States (HTSUS), thereby
qualifying the returned Model D copier for the duty
exemption under this tariff provision.
LAW AND ANALYSIS:
Articles exported from and returned to the U.S., after
having been advanced in value or improved in condition by
repairs or alterations in Mexico, may qualify for a duty
exemption 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 are
entitled to this duty exemption provided the documentary
requirements of section 181.64(c), Customs Regulations (19
CFR 181.64), are satisfied. In particular, the
documentation required includes a declaration from the
person who performed the repairs or alterations, which
describes the operations performed and the value and cost of
such operations and which includes a statement that "no
substitution whatever has been made to replace any of the
goods originally received."
"Repairs or alterations" are defined in 19 CFR 181.64
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.
Since counsel has indicated that the processes involved
in the conversion of a model B to a model C are similar to
those when a model F is made into a model D, your office's
concerns over the model B to model C process are noted.
Your office contends that rulings allow for programming and
reprogramming of an article's PROMs and EPROMs under
9802.00.50, HTSUS, where the article's performance
characteristics upon foreign processing are upgraded and
enhanced, and do not alter the exported article's handling
and uses over that which earlier prevailed. It is your view
that these rulings are distinguishable from the copier at
issue since the foreign processing of the model B altered
its handling and uses over that which earlier prevailed, and
the replacement and reprogramming of the EPROMS created a
new and different article of commerce with attributes and
functions that are unique to the model C.
We note that under Additional Note 5, Chapter 90,
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. We note
that the major components of a typical high-volume
photocopier include the photoconductor, a primary charger,
and systems for exposure, toning, transfer, erasing, and
cleaning. McGraw Hill Encyclopedia of Science & Technology,
Vol. 13 (1987). We also note that cartridges and developer,
fuser rollers and oil, the photoconductor belt, and cleaning
brush are consumables which are replaced approximately every
300,000 copies (except for the cartridges which are replaced
about every 10,000 copies). Therefore, for purposes of our
determination of eligibility for subheading 9802.00.50,
HTSUS, treatment, we have focused upon the effect of the
operations performed abroad upon the above copier
assemblies.
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, the court found that radio tubes or valves
replaced with heavier filaments, allowing heavier amperage,
were "repaired" within the meaning of paragraph 1615, Tariff
Act of 1930 (a precursor provision of subheading 9802.00.50,
HTSUS). Additionally, the court found that the identical
tubes were returned in a "condition of restoration to their
original efficiency", and noted that an automobile repaired
with materials of a heavier and superior quality than the
worn-out parts would still be the same automobile, and that
a fur coat relined with a superior material would still be
the same coat. 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. However, in C.J.
Tower & Sons of Niagara, Inc. v. United States, C.D. 2208,
45 Cust. Ct. 111 (1960), cotton drills were exported and
subjected to multiple operations, including dyeing and
finishing. The cotton cloth returned to the U.S. was denied
the partial duty exemption as the court determined that the
merchandise exported was changed in color, width, length,
porosity, in the distribution of the threads in the weave,
in weight, tensile strength, and suppleness by the foreign
processing. In holding that the foreign processing
constituted more than an alteration, the court found that
the returned merchandise was a new and different article
having materially different characteristics and a more
limited and specialized use.
In previous rulings, we have held that subheading
9802.00.50, HTSUS, will be applicable to articles
disassembled for repairs, where repairs are made and parts
are replaced as long as the essential components and,
therefore, the identity of the article remains intact
throughout the repair process. See HRL 557991 dated October
17, 1991.
In HRL 558858/558859 dated March 11, 1996, Customs
considered seven models of used copier "hulks" which were
repaired, upgraded, and/or modified in Mexico. In each
case, the frame of the "hulk" remained intact, and the
components such as the wiring harnesses, optics assemblies,
printed circuit boards, and other electronic subassemblies
remained assembled to the hulk at all times. The operations
performed in Mexico involved removing the covers, feeder
assembly, fuser, developer houser, xerographic motor,
control panel, bypass, platen glass, coroton, copy cartridge
and bypass tray assembly. The covers were sanded and
painted, and the platen glass and other non-repairable parts
were scraped. Next, the fuser, developer housing and bypass
were sent to subassembly stations for repair. The partially
torn-down hulk was then sent to an assembly and repair area
where the enabler, low and high voltage power supplies,
power cord, main printed wiring board assemblies (pwba),
paper size pwba, feeder motor, copy cartridge, counter
solenoid, counter, balance spring, half rate cartridge, and
front/rear rail were removed, repaired, and reassembled
along with the previously removed parts.
During the period of 1992-1993, in HRL 558858/558859,
the frames, optics, wiring harnesses, optical control
boards, optical drive motor, noise filter, fans, blower,
discharge lamp, lower cover base, paper feeder motor, ac
driver and sensor pwbas, and the low and high voltage power
supplies were left intact on the hulk. During the period of
1993-1995, the paper feeder motor, ac driver and sensor
pwbas and the low and high voltage power supplies were
removed from the hulk frame during the repair and assembly
process. However, such parts were identified by bar code,
and new parts were either used if required, or the used
repaired parts were returned to the same model number. It
was found that the essential components of the copiers
remained intact throughout the repair process, and did not
lose their identity as a result of the Mexican operations.
In HRL 5558858/558859, the EPROMS contained in the
copier's control panel were replaced or reprogrammed so that
the copier could perform upgraded tasks, such as operating a
noise reduction package or an automatic stapler. In regard
to the replacement or reprogramming of the EPROMS, which
upgraded the copiers to conform to current industry
standards, in HRL 558858/558859, it was determined that this
did not change the identity of the exported articles, but
rather improved the product and advanced its value.
Accordingly, the copiers qualified for subheading
9802.00.50, HTSUS, treatment.
As noted above, the major components in this case
include the photoconductor, a primary charger, and systems
for exposure, toning, transfer, erasing, and cleaning.
There are numerous changes, not only to the Paper Handling
Assemblies, but a completely new toner and developer
assembly, new LED erase bar, and an upgraded cleaning
housing along with a scavenger were installed. It is our
opinion that these are substantial changes to the Imaging
Assemblies. Accordingly, we find, especially in conjunction
with the other changes made to each of the major systems of
the photocopier, that the identity of the exported
photocopier was destroyed and that a new and different
photocopier was created. While the use of the returned
photocopier is the same, i.e., to make copies, it possesses
a different name (model D) and characteristics (especially
noteworthy, better copy quality as counsel indicates), which
targets the model D towards a different market.
Additionally, the copier D is able to produce two-sided
copies. The fact that the returned photocopier may be
classified in the same HTSUS provision is not determinative
of whether the essential identity remains the same. See
Dolliff & Company, Inc. v. United States, 599 F.2d 1015, 66
C.C.P.A. 77, 83 (1979). Accordingly, it is our opinion that
since the essential identity of the exported model F copiers
has not been maintained in the returned model D copiers,
they are not eligible for duty-free treatment under
subheading 9802.00.50, HTSUS. We also note that the record
does not contain any of the documents required by 19 CFR
181.64(c).
In this case it was also indicated that numerous "worn
components" were replaced. As we have already determined
that the model D copiers are not eligible for subheading
9802.00.50, HTSUS, treatment, we do not need to address
whether the replacement of these worn components changes the
identity of the returned copiers. It is also our opinion,
however, that the replacement of numerous components in each
major assembly of the model copier in this case has the
cumulative effect of changing the identity of the returned
copier to such an extent that they would not be eligible for
subheading 9802.00.50, HTSUS, treatment even if these
operations were the only ones performed abroad.
HOLDING:
On the basis of the information submitted, it is our
opinion that the Mexican operations enumerated above do not
constitute "repairs or alterations" since the essential
identity of the copiers was not retained. Therefore, the
model D copiers are not eligible for the full duty exemption
under subheading 9802.00.50, HTSUS.
This decision should be mailed by your office to the
internal advice requester no later than 60 days from the
date of this letter. On that date the Office of Regulations
and
Rulings will take steps to make the decision available to
Customs personnel via the Customs Rulings Module in ACS and
the public via the Diskette Subscription Service, Freedom of
Information Act and other public access channels.
Sincerely,
John Durant, Director
Tariff Classification Appeals
Division