OT:RR:CTF:VS H011186 GOB
U.S. Customs and Border Protection
Director, Field Office
2323 S. Shepherd Drive
Suite 1200
Houston, TX 77019
RE: Request for Internal Advice; Subheading 9802.00.50, HTSUS;
Country of origin; Gas Turbine Engines; Bearings; Airplane
Dear Director:
This is in response to your request for internal advice of May 11, 2007 to this office. The request was transferred to the Valuation and Special Programs Branch on August 11, 2008. The internal advice requester is Rolls-Royce North America (RRNA).
FACTS:
RRNA describes the facts as follows. It manufactures large turbofan gas turbine engines used on commercial airplanes at one of its manufacturing and engine assembly sites in England. The gas turbine is imported into the U.S. and assembled into an airplane. At some point in time, the engines are removed from the aircraft and sent to an overhaul facility in Texas, where they are disassembled and certain bearings are exported to Europe for repair and overhaul. The bearings were manufactured in Germany. The exported bearings are subsequently reimported into the U.S., assembled with the items overhauled in the U.S., and reassembled back into the engine. One bearing that is disassembled from the engine, exported for overhaul, and returned to the U.S. for reassembly to the engine is part FB222023, an angular contact ball bearing.
RRNA states that the ball bearings consist of four main elements: rollers or balls; a cage; an inner race; and an outer race. During the repair and overhaul process in Europe, the ball bearings are received, inspected for wear and the ability to be repaired based on aviation authority guidelines. During this process, the balls or rolling elements are always replaced because all rolling elements are matched sets.
RRNA states that if the bearing is capable of being repaired, it is disassembled and one of the following scenarios occurs: 1. It is inspected and new rolling elements are fitted; 2. It is inspected, new rolling elements are fitted, the inner/outer race is reworked, and the cage is replated; 3. It is inspected, new rolling elements are fitted, the inner race is reworked, a new outer race is installed, and the cage is replated; 4. It is inspected, new rolling elements are fitted, the inner/outer race is reworked, and a new cage is installed; and 5. It is inspected, new rolling elements are fitted, the outer race is reworked, a new inner race is installed, and the cage is replated.
ISSUES:
1. Are the subject ball bearings (FB222023) eligible for treatment under subheading 9802.00.50, HTSUS upon their reimportation into the U.S.?
2. Aside from subheading 9802.00.50, HTSUS, what is the classification of the subject ball bearings (FB222023)?
3. What is the country of origin of the subject ball bearings (FB222023) when returned to the U.S. to be reassembled to the engine?
LAW AND ANALYSIS:
Subheading 9802.00.50, Harmonized Tariff Schedule of the United States (“HTSUS”), provides a partial duty exemption for articles returned to the United States after having been exported to be advanced in value or improved in condition by means of a repair or alteration. For countries other than Mexico and Canada, duty is assessed only on the cost or value of the repair or alteration abroad, provided that the documentary requirements of section 10.8, Customs and Border Protection (“CBP”) Regulations (19 CFR § 10.8) are met.
The application of subheading 9802.00.50, HTSUS, 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), aff’g C.D. 1752, 36 Cust. Ct. 46 (1956), and Guardian Industries Corp. v. United States, 3 CIT 9 (1982). The partial duty exemption provided by subheading 9802.00.50, HTSUS, is also precluded where the exported articles are incomplete for their intended use and the foreign operation constitutes an intermediate processing operation, which is performed as a matter of course in the preparation or the manufacture of finished articles. See Dolliff & Co. v. United States, 66 CCPA 77, C.A.D. 1225, 599 F.2d 1015, 1019 (1979), aff’g 81 Cust. Ct. 1, C.D. 4755, 455 F.Supp. 618 (1978).
We find that the operations to be performed on the bearings in Europe constitute repairs within the meaning of subheading 9802.00.50, HTSUS. Based upon the facts presented, we determine that the ball bearings which are sent to Europe for repair are eligible for treatment under subheading 9802.00.50, HTSUS, upon their reimportation into the U.S., provided that all regulatory requirements are satisfied.
The subject ball bearings (FB222023) are classified in subheading 8482.10.50, HTSUS, as: “Ball or roller bearings … Ball bearings: Other.” This is consistent with NY R04120, dated June 26, 2006, which was issued to RRNA with respect to a split-ring angular contact ball bearing.
Concerning the country of origin issue which RRNA presents, NY R04297, dated July 26, 2006, involved facts which appear to be extremely similar, or identical, to the facts herein. Engines, originally manufactured by RRNA in England and with the country of origin of England, were sent to a firm in Texas for overhauling. The Texas firm disassembled the engines, exported certain parts for repair, and reassembled the engines after reimportation. CBP determined that the repaired engine parts did not undergo a change in character or use as a result of the disassembly and repair, but retained their identity as parts of the engine from which they were removed. Therefore, CBP held that, since the parts did not undergo a substantial transformation as a result of the assembly and repair, the country of origin of the parts remained the country where the engine was manufactured, England. CBP held similarly in HQ 559703, dated August 31, 1996, which was cited in HQ 966117, dated April 17, 2003 and HQ 563353, dated December 1, 2005.
We find that NY R04297 and HQ 559703 are on point here such that the country of origin of the subject ball bearings (FB222023) after they are repaired remains the country where they last underwent a substantial transformation. Details regarding the assembly of the gas turbine engine (containing the bearings) into an airplane were not presented. Accordingly, the country of origin is either the country of origin of the airplane or the country of origin of the engine.
HOLDINGS:
1. The ball bearings which are sent to Europe for repair are eligible for treatment under subheading 9802.00.50, HTSUS, upon their reimportation into the U.S., provided that all regulatory requirements are satisfied.
2. The subject ball bearings (FB222023) are classified in subheading 8482.10.50, HTSUS, as: “Ball or roller bearings … Ball bearings: Other.”
3. The country of origin of the subject ball bearings (FB222023) after they are repaired remains the country where they last underwent a substantial transformation. Details regarding the assembly of the gas turbine engine (containing the bearings) into an airplane were not presented. Accordingly, the country of origin is either the country of origin of the airplane or the country of origin of the engine.
Please promptly provide a copy of this ruling to RRNA. Sixty days from the date of this ruling the office of Regulations and Rulings will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Monika R. Brenner
Chief
Valuation and Special Programs Branch