OT:RR:CTF:VS H173817 KSG
Mr. Bret Holder
Simon, Gluck & Kane LLP
1700 Broadway
New York, NY 10019
RE: Revocation of NY N163660; subheading 9801.00.25; not conforming due to sample or specifications; tires
Dear Mr. Holder:
This is in reference to New York ruling letter (“NY”) N163660, dated May 16, 2011, regarding the eligibility of imported tires for duty-free treatment under subheading 9801.00.25, of the Harmonized Tariff Schedule of the United States (“HTSUS”). In NY N163660, CBP held that tires reimported for repair, upgrade or exchange are eligible for duty-free treatment under subheading 9801.00.25, HTSUS, if documentary requirements are met. Upon review of NY N163660, CBP has determined that it is incorrect.
Pursuant to section 625(c)(1), Tariff Act of 1930 (19 U.S.C. 1625(c)(1)), as amended by section 623 of Title VI, of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057), notice of the proposed action was published on August 15, 2012, in Volume 46 , Number 34, of the Customs Bulletin. No comments were received in response to this notice.
FACTS:
New pneumatic radial and bias tires are imported into the U.S. and any duties owing are paid by Bridgestone. Certain tires are exported to Canada where they do not undergo processing or any manufacture. Bridgestone Americas Tire Operations LLC (“Bridgestone”) reimports some tires for repair due to defect or damage, upgrade, or for exchange. The exact reason for the exchange of each reimported tire is not given. Bridgestone would submit the appropriate documentation required by 19 CFR 10.8a.
You state that the tires are classified in subheadings 4011.10 and 4011.20, HTSUS.
ISSUE:
Whether the reimported tires described above are eligible for duty-free treatment under subheading 9801.00.25, HTSUS.
LAW AND ANALYSIS:
Section 141.2 of the Customs Regulations (19 CFR 141.2) provides that dutiable merchandise imported and afterward exported, even though duty thereon may have been paid on the first importation, is liable to duty on every subsequent importation into the Customs territory of the United States unless exempt by law.
Subheading 9801.00.25, HTSUS, provides for the duty-free treatment of:
[a]rticles, previously imported, with respect to which the duty was paid upon such previous importation if (1) exported within three years after the date of such previous importation, (2) reimported without having advanced in value or improved in condition by any process of manufacture or other means while abroad, (3) reimported for the reason that such articles do not conform to sample or specifications, and (4) reimported by or for the account of the person who imported them into, and exported them from, the United States.
We assume for the purposes of this ruling that paragraphs (1), (2), and (4) are satisfied in this case. In order to qualify for duty-free treatment under subheading 9801.00.25, HTSUS, there must be some tangible evidence that the returned merchandise does not conform to “sample or specifications.”
The application of this provision is clear where the failure to meet specifications relates to the physical nature of the goods such as a shipment which includes the wrong style number, the wrong size, the wrong color, or defective workmanship. In Headquarters Ruling Letter (“HRL”) 558746, dated January 6, 1995, Customs held that alarm and security equipment which was defective due to mishandling during delivery failed to conform to specification and was entitled to duty-free treatment under subheading 9801.00.25, HTSUS, upon reimportaton into the United States. By contrast, in HRL 559298, dated February 7, 1996, Customs held that goods which were returned that physically conformed to contract specifications but which did not comply with other terms of the contract, such as the quantity of the merchandise or timeliness of delivery were not eligible for duty-free treatment under subheading 9801.00.25, HTSUS. In HRL 560421, dated August 20, 1997, Customs held that merchandise reimported for repair but subsequently returned without repair due to the costliness of repair was not eligible for duty-free treatment under subheading 9801.00.25, HTSUS. CBP concluded in this ruling that the importer must be able to submit evidence that the goods were reimported because they do not conform to specifications. In HRL 562057, dated August 27, 2002, CBP held that a vacuum pump reimported because it did not work properly was not eligible for duty-free treatment under subheading 9801.00.25, HTSUS, because no evidence was submitted to establish that the pump was delivered in a defective condition.
The issue presented is whether the tires reimported for repair, upgrade or exchange would be considered reimported for the reason that such articles do not conform to sample or specifications.
Bridgestone did not submit evidence to establish that any of the tires did not conform to sample or specification. The reimported goods include tires reimported for upgrade or exchange that may conform to sample or specification. Subheading 9801.00.25, HTSUS, is only available for goods that do not conform to sample or specification. Goods that need repair or are exchanged because they do not conform to sample or specification are covered by this provision where the importer submits appropriate documentation to show non-conformance with sample or specification. However, goods that are upgraded or exchanged due to lack of demand or other rationale are not considered as failing to conform to sample or specification. Therefore, we find that tires reimported for upgrade would not be eligible for duty-free treatment under subheading 9801.00.25, HTSUS. Further, tires reimported for repair or exchange are only eligible for duty-free treatment under subheading 9801.00.25, HTSUS, if those tires failed to conform to sample or specification and the importer, upon their return, submits sufficient documentation to demonstrate that the goods do not conform to sample specification.
HOLDING:
Tires reimported for upgrade or exchange due to lack of demand are not eligible for duty-free treatment under subheading 9801.00.25, HTSUS. The importer must establish that the goods did not conform to sample or specification and the documentary requirements set forth in 19 CFR 10.8 must be satisfied.
EFFECT ON OTHER RULINGS:
NY N163660, dated May 16, 2011, is revoked. In accordance with 19 U.S.C. 1625(c), this ruling will become effective 60 days after its publication in the Customs Bulletin.
Sincerely,
Myles B. Harmon, Director
Commercial & Trade Facilitation Division