OT:RR:CTF:VS H244198 SEK
Category: Classification
Port Director
U.S. Customs and Border Protection
Post Office Box 789
Great Falls, Montana 59403-0789
Re: Protest No. 3304-12-100085; Heading 9817.85.01, HTSUS, Prototype Determination; Tatra Truck
Dear Port Director:
This is in response to the Application for Further Review of Protest No. 3304-12-100085 timely submitted by counsel on behalf of Navistar, Inc. (“Navistar”), which was received by this office on July 17, 2013. At issue in this protest is whether the Tatra truck imported by Navistar qualifies as a prototype within the meaning of heading 9817.85.01, Harmonized Tariff Schedule of the United States (“HTSUS”).
FACTS:
Navistar imported a “TATRA Chassis Cab w/ Flatrack T815-7N0R99 38 331 8x8 Truck” (“Tatra truck”) at the Port of Great Falls, Montana on June 21, 2012. Navistar states that the Tatra truck was a pre-production model that was imported exclusively for product research, development and testing, and therefore meets the requirements of the Product Development and Testing Act of 2000 (“PDTA”), 19 CFR 10.91(b), and U.S. Note 7 to Subchapter XVII of Chapter 98, HTSUS. The vehicle was classified under subheading 9817.85.01, HTSUS, with an associated subheading of 8704.23.0000, HTSUS.
On September 26, 2012, CBP issued a CBP Form 29 Notice of Proposed Action in which CBP asserted that “[a]s per review of submitted documentation, and as per guidance from the National Import Specialist, this Tatra T815 7N0R99 Truck does not qualify as a ‘Prototype’ under 9817.85.01, as outlined in U.S. Note 6 [sic] to subchapter XVII of Chapter 98, HTSUS.” The notice proposed to reclassify the Tatra truck under subheading 8704.23.0000, HTSUS, with a 25% rate of duty.
Navistar responded to the CBP Form 29 in a letter dated October 3, 2012, in which it argued that the imported truck is a “pre-production prototype model of a military vehicle that is being used exclusively to test and evaluate whether or not a new family of tactical and logistical military vehicles (provisionally called “ATX”) should be produced in the U.S. to leverage Navistar, Inc.’s manufacturing capability.” Navistar stated that the original entry documentation included a June 6, 2012 “Letter of Intent” signed by a Navistar employee, and provided the following:
The vehicle in reference is being imported to undergo a battery of tests to finalize the integration of the Navistar engine into a TATRA chassis. After optimizing the engine calibration for these new vehicles, we will conduct automotive performance, reliability, durability, and maintenance tests, among others. We will carefully study the driveline components and the overall chassis, but also the integration and operability of vehicles with standard military equipment mounted on them, such as cargo beds, cranes, and other load handling systems installed. This prototype vehicle will remain in the possession and control of Navistar Defense at all times while in the U.S. The pre-production prototype will not be leased, sold, or utilized in any commercial capacity.
On October 24, 2012, CBP issued a CBP Form 29 Notice of Action Taken, in which it stated that the imported Tatra truck did not qualify as a prototype under subheading 9817.85.01, HTSUS, as outlined in U.S. Note 7 to subchapter XVII of Chapter 98, HTSUS, and that the Tatra would instead be classified under subheading 8704.23.0000 with a duty rate of 25%. The entry was liquidated on November 9, 2012.
ISSUE:
Whether the Tatra truck imported by Navistar qualifies as a prototype within the meaning of heading 9817.85.01, HTSUS.
LAW & ANALYSIS:
Pursuant to section 1433 of the Product Development and Testing Act of 2000 (PDTA), enacted as part of the Tariff Suspension and Trade Act of 2000 (Pub.L. 106-476, § 1433), articles described as “prototypes” under the Act may be imported duty-free. To provide for duty-free entry of prototypes, section 1433 of the PDTA inserted heading 9817.85.01 into Subchapter XVII of Chapter 98, HTSUS, which provides for:
Prototypes to be used exclusively for development, testing, product evaluation, or quality control purposes …
U.S. Note 7 to Subchapter XVII, Chapter 98, HTSUS, provides, in relevant part:
The following provisions apply to heading 9817.85.01:
For the purposes of the subchapter, including heading 9817.85.01, the term “prototypes” means originals or models of articles that –
(i) are either in the preproduction, production, or postproduction stage and are to be used exclusively for development, testing, product evaluation, or quality control purposes; and
(ii) in the case of originals or models of articles that are either in the production or postproduction stage, are associated with a design change from current production (including a refinement, advancement, improvement, development, or quality control in either the product itself or the means for producing the product).
For purposes of clause (i), automobile racing for purse, prize, or commercial competition shall not be considered to be “development, testing, product evaluation, or quality control.”
(i) Prototypes may be imported only in limited noncommercial quantities in accordance with industry practice.
(ii) Except as provided for the Secretary of the Treasury, prototypes or parts of prototypes may not be sold after importation into the United States or be incorporated into any other products that are sold.
Articles subject to quantitative restrictions, antidumping orders, or countervailing duty orders may not be classified as prototypes under this note. Articles subject to licensing requirements, or which must comply with laws, rules, or regulations administered by agencies other than the United States Customs Service before being imported, may be classified as prototypes if they comply with all applicable provisions of law and otherwise meet the definition of “prototypes” under paragraph (a).
“Prototypes” are defined in U.S. Note 7(a), in part, to be originals or models of articles that are either in the preproduction, production, or postproduction stage and are to be used exclusively for development, testing, product evaluation, or quality control purposes. Based on the facts provided, we find that the Tatra truck meets the definition of “prototypes” in U.S. Note 7(a). Navistar contends that the imported Tatra truck is a prototype at a preproduction stage for the purpose of developing a new line of military vehicles produced in the U.S. and exported overseas. This purpose is consistent with the requirement of U.S. Note 7(a)(i) that the prototype by used exclusively for development, testing, product evaluation, or quality control purposes. The requirement of U.S. Note 7(a)(ii) is not applicable here as it applies only to originals or models of articles that are either in the production or postproduction stage, and Navistar states that the Tatra truck is in the preproduction stage.
Since there is only one Tatra truck at issue in this importation, we find that the Tatra truck meets the requirement of U.S. Note 7(b)(i) that prototypes eligible for subheading 9817.85.01, HTSUS, be imported only in limited noncommercial quantities in accordance with industry practice.
The requirement of U.S. Note 7(b)(ii) for subheading 9817.85.01, HTSUS, is that prototypes or parts of prototypes may not be sold after importation into the U.S. or be incorporated into other products that are sold, except as provided by the Secretary of the Treasury. Navistar states that the Tatra truck will not be “leased, sold, or utilized in any commercial capacity” after importation. Based on the facts submitted, we find that the requirement of U.S. Note 7(b)(ii) is satisfied.
Note 7(c) provides that articles subject to quantitative restrictions, antidumping orders, or countervailing duty orders may not be classified as prototypes under heading 9817.85.01, HTSUS. We find that the Tatra truck is not currently subject to such restrictions or orders. Note 7(c) also provides that articles subject to licensing requirements, or which must comply with laws, rules, or regulations administered by agencies other than CBP before being imported, may be classified as prototypes if they comply with all applicable provisions of law and otherwise meet the definition of “prototypes” in Note 7(a). Accordingly, Navistar must ensure that none of the parts become subject to any limitations listed in U.S. Note 7(c), and that the Tatra truck complies with all applicable laws, rules, and regulations before importation.
Based on the totality of the facts, we find that the imported Tatra truck satisfies the applicable terms of U.S. Note 7, Subchapter XVII, Chapter 98, HTSUS. Accordingly, the Tatra truck may be classified in heading 9817.85.01, HTSUS, as a prototype, assuming the terms of subparagraph (c) have been met.
HOLDING:
The Tatra truck imported by Navistar qualifies as a prototype within the meaning of heading 9817.85.01, HTSUS. The information submitted indicates that the Tatra truck satisfies the provisions of U.S. Note 7 to Subchapter XVII, Chapter 98, HTSUS, provided that all of the requirements referenced above are complied with.
In accordance with the Protest/Petition Processing Handbook (CIS HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with this decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision, Regulations and Rulings of the Office of International Trade 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,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division