OT:RR:CTF:VS H264418 AJR
Port Director
Port of Pembina
U.S. Customs & Border Protection
112 West Stutsman
Pembina, ND 58271
RE: Application for Further Review of Protest 3401-2015-100027; Applicability of subheading 9802.00.50
Dear Port Director:
This is in response to the Application for Further Review of Protest 3401-2015-100027 filed on behalf of Petrofield Industries Inc. (“Petrofield”), addressing whether a hydrovac truck is
eligible for tariff treatment under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (“HTSUS”).
FACTS:
This case involves a hydrovac truck that was entered into the United States from Canada on March 22, 2014. According to Petrofield, the 2014 Western Star chassis and cab were exported from the United States to Canada, without the hydrovac, and entered under subheading 8704.22.5080, HTS. In Canada, the hydrovac was mounted onto the cab and chassis. After the hydrovac was mounted, the hydrovac truck was imported into the United States.
When Petrofield entered the hydrovac truck, it classified the cab and chassis under subheading 9802.00.5060, HTSUS, and the hydrovac under subheading 8704.22.5080, HTSUS. Customs and Border Protection (“CBP”) disagreed with these classifications and corrected the entry summary to classify the entire hydrovac truck under subheading 9801.00.1071, HTSUS. However, on April 14, 2015, the Port of Pembina revised this classification to subheading 8704.23.0000, HTSUS, per Customs Form 6445A.
ISSUE:
Whether the hydrovac truck is eligible for tariff treatment under subheading 9802.00.50, HTSUS?
LAW & ANALYSIS:
Subheading 9802.00.50, HTSUS, provides a full or 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 repairs or alterations. Articles returned to the United States after having been repaired or altered in Canada, whether or not pursuant to warranty, may be eligible for duty-free treatment, provided the documentary requirements of 19 CFR § 181.64 are satisfied.
Section 181.64(a), CBP Regulations, (19 C.F.R. § 181.64(a)) states, in pertinent part:
‘[R]epairs or alterations’ means restoration, addition, renovation, redyeing, cleaning, resterilizing, or other treatment which does not destroy the essential character of, or create a new and commercially different good from, the good exported from the United States.
Section 181.64(b), CBP Regulations, (19 C.F.R. § 181.64(b)) states:
Goods not eligible for duty-free or reduced-duty treatment after repair or alteration. The duty-free or reduced-duty treatment referred to in paragraph (a) of this section shall not apply to goods which, in their condition as exported from the United States to Canada or Mexico, are incomplete for their intended use and for which the processing operation performed in Canada or Mexico constitutes an operation that is performed as a matter of course in the preparation or manufacture of the finished goods.
The example following 19 C.F.R. § 181.64(b) is illustrative, stating:
Unflanged metal wheel rims are exported to Canada for a flanging operation to strengthen them so as to conform to U.S. Army specifications for wheel rims; although the goods when exported from the United States are dedicated for use in the making of wheel rims, they cannot be used for that purpose until flanged. The flanging operation does not constitute a repair or alteration because that operation is necessary for the completion of the wheel rims.
In this case, the U.S.-origin cab and chassis were exported to Canada for an operation that mounted the Canadian-origin hydrovac for the purpose of enabling the truck to act as a hydrovac truck. Your office believes this process created a new and commercially different good, the hydrovac truck, and destroyed the essential characteristics of the truck. Petrofield argues that mounting the hydrovac onto the cab and chassis is a “repair or alteration” within the meaning of 19 CFR § 181.64(a). In support, Petrofield’s broker, Cole International, submitted a “Statement of Repairs, Alterations, or Processing” that is dated by Cole International on March 2, 2015, but was filled out by Petrofield on August 21, 2013, according to Petrofield’s submission. It shows that Petrofield received imported materials in Canada with a value of $158,586 that were repaired, altered, or processed by mounting the hydrovac for an additional value of $366,414, for total value of $525,000.
We find that, although the cab and chassis without the hydrovac could be used for other purposes, the cab and chassis cannot be used as a hydrovac truck until the mounting operation is performed. Accordingly, because the cab and chassis are incomplete for their intended use as a hydrovac truck when exported to Canada, the mounting of the hydrovac does not constitute a repair or alteration per 19 C.F.R. § 181.64(b) because that operation is necessary for the completion of a finished hydrovac truck. Therefore, this protest should be denied.
HOLDING:
The protest should be denied. Based on the evidence presented, the processing of the cab and chassis constituted an operation necessary for the completion of the finished hydrovac truck. Therefore, the hydrovac truck is not eligible for subheading 9802.00.5060, HTSUS, treatment.
In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the 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 & Trade Facilitation Division