CON-04
CBP:OT:RR:ER
H314204 JCO
Ms. Tammy Flanders Hetrick
A.N. Deringer, Inc.
173 West Service Road
Champlain, NY 12919
RE: Eligibility for duty-free treatment as temporary importations under bond
Dear Ms. Hetrick.
This is in response to your ruling request of September 9, 2020, on behalf of Burr Oak Tool ("Burr"). You requested a binding ruling regarding whether certain merchandise is eligible for importation via a Temporary Importation under Bond ("TIB") pursuant to subheading 9813.00.30, Harmonized Tariff Schedule of the United States ("HTSUS").
FACTS:
Burr manufactures production machinery in the United States that is sold to customers worldwide. Burr's machinery is custom-built to customer specifications. Burr will import raw material termed "finstock" from several countries, including Canada and Mexico, for use in the custom-built machinery it will manufacture, specifically in order to determine if a machine will perform as required. The finstock will consist of three distinct types of metal: 1) flat-rolled stainless-steel products; 2) copper plates, sheet or strip; and 3) aluminum foil. Burr states that the imported finstock is intended for assessing the performance of the machinery Burr builds and will not be offered for sale or purchase.
Burr specifically will use the imported finstock to test each custom machine it will build, i.e., to prove that each machine will work as it should before shipment to customers. For each customer's machine, Burr will process finstock in the machine by applying oil to the finstock, stamping it to form, and cutting it, all to test the functionality of the machine. Once so processed, the finstock will yield a "test article" for each customer. Burr will then export the test article(s) to its customers for examination, along with unused finstock or finstock scrap, if any. The customer will not complete the machine purchase until it has examined the customized test article and found it satisfactory.
Burr concludes that finstock imported for such processing may be imported under a TIB as an article intended solely for testing, experimental or review purposes, pursuant to subheading, 9813.00.30, HTSUS.
ISSUE:
Whether the finstock may be imported via a TIB as an article intended solely for testing, or experimental or review purposes, pursuant to subheading 9813.00.30, HTSUS?
LAW AND ANALYSIS:
Pursuant to General Note 1, HTSUS, all merchandise imported into the United States is subject to duty unless specifically exempted therefrom. Pursuant to Chapter 98, Subchapter XIII, U.S. Note 1(a), HTSUS, which contains subheading 9813.00.30, HTSUS, articles intended solely for testing, or experimental or review purposes, and not for the purpose of sale or sale on approval, may be entered free of duty under a TIB. Duty-free treatment is contingent on the exportation or destruction of such articles within one year from the date of importation. See e.g. 19 C.F.R. 10.31. This one-year period may be extended for one or more additional years, not to exceed three years. See 19 C.F.R. 10.37.
CBP has addressed the scope of the term "testing" in previous rulings. In HQ 214437, (Jan. 11, 1983), we stated that for purposes of entry under TIB, the statute is "not limited to the performance of ritualized testing operations upon imported equipment, but also extends to cover less rigorous procedures so long as they are designed to yield information about the imported articles which was not known prior to completion of the procedures." In that case, we ruled that gathering (i.e., sorting) was not a "testing" but held that cold staging (i.e., unpacking component parts for visual inspection and comparison with the particular customer configuration) and hot staging (i.e., a process with multiple staging cycles such as an out of box audit, component tests, and a long duration simulation test) did qualify as "testing" for TIB purposes.
Further, in addition to the described operation constituting testing, the testing must be the primary purpose of the importation to qualify under subheading 9813.00.30, HTSUS. In HQ 216531 (Dec. 28, 1983), we permitted entry under a TIB under subheading 9813.00.30, HTSUS, for testing Canadian locomotives in the United States to yield previously unknown information about train traction. The testing equipment and facilities of the railway company were located in the United States, were not available in Canada, and the testing was the primary purpose of the importation.
Subheading 9813.00.30, HTSUS, also states that articles must be entered "solely for testing." "Solely" is not to be interpreted as "exclusively." Therefore, subjecting articles being tested to other uses is not prohibited as long as such uses are necessary or can reasonably be calculated to assist in the testing. However, in HQ 228619 (Sept. 12, 2001), we held that imported racecar engines consisting of prototype engines imported for track testing and development engines used in races did not qualify for entry under subheading 9813.00.30, HTSUS.
This was because testing was not the primary purpose of the entry of the engines. Our analysis found that, despite testing and extensive analysis being performed, the primary purpose of the importation of the engines was to use them in races, whether as the actual race car engines, in qualifying races, or as spares. Therefore, CBP has held that, in addition to the procedures described constituting testing, i.e., providing information on the imported articles that was not known prior to the completion of the procedures described, the testing must be the primary purpose for importation.
Here, Burr's processing will result in a sample of "stamped and cut" finstock which is then to be exported to potential customers for examination. Customers, and Burr, will only know whether Burr's machinery performs to specification, enabling its final sale, based on the "stamped and cut" finstock. This is the only purpose of the importation of finstock. The primary purpose, then, of the importation of the finstock is not to test the finstock, itself, but to test how Burr's machinery processes the finstock. Therefore, the primary purpose of the importation is also the sole purpose of the importation.
Additionally, Burr selects finstock as a material for processing in Burr's machines not because of its variability, but because Burr knows the finstock will perform as intended when processed by Burr's machines, i.e., the finstock will let itself be "stamped" and "cut." The sole unknown in the entire processing is whether Burr's machines, as constructed, will stamp and cut the finstock as requested by Burr's customers. In other words, Burr does not know anything about the finstock, as finstock, after completion of Burr's procedures that it does not know prior to completion of Burr's procedures. See HQ 214437. Therefore, as: 1) the primary purpose of the importation will not be to "test" the finstock, itself, but to use the finstock to test Burr's machinery; and 2) the importation of the finstock will not provide information on the finstock that was not known prior to the completion of the processing, Burr's finstock is ineligible for entry via a TIB pursuant to subheading 9813.00.30, HTSUS. See also HQ 216531; HQ 214437; HQ 228619.
Last, although the finstock is ineligible for entry under subheading 9813.00.30, HTSUS, in its ruling request, we note Burr indicated some of the imported finstock may be subject to AD/CVD. Had the finstock been eligible for entry under a TIB, the TIB bound amount "should be sent in an amount to take into account any AD/CVD in order to protect the revenue." HQ 229970 (Aug. 11, 2003), citing HQ 223491 (Mar. 30, 1992).
HOLDING:
The finstock is ineligible for entry as an article intended solely for testing, or experimental or review purposes via a TIB pursuant to subheading 9813.00.30, HTSUS.
Please note that 19 C.F.R. 177.9(b)(1) provides that "[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by CBP to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based." If the terms of the import or export contracts vary from the facts stipulated to herein, this decision shall not be binding on CBP as provided for in 19 C.F.R. 177.2(b)(1), (2) and (4), and 177.9(b)(1) and (2).
Sincerely,
Monika Brenner, Interim Chief
Entry Process and Duty Refunds