OT:RR:CTF:VS H328190 RB
Crispin N. Flores
C&J Logistical Services Inc.
9106 S. Austin Dr, Ste B
Pharr, TX 78577
Re: Country of Origin; Subheading 9802.00.50, HTSUS; Section 301 Trade Remedy
Dear Mr. Flores:
This is in response to your correspondence, dated September 12, 2022. In your letter, you request a binding ruling pursuant to 19 C.F.R. Part 177 on the applicability of section 301 measures of various electronics which will be returned to the United States from Mexico pursuant to subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS).
FACTS:
According to the information provided, C & J Logistics ("C & J") will have its United States facility ship used electronic goods (such as notebooks, laptops, and modems) to their Mexican facility. You claim that the country of origin for these electronic goods will vary, but some of the items may be of Chinese origin. In Mexico, the items may be inspected, tested, and cleaned and repaired as necessary, before return to the United States. The spare parts/and or components used in the repairs can be shipped directly to the Mexican facility from China or the United States. These repairs or alterations will consist of replacing one or more spare parts and/or components or replacing none. C & J has stated that the electronic goods will not undergo a substantial transformation where a new article of commerce will emerge from the process being completed in Mexico. The articles will be returned to the United States pursuant to subheading 9802.00.50, HTSUS. For purposes of this ruling request, we are assuming that the articles will qualify for the requirements of subheading 9802.00.50, HTSUS.
ISSUE:
Whether section 301 duties are applicable on electronic goods upon re-importation to the United States from Mexico when either inspected, tested, repaired and/or cleaned pursuant to subheading 9802.00.50, HTSUS.
LAW AND ANALYSIS:
The United States - Mexico - Canada Agreement (USMCA) was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. It was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. 4511(a)). The USMCA provides at Article 2.8 for goods re-entered after repair or alteration. The agreement states, in relevant part:
1. No Party shall apply a customs duty to a good, regardless of its origin, that re-enters its territory after that good has been temporarily exported from its territory to the territory of another Party for repair or alteration, regardless of whether that repair or alteration could have been performed in the territory of the Party from which the good was exported for repair or alteration or has increased the value of the good.
* * *
4. For the purposes of this Article, repair or alteration does not include an operation or process that:
a) destroys a good's essential characteristics or creates a new or commercially different good; or
(b) transforms an unfinished good into a finished good.
The provision for articles exported for repair or alteration and re-imported appears at subheading 9802.00.50, HTSUS. This provision provides a complete duty exemption for articles exported from and returned to the U.S. after having been advanced in value or improved in condition by repairs or alterations in Canada or Mexico.
Note 3, Subchapter II, Chapter 98, sets forth additional provisions applicable to subheading 9802.00.50, HTSUS. The Special Program Indicator for the USMCA which appears in the tariff rate column of the tariff is "S" or "S+." Notes 3(d) and (e), Subchapter II, Chapter 98, indicate, in relevant part, that the symbol "S" in parentheses indicates that the rates of duty in the "Special" column 1 and the "Special" subcolumn of column 1, for goods classified in subheading 9802.00.50, HTSUS, apply to any goods which are returned to the United States after having been repaired in Canada or Mexico, respectively, whether or not such goods are goods of Canada or Mexico under the terms of general note 11 to the tariff schedule.
Nineteen CFR 182.112(a) provides:
General. This section sets forth the rules that apply for purposes of obtaining
duty-free treatment on goods returned after repair or alteration in Canada or
Mexico as provided for in subheadings 9802.00.40 and 9802.00.50, HTSUS.
Goods returned after having been repaired or altered in Canada or Mexico,
regardless of whether the repair or alteration could be performed in the United
States or has increased the value of the good and regardless of their origin, are
eligible for duty-free treatment, provided that the requirements of this section are
met. For purposes of this section, "repairs or alterations" means restoration,
addition, renovation, re-dyeing, cleaning, re-sterilizing, or other treatment that
does not destroy the essential characteristics of, or create a new or commercially
different good from, the good exported from the United States.[1]
For purposes of this ruling, we are assuming that the requirements of subheading 9802.00.50, HTSUS, will be met. However, we note that based upon the definition of "repairs or alterations" in 182.112(a), cited above, the electronics which are simply inspected tested and returned to the United States will not qualify for subheading 9802.00.50, HTSUS, treatment. However, you may wish to reimport these used electronics under subheading 9801.00.10, HTSUS. Subheading 9801.00.10 provides for: "Products of the United States when returned after having been exported, or any other products when returned within 3 years after having been exported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad."
The electronics which are either inspected, tested, cleaned and/or repaired may be eligible for duty-free treatment under subheading 9802.00.50, HTSUS pursuant to 19 CFR 182.112(a). While you have not provided specific details on the contemplated repairs, we are assuming that the used electronics will be subject to suitable repairs within the meaning of subheading 9802.00.50, HTSUS.
You have also indicated that the articles will not undergo a change in origin while in Mexico. For purposes of this ruling, we are assuming this to be correct.
The United States Trade Representative ("USTR") has determined that an additional ad valorem duty of 25 percent will be imposed on certain Chinese imports pursuant to USTR's authority under Section 301(b) of the Trade Act of 1974 ("Section 301 measures"). The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20, HTSUS. U.S. Note 20(c) provides, in relevant part:
The additional duties imposed by heading 9903.88.02 do not apply to goods for which entry is properly claimed under a provision of chapter 98 of the HTSUS, except for goods entered under subheadings 9802.00.40, 9802.00.50, and 9802.00.60, and heading 9802.00.80. For subheadings 9802.00.40, 9802.00.50, and 9802.00.60, the additional duties apply to the value of repairs, alterations, or processing performed abroad, as described in the applicable subheading. For heading 9802.00.80, the additional duties apply to the value of the article less the cost or value of such products of the United States, as described in heading 9802.00.80.
Therefore, assuming the returned articles qualify for subheading 9802.00.50, HTSUS, treatment, and an article remains of Chinese origin, the article will be subject to section 301 measures. However, pursuant to U.S. Note 3(d), Subchapter II, Chapter, 98, HTSUS, as repairs performed in Mexico are duty-free, no additional duty will be due.
HOLDING:
Based upon the information submitted, the used electronics that are inspected, tested and returned to the United States will not qualify for subheading 9802.00.50, HTSUS, treatment.
For purposes of section 301, articles that remain a product of China and that meet the requirements of subheading 9802.00.50, HTSUS, will be subject to section 301 measures; however, pursuant to U.S. Note 3(d), Subchapter II, Chapter, 98, HTSUS, as repairs performed in Mexico are duty-free, no additional duty will be due.
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 a CBP field office 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."
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch
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[1] See 86 Federal Register 35589, Interim Final Rule, Agreement Between the United States of America, the United Mexican States, and Canada (USMCA) Implementing Regulations Related to the Marking Rules, Tariff-Rate Quotas, and Other USMCA Provisions, July 6, 2021 (Effective date, July 1, 2021).