OT:RR:CTF:VS H292342 JMV
Pawan R. Bhayana
FedEx trade Networks, Transport & Brokerage (Canada), Inc.
7075 Orden Drive
Mississauga, ON L5T 1K6
RE: Applicability of subheading 9802.00.50
Dear Mr. Bhayana:
This is in response to the ruling request filed on behalf of Shred-Tech Corp. dated November 8, 2017. In the request, you asked us to address whether the mobile document shredding truck and mobile document collection truck are eligible for tariff treatment under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (“HTSUS”).
FACTS:
Shred-Tech Corp. is a Canadian company involved with designing and manufacturing shredding and recycling systems. The two systems at issue here are the mobile document shredding truck and the mobile document collection truck. The primary use of these trucks is to shred and/or collect documents from customers, which are then transported to a location where the documents are destroyed. Shred-Tech USA, LLC has a U.S. customer that wants to contract with Shred-Tech Corp. to purchase these document shredding and collection trucks. This customer will supply the chassis from Japan and export it to Canada, where both trucks will be assembled.
In Canada, the shredding truck will be created by installing the mobile shredder, Shred-Tech MDS15GT, onto the Japanese chassis. Similarly, the document collection truck will be created in Canada through the installation of a document collection box onto the Japanese chassis.
Shred-Tech Corp. seeks a ruling that the chassis portion of the mobile document shredding and collection trucks will be eligible for 9802.00.50, HTSUS, which provides for 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.
ISSUE:
Whether the mobile document shredding truck and mobile document collection truck are 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), defines “repairs or alterations” as:
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.
Additionally, 19 CFR § 181.64(b) outlines instances where goods are 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. (Emphasis added).
Shred-Tech Corp. argues that since the chassis is exported into Canada under tariff heading 8704.22 and then, after assembly, imported back into the United States under 8704.22, HTSUS, the assembly abroad does not destroy the identity of the chassis or create a new commercially different article. Therefore, according to Shred Tech Corp., pursuant to 19 CFR § 181.64(a), the trucks are eligible for treatment under 9802.00.50, HTSUS. However, to determine eligibility under 9802.00.50, HTSUS, CBP gives little importance to the article’s classification.
When CBP considers whether an article meets the requirements of 19 CFR § 181.64(a), CBP considers whether the article is complete for its intended use when exported from the United States. An example in 19 CFR § 181.64(b) provides that un-flanged metal wheel rims exported to Canada for a flanging operation to strengthen them so as to conform to U.S. Army specifications does not constitute a repair or alteration because that operation is necessary for the completion of the wheel rims. While the goods are dedicated for use in the making of wheel rims when exported from the United States, they cannot be used for that purpose until flanged.
In HQ H264418, dated July 6, 2015, a U.S.-origin cab and chassis were exported to Canada for an operation that mounted a Canadian-origin hydrovac, which enabled the truck to act as a hydrovac truck. The hydrovac truck was then imported into the United States. CBP found that, although the cab and chassis without the hydrovac could be used for other purposes, the cab and chassis could not be used as a hydrovac truck until the mounting operation was performed. Accordingly, because the cab and chassis were incomplete for their intended use as a hydrovac truck when exported into Canada, the mounting of the hydrovac did not constitute a repair or alteration per 19 CFR § 181.64(b) because that operation was necessary to complete the hydrovac truck.
Similarly, in this instance, the chassis will be exported to Canada for the mounting of the Shred-Tech MDS15GT or a document collection box. Although the chassis alone could be used for other purposes, the chassis cannot shred or collect documents until the mounting operations are performed. Thus, the chassis will be incomplete for their intended use when exported to Canada and the mounting operations will not constitute a repair or alteration per 19 C.F.R. § 181.64(b).
HOLDING:
Based on the evidence presented, the assembly process in Canada will be an operation necessary for the completion of the mobile document shredding truck and mobile document collection truck. Therefore, these trucks are not eligible for subheading 9802.00.50, HTSUS, treatment.
Please note that 19 CFR § 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.”
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch