OT:RR:CTF:VS H308933 EGJ
Alex Romero
A.F. Romero Co., Inc.
1749 Stergios Rd.
Calexico, CA 92231
RE: Eligibility for Preferential Tariff Treatment under Subheading 9802.00.50, HTSUS
Dear Mr. Romero:
This is in response your ruling request letter filed on behalf of your client AddArmor, dated January 9, 2020. In the request, you asked us to address whether motor vehicles exported from the United States to Mexico to be equipped with one of three different armoring packages are eligible for preferential tariff treatment under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (“HTSUS”) when they are returned to the United States.
You have requested confidential treatment for certain information contained in your submission and in the file. Inasmuch as this request conforms to the requirements of 19 C.F.R. § 177.2(b)(7), the request for confidentiality is approved. The information contained within brackets in your request will not be released to the public and will be withheld from published versions of this ruling.
FACTS:
AddArmor is a U.S. company which exports new and used vehicles to Mexico for installation of protective armoring, and then imports them back into the United States. The vehicles can be any make or model. Each vehicle is fully functional and completely finished when it is exported to Mexico. At a facility in Mexico, workers alter the vehicle by replacing the windshield and windows with bullet-resistant glass, and installing ballistic protection panels. The degree of enhanced protection depends upon which of the three armoring packages that the client selects. With your ruling request, you provided descriptions of the protection packages as featured on a full-sized Cadillac Escalade Sport Utility Vehicle (“SUV”).
You note that part of the armoring process involves replacing factory installed vehicle windows with bullet resistant, shatter-proof glass. You state that the ballistic glass is a multi-layered sandwich of acrylic, polycarbonate (a type of plastic), and leaded glass. The thinnest option – 0.8 inch – will stop rounds such as those from a 9 mm or .44 magnum handgun, as well as prolonged physical attacks from blunt objects such as bats and cinder blocks. The thickest glass – 2 inches – will stop a sniper bullet from a high-powered rifle.
The workers also install ballistic protection panels inside each door and hatch of the vehicle. You state that ballistic protection panels are made up of ultra-light synthetic laminate materials that are 60% lighter and ten times stronger than ballistic steel. You note that AddArmor’s proprietary ballistic panels add minimal weight to the vehicle, which maintains the look of the vehicle’s exterior appearance and does not compromise the vehicle’s mechanical performance.
You note that when the relevant passenger vehicles are exported from the United States, they are classified under subheading 8703.24, HTSUS, which provides for “Motor cars and other motor vehicles principally designed for the transport of persons…: Other vehicles, with only spark-ignition internal combustion reciprocating piston engines.” You note that they remain classified under subheading 8703.24, HTSUS, after the protection packages are installed and they are returned to the United States.
You have asked us to issue a determination on the applicability of preferential tariff treatment under subheading 9802.00.50, HTSUS, for each of the three armoring packages. A description of each armoring package is set forth below.
#1 Anti-Intrusion Protection Package
Vehicles in this package may be shipped new from a dealer, or used from its owner/operator to the facility in Mexico, which:
Replaces all of the vehicle factory installed windows with bullet resistant, shatter-proof glass;
Reassembles the vehicle to ensure it maintains its original appearance with no visual cues that the vehicle is armored;
Fortifies the vehicles doors by installing custom fit ballistic protection panels inside each door and rear hatch; and,
Prepares the finished vehicle for export to the United States.
#2 Full Protection Package
This package is geared towards clients who want to mitigate higher-level deliberate threats such as kidnappings, car bombings, or for working and traveling in combat zones. The vehicle may either be shipped new from the dealer, or used from the owner/operator to the facility in Mexico, which:
Replaces all of the factory installed windows with bullet resistant, shatter-proof glass;
Encases the entire passenger compartment in ballistic protection;
Attaches tires which are designed to run while flat;
Installs ballistic protection for the major engine components such as: the radiator, battery, fuel tank, and the computer circuit boards in the Engine Control Module (“ECM”);
Reassembles the vehicle so that it maintains its original appearance with no visual cues that the vehicle is armored; and,
Prepares the finished vehicle for export to the United States.
#3 Executive Protection Package
Just like the prior two packages, the vehicles equipped with the executive protection package can either be shipped new from the vehicle dealer, or used from the owner/operator. Upon arrival in Mexico, the processing facility will:
Add ballistic protection for either Package #1 or Package #2, per the client’s request;
Upgrade the vehicle’s interior cabin with an array of upgraded features, such as built-in flat screen televisions, mini-bars, and leather upholstery; and,
Prepares the armored vehicle for export to the United States.
You have provided us with the following price range for each armoring package: Anti-Intrusion Package #1 costs approximately [$XXXX - $XXXX] for an SUV, Full Protection Package #2 costs approximately [$XXXX - $XXXX] for a sedan or SUV, and the Executive Protection Package #3 costs approximately [$XXXX - $XXXX]. According to the online version of Kelly’s Blue Book, a model year 2020 Cadillac Escalade SUV has a retail price of $75,000 - $90,000, depending on the vehicle’s features.
ISSUE:
Whether a vehicle which undergoes antiballistic modification in Package #1, 2, or 3, is eligible for preferential tariff treatment under subheading 9802.00.50, HTSUS.
LAW & ANALYSIS:
Subheading 9802.00.50, HTSUS, provides for, “Articles returned to the United States after having been exported to be advanced in value or improved in condition by any process of manufacture or other means: other.” Articles returned to the United States after having been repaired or altered in Mexico, whether or not pursuant to warranty, may be eligible for duty-free treatment, provided the documentary requirements of 19 C.F.R. § 181.64 are satisfied. The first two subsections of 19 C.F.R. § 181.64 provide, in pertinent par, as follows:
§ 181.64 Goods re-entered after repair or alteration in Canada or Mexico.
(a) General. This section sets forth the rules which apply for purposes of obtaining duty-free or reduced-duty 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 Mexico, whether or not pursuant to a warranty, and goods returned after having been repaired or altered in Canada pursuant to a warranty, 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, redyeing, cleaning, resterilizing, or other treatment which does not destroy the essential characteristics of, or create a new or commercially different good from, the good exported from the United States.
Example. Glass mugs produced in the United States are exported to Canada for etching and tempering operations, after which they are returned to the United States for sale. The foreign operations exceed the scope of an alteration because they are manufacturing processes which create commercially different products with distinct new characteristics.
(b) 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 finished goods.
Example. 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 Pleasure-Way Indus. v. United States, 878 F.3d 1348 (Fed. Cir. 2018) (“Pleasure-Way II”), the U.S. Court of Appeals for the Federal Circuit (“CAFC”) analyzed the application of subheading 9802.00.50, HTSUS, to motorhomes imported from Canada. The Plaintiff exported 144 Daimler-Chrysler AG “Sprinter” cargo vans from the United States to Canada. In Canada, the vans were converted into the Plateau TS and Ascent TS model motorhomes. The conversion included “installation of interior features such as fully plumbed kitchen and bathroom fixtures with freshwater and sewage tanks, water heaters, sleeping quarters, counter-tops with propane burners, microwave ovens, wall-mounted televisions, and refrigerators.” Id. at 1349.
Citing to 19 C.F.R. § 181.64(a), the court examined whether the aforementioned processing on the vans “does not destroy the essential characteristics of, or create a new or commercially different good from, the good exported from the United States.” Id. at 1352. Examining the U.S. Court of International Trade’s (“CIT”) decision in Pleasure-Way Indus. v. United States, 2016 Ct. Intl. Trade LEXIS 100 (Ct. Int’l Trade Slip. Op. 2016), (“Pleasure-Way I”), the CAFC took note of the CIT’s conclusion that the imported motorhomes were commercially different from the exported Sprinter vans. In its decision, the CIT observed that there were “changes to the applicable tariff heading, the use, and the name of the vans.” Pleasure-Way I at 5. The CIT determined that the motorhomes “no longer resembled the exported cargo vans,” were “no longer classifiable as motor vehicles for the transport of goods,” and were sold at “different price points than the exported vehicles.” Id. Taking into account all of the aforementioned reasons, the CAFC agreed with the CIT’s conclusion that the motorhomes were commercially different from the Sprinter vans. Therefore, they were not properly classifiable under subheading 9802.00.50, HTSUS.
The question presented is whether installing the protection packages on the vehicles in Mexico destroys the essential characteristics of the vehicles or creates new or commercially different goods from the goods exported from the United States. In Headquarters Ruling Letter (“HQ”) 560245, dated April 4, 1997, we examined freight trucks and vans which were exported to Canada from the United States. In Canada, a mobile satellite communications system was installed onto each vehicle. These systems worked as communications tools to link the vehicles to a dispatch center so that messages and positioning information could be sent between the vehicles and the dispatchers. We found that the function of the freight vans and trucks remained the same after the communications systems were installed and they were returned to the United States. The systems merely enabled the vehicles to be located while they were driven. Therefore, we concluded that the freight vans and trucks qualified for a reduction in duty under subheading 9802.00.50, HTSUS.
Conversely, 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. U.S. Customs and Border Protection (“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 C.F.R. § 181.64(b) because that operation was necessary to complete the hydrovac truck.
In the instant case, we find that installing the three different vehicle armoring packages is more similar to installing the mobile communications system of HQ 560245 than the motorhome conversion in Pleasure Way I & II and the hydrovac installation of HQ H264418. All of the vehicles which are exported to Mexico for processing are classified as passenger vehicles under subheading 8703.24, HTSUS. When they return to the United States with additional armoring or feature upgrades, they remain classifiable as passenger vehicles of subheading 8703.24, HTSUS. The only changes which occur in Mexico are the installation of additional protective features and optional luxury features. Although these installations are costly, they do not alter the character of the vehicle. For all of these reasons, we find that vehicles which are exported to Mexico and are equipped with any one of the three protection packages will qualify for duty free treatment under subheading 9802.00.50, HTSUS, provided the documentary requirements of 19 C.F.R. § 181.64 are satisfied.
HOLDING:
Based on the evidence presented, passenger vehicles returned to the United States from Mexico equipped with any one of the three protection packages will qualify for duty free treatment under subheading 9802.00.50, HTSUS, provided the documentary requirements of 19 C.F.R. § 181.64 are satisfied.
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.”
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