TIB
CBP:OT:RR:ER
H327240 IPW
Mr. Jeffrey E. Stapleton M.E. Dey and Co., Inc. 700 W Virginia Street #300 Milwaukee, WI 53204
RE: Ruling Request; eligibility for duty-free treatment as temporary importations under bond
Dear Mr. Stapleton,
This is in response to your electronic ruling request of August 20, 2022, on behalf of your client International Products 90 LLC (“International Products 90”). You requested a binding ruling regarding importing lawn mower engines for processing and subsequent exportation under subheading 9813.00.05, Harmonized Tariff Schedule of the United States (“HTSUS”).
FACTS:
International Products 90 plans to import gasoline engines from China under a Temporary Importation under Bond (“TIB”). After importation, International Products 90 will sell and ship the engines to Metalcraft of Mayville (“Metalcraft”) located within the United States. Metalcraft will add the engines to lawn mower frames and export the completed lawn mowers to Australia, Canada, and the European Union. Metalcraft will provide International Products 90 with the export documentation as proof of export to cancel the TIB entries.
ISSUE:
Whether the lawn mower engines would be imported for sale in violation of subheading 9813.00.05, HSTUS, if sold for incorporation into lawn mowers within the United States.
LAW AND ANALYSIS:
U.S. Note 1(a) of Subchapter XIII of Chapter 98, HTSUS states that articles may be admitted temporarily free of duty under bond into the United States “when not be imported for sale or sale on approval.” See also 19 C.F.R. § 10.31(a)(3)(iii). Merchandise imported under a TIB and subsequently sold before exportation does not necessarily mean the merchandise was imported for sale. The courts have stated that the importer’s intentions for the goods at the time of the importation is the determinative factor. See Louise & Co. v. United States, 8 Ct. Cust. 430, 433 (1918).
Intent is evidenced by the importer’s statements, their actions, and the circumstances surrounding. Id. at 432. If the imported goods are sold to be consumed in the U.S. before exportation, it is implied that the importer’s intent was to import the goods for sale. See id. at 433 (“[i]f the sale were for consumption in this country, no injustice could arise from imputing to the importer by relation a purpose to sell, as in holding that the goods were imported for that purpose”). If, however, the imported goods are only sold to effectuate an exportation, the importer did not intend to import them for sale. See id.; see also Grab Fashion Co. v. United States, 10 Ct. Cust. 39 (1920).
Louise & Co. involved a statute that granted duty free entry of hats that were used as models and “imported…not for sale." The Tariff Act of 1913, Section IV, J. Subsection 4. In that case, the hats were imported to be used as models and then “offered for export free of duty.” Id. The court held that the sale was not for domestic consumption but “was as an incident to such exportation within the rights of the importer.” Louise & Co., 8 Ct. Cust., at 433. As such, the importer did not intend to import the merchandise “for sale.” In Grab Fashion Co. v. United States, an importer brought in garments duty free under the same statute. 10 Ct. Cust. 39 (Feb. 2, 1920). The importer rented the garments he could, sold the garments he could, and only exported the ones he could not rent or sell. Id. at 41. The court found that these actions showed the importer had no definitive intent to export the garments when they were imported. Therefore, the garments were held to be imported for sale.
CBP has followed the courts’ interpretation of imported “not for sale” as it applies to U.S. Note 1(a) of Subchapter XIII of Chapter 98, HTSUS. In HQ 227704, dated February 22, 2000, transceivers imported under a TIB were assembled with other components to form a Fixed Wireless Terminal (“FWT”), some of which were sold to a company in Illinois who crated the FWTs for shipping purposes and exported them. Purchase orders for the FWTs that predated the creation of the TIBs showed that the goods were destined for the Hungarian market. Because the sale to the Illinois company merely served to effectuate the exportation, and foreign destination was evident at the time of importation, we held that the sale did not violate the TIB. HQ 227512, dated October 5, 1998, involved two sales of imported titanium alloy to U.S. entities prior to exportation. In the first transaction, the importer, Ormet, sold and shipped the titanium alloy to KBK in Los Angeles, who in turn sold and exported it to a Japanese affiliate. KBK’s purchase order and Ormet’s invoice stated the Japanese destination, and the bills of lading documented a continual transit of the shipment from Oregon to Los Angeles to Japan. Because the documentary evidence showed that the intent of the sale to KBK was to effectuate the exportation, we held that the sale did not violate the TIB. In the second transaction, Ormet sold the titanium alloy to Trahide with terms FOB, Portland Oregon, who later sold and exported the alloy to Peru. Trahide’s purchase order with Ormet showed no foreign destination. Further, the evidence showed that the contract between Trahide and the Peruvian company was made a month after the sale with Ormet. We held that the documentary evidence failed to show that the alloy was sold to effectuate the export, but rather showed it was held out for sale in violation of the TIB.
Even if a foreign destination is known and documented at importation, CBP holds that the importer intends to import merchandise for sale if it is sold to be consumed prior to exportation. In HQ 227362, dated December 8, 1997, the Egyptian Navy agreed to purchase three submarines from a U.S. company. That company contracted with Thoray to source the sonar systems. Thoray imported sonar kits under a TIB and sold them to the U.S. company to be integrated into the electrical systems for the submarines. The electrical systems were then sold to a submarine builder to be installed into the submarines and exported to Egypt. We held that the sonar kits were not sold to merely effectuate its export to Egypt, but rather sold to be consumed in the assembly of the submarines. Therefore, despite the known foreign destination at importation, we held that the sonar kits were imported for sale in violation of the TIB.
International Products 90’s proposal to import the engines for sale would violate the TIB. You stated that International Products 90 plans to import and sell the engines to Metalcraft so that they may be assembled into lawn mowers prior to being exported. The proposed sale of the engines does not merely effectuate the export but would result in the consumption of the engines in the United States. Therefore, in the language of Louise & Co, it would be fair to impute “a purpose to sell” to the importation. Louise & Co., 8 Ct. Cust. at 432. The sale to Metalcraft could not be characterized like the sales in HQ 227704 or the sale to KBK in HQ 227512, in which the sales were made with the sole purpose to effectuate the export of merchandise. Instead, the engines will be sold with the same purpose as the sonar kits in HQ 227362—that is, to be consumed in the assembly of the final good before exportation. Because they would be sold for domestic consumption prior to exportation, the engines would be imported for sale in violation of subheading 9813.00.05, HTSUS.
HOLDING:
The lawn mower engines would be imported for sale in violation of subheading 9813.00.05, HSTUS, if sold for incorporation into lawn mowers within the United States.
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,
Renee N. D’Antonio for
Kristina Frolova, Acting Chief
Entry Process and Duty Refunds