CLA-2-85:OT:RR:NC:N1:112
Demetrius D. Jones
Vice President / LCB / CCS
Crane Worldwide Trade Services
185 Southside Industrial Parkway
Atlanta, GA 30354
RE: The applicability of subheading 9802.00.5060, HTSUS, to Remote Controls that are exported from the United States to Mexico and returned to the United States
Dear Ms. Jones:
In your letter dated April 10, 2015, you requested a ruling on behalf of your client Universal Electronics, Inc. Your request pertained to the applicability of subheading 9802.00.5060, Harmonized Tariff Schedule of the United States, (HTSUS), and preferential treatment under the North American Free Trade Agreement, (NAFTA), to merchandise that your client will export to Mexico to be repaired and subsequently returned to the United States for consumption.
Your letter states that your client imports television remote controllers, (remotes), into the United States from China, where duty is paid, and then exports the remotes to Mexico for further processing and/or refurbishment. You have provided two scenarios where the subject remotes will be imported from Mexico after being re-worked. In the first scenario, functional remotes are exported to Mexico from the United States for pad printing and software updates. These units are operational but require software updates in order to function properly in the United States. After reprogramming, the remotes also receive cosmetic and logo markings. The second scenario involves non-functional, or scrap, remotes that have been recycled in the United States which are being sent to Mexico for refurbishment. These remotes are non-working and in addition to the pad printing and software updates similarly performed in the first scenario, they also require keypad and plastic case replacements.
In both scenarios, after the software updates, pad printing, repair and/or alteration by cleaning, testing, and refurbishing operations performed in Mexico, the remotes are repackaged with instructions and batteries in a sealed plastic bag to be returned to the United States. The articles remain embossed with “Made in China” on the back of the remote case throughout the refurbishment process.
Articles exported from and returned to the United States, after having been advanced in value or improved in condition by repairs or alterations in Mexico, may qualify for duty exemption under the HTSUS subheading 9802.00.50 provided the foreign operation does not destroy the identity of the exported articles or create new or commercially different articles through a process of manufacture. The Customs regulations which implement the NAFTA are contained in title 19 CFR Part 181. Section 181.64(a) defines "repairs or alterations" for purposes of NAFTA as follows:
“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.
On the basis of the information submitted, the Mexican operations enumerated above constitute "repairs or alterations" within the meaning of 19 CFR 181.64(a) and therefore the Remotes repaired or altered in Mexico are dutiable only upon the value of the foreign repairs or alterations. However, regarding the duty to be assessed on the value of the foreign repairs or alterations, U.S. Note 3(d) to Subchapter II of Chapter 98, HTSUS, is controlling. It states:
For the purposes of subheadings 9802.00.40 and 9802.00.50, the rates of duty in the "special" subcolumn of column 1 followed by the symbol "CA" or "MX" in parentheses shall apply to any goods which are returned to the United States after having been repaired or altered in Canada or in Mexico, respectively, whether or not such goods are goods of Canada or goods of Mexico under the terms of General Note 12 to the tariff schedule. The “special” subcolumn reflects a free rate of duty. Accordingly, the remotes will qualify for the full duty exemption provided by subheading 9802.00.5060, HTSUS, upon re-importation into the United States.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on World Wide Web at http://www.usitc.gov/tata/hts/.
As noted in 19 C.F.R. § 181.64 (c)(2), the port director may require additional information as is deemed necessary to prove actual exportation of the goods from the United States and subsequent re-importation of the same goods after alteration. The documentation must clearly follow the remotes through exportation, alteration, and re-importation. For information as to the documentation that will satisfy Section 181.64, C.R., you should contact the Port Director at the anticipated United States port of entry.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Karl Moosbrugger at [email protected].
Sincerely,
Gwenn Klein Kirschner
Director
National Commodity Specialist Division