HQ 555135: Applicability of partial duty exemption of item 806.20, TSUS, to automobiles exported to Mexico to be disassembled, repaired and refurbished

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                                      HQ 555135

                                  October 18, 1988

          CLA-2  CO:R:C:V  555135 DBI

          CATEGORY:  Classification

          TARIFF NO.:  9802.00.40; 806.20

          Mr. Alfred Roser
          Roser Customs Service, Inc.
          P.O. Box 48
          Brownsville, Texas 78520

          RE:   Applicability of partial duty exemption of item 806.20,
                TSUS, to automobiles exported to Mexico to be disassembled,
                repaired and refurbished

          Dear Mr. Roser:

                This is in response to your letters of June 2 and August
          20, 1988, on behalf of Mr. Mervin J. Yetley, concerning the
          applicability of item 806.20, Tariff Schedules of the United
          States (TSUS), to passenger automobiles exported to Mexico to be
          repaired and refurbished and then returned to the U.S.

          FACTS:

                You state that the process begins with an evaluation in the
          U.S. of the repairs to be made to each passenger automobile.
          After the necessary replacement parts are obtained for each
          automobile, the automobile and the parts will be exported from
          the U.S. to Mexico.  All automobiles, parts, and supplies (oil,
          lubrication, welding rods, etc.) to be exported to Mexico will be
          of U.S. origin.

                In Mexico, various major components will be removed as
          necessary and mechanical components will be disassembled to the
          extent required.  After disassembly, the need for any additional
          required repairs will be noted, at which time arrangements will
          be made to purchase any additional parts from the U.S. and export
          them to Mexico.

                Components, such as the engine and drivetrain as well as
          the steering and suspension, will be rebuilt and repaired in
          Mexico.  Repairs will be made to other components, including the
          frame, shell, seats, etc., as needed.  Disposable items, such as
          oil, brake shoes, tires and filters normally will be replaced.
          The frame, bumpers, and other body parts usually will be repaired
          by straightening and/or welding.  In some cases replacement of
          these parts will be required.  Items such as seats, headliners,












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          carpets and dash items will be repaired when possible, but in
          most cases it is expected that these units will be replaced or
          will require some replacement parts.  Defective windows,
          windshields, bulbs, lens covers and mirrors will be replaced.
          The automobile will be reassembled and painted and a protective
          undercoating may be added.  Additional items, such as trim and
          decals, will be added as needed.  The repaired/refurbished
          automobiles will then be returned to the U.S. for sale.

          ISSUE:

                Whether the described passenger automobiles, when returned
          to the U.S., will be eligible for the partial duty exemption in
          item 806.20, TSUS (9802.00.40, Harmonized Tariff Schedule of the
          United States (HTSUS)).

          LAW AND ANALYSIS:

                Item 806.20, TSUS, provides for the assessment of duty on
          the value of repairs or alterations performed on articles
          exported for that purpose.  However, the application of this
          tariff provision is precluded in circumstances where the
          operations performed abroad destroy the identity of the articles
          or create new or commercially different articles.  See A.F.
          Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1957);
          Guardian Industries Corporation v. United States, 3 CIT 9, Slip
          Op. 82-4 (Jan. 5, 1982).  Item 806.20, TSUS, treatment also is
          precluded where the exported articles are incomplete for their
          intended use and the foreign processing operation is a necessary
          step in the preparation or manufacture of finished articles.
          Dolliff and Company, Inc. v. United States, 66 CCPA 77, C.A.D.
          1225, 599 F.2d 1015 (1979).

                We have previously held that certain repairs performed
          abroad on U.S.-made automobiles are eligible for item 806.20,
          TSUS, treatment.  For instance, we held in a ruling dated July
          22, 1981 (HQ 542424), that U.S.-made automobiles exported to
          Japan for the purpose of converting the engine to incorporate
          emission systems were eligible for treatment under item 806.20,
          TSUS.  The modifications made in Japan to the cylinder heads,
          intake and exhaust manifolds, carburetors and other parts were
          found not to create a new or commercially different automobile
          upon its return to the U.S.

                In a ruling dated February 2, 1979 (HQ 058822), we held
          that U.S.-made automobiles exported to Mexico for installation of
          a replacement body were entitled to item 806.20, TSUS, treatment.
          We reasoned that the returned automobiles were the same completed
          articles of commerce dedicated to the same use with the described
          modifications.  The foreign processing of the exported












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          automobiles did not produce changes in the performance
          characteristics of the exported article that would alter its
          subsequent handling and uses over that which earlier prevailed.

                In the present case, the described foreign repairs and
          refurbishments do not create a new or commercially different
          article.  The automobiles that are returned are the same articles
          as those exported with the described modifications.

                The cost or value of replacement parts, irrespective of
          origin, used in the repair or refurbishment of the returned
          automobiles are to be included in the value of the repairs
          performed abroad.  Any part included in a returned automobile
          which was not a part of the automobile exported for repair is
          considered a replacement part.

          HOLDING:

                On the basis of the information submitted, it is our
          opinion that the foreign repairs and refurbishments may be
          considered a repair within the meaning of item 806.20, TSUS, and,
          therefore, the returned automobiles are entitled to tariff
          treatment under item 806.20, TSUS, upon compliance with section
          10.8, Customs Regulations (19 CFR 10.8).

                                     Sincerely,




                                     John Durant
                                     Director, Commercial
                                     Rulings Division