Applicability of subheading 9802.00.50, HTSUS, to certain automotive compressors repaired abroad

HQ 555007 March 20, 1989 CLA-2-CO:R:C 555007 RA CATEGORY: Classification TARIFF NO: 9802.00.50, HTSUS Mr. Bill McKeown McKeown Customs Brokers 1809 Farragut Street Laredo, Texas 78040-0909 RE: Applicability of subheading 9802.00.50, HTSUS, to certain automotive compressors repaired abroad Dear Sir: This is in response to your letter of April 25, 1988, in which you inquire on behalf of Smith & Sons, Inc. regarding the applicability of the repair provision in subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), to automotive compressors which are subjected to certain repair operations in Mexico. FACTS: Your client is sending broken-down automotive compressors to a repair shop in Mexico where they are disassembled into their constituent parts, which are then sorted, placed into large vats, cleaned in acid, and sometimes further cleaned with sandpaper and a chemical solution. Unrepairable parts, which could vary from unit to unit, are discarded and replaced with new parts. The cleaned components are then reassembled with any new parts, and the reassembled compressors are tested, painted, packed, and shipped to the U.S. ISSUE: Whether the repaired automotive compressors are entitled to the partial duty exemption provided for in subheading 9802.00.50, HTSUS, upon their return to the U.S. LAW AND ANALYSIS: Effective January 1, 1989, the HTSUS superseded and replaced the Tariff Schedules of the United States (TSUS). Item 806.20, TSUS, was carried over into the HTSUS, in part, as subheading 9802.00.50. Subheading 9802.00.50, HTSUS, provides - 2 - for the assessment of duty on the value of repairs or alterations performed on articles sent abroad for that purpose. However, an article exported for repairs may not receive the benefits of this tariff provision upon its return where the foreign processing destroys the identity of the exported article or creates a new and different article. Press Wireless, Inc. v. United States, 6 Cust. Ct. 102, C.D. 438 (1941). In rulings 554568 and 554539 (both dated August 25, 1987; copies enclosed) we held that where certain defective articles are exported and disassembled into multiple parts, and these parts are stored in separate bins or containers, cleaned, replaced with new parts, where necessary, and then reassembled, the resulting articles are dutiable on their total cost or value. We stated that the complete disassembly, separate storage of parts, and reassembly into new and different units constitute operations beyond repairs which not only destroy the identity of the exported units but result in new and different manufactured articles. We believe that the holdings in these rulings are controlling in regard to repair operation described in your letter. We are enclosing for your information a copy of ruling 555117 dated December 22, 1988, in which we held that alternators repaired abroad qualify for subheading 9802.00.50, HTSUS, treatment because the essential identity of the articles is maintained throughout the foreign repair process. HOLDING: Where articles are exported for repairs and the operations performed abroad consist of disassembly, sorting of parts into different bins, cleaning, and reassembly into new units which cannot be identified as the exported articles in a repaired condition, the tariff treatment provided for in subheading 9802.00.50, HTSUS, is inapplicable. Sincerely, John Durant, Director Commercial Rulings Division Enclosures