Applicability of partial duty exemption under HTSUS subhead- ing 9802.00.50 to water treatment equipment from Canada

HQ 555320 February 21, 1990 CLA-2 CO:R:C:V 555320 GRV CATEGORY: CLASSIFICATION TARIFF NO.: 9802.00.50 Ms. Deborah J. Clune PBB USA Inc. Customs Brokers P.O. Box 950 Buffalo, New York 14213 RE: Applicability of partial duty exemption under HTSUS subhead- ing 9802.00.50 to water treatment equipment from Canada Dear Ms. Clune: This is in response to your letter of February 3, 1989, to the District Director of Customs, Buffalo, New York, on behalf of Anderson Water Systems Ltd., requesting a ruling on the applic- ability of subheading 9802.00.40, Harmonized Tariff Schedule of the United States (HTSUS), to water treatment equipment from Canada. Your letter, as well as correspondence from your client, were forwarded to this office for a response. We regret the delay in responding to your request. FACTS: Your client, located in Dundas, Ontario, Canada, rents water treatment equipment to customers in the U.S. for use in the softening and demineralization of their particular water systems. The water treatment equipment consists of two sets of eight filtering canisters (one made of steel and 7 made of fiberglass), which contain anion exchange resin. One set of canisters is held in reserve until the resin in the on-line set requires cleaning, at which time the reserve canisters are placed on-line and the canisters containing the dirty resin are sent to Canada for a cleaning operation. In Canada, the dirty resin will be removed, cleaned and reinstalled in the canisters. Following the foreign cleaning operation, the canisters are returned to the U.S. where they are exchanged with the on-line set when the resin they contain becomes dirty. The time period between the exchange of tanks is estimated to average once per month. The resin cleaning operation is not done pursuant to a warranty. ISSUE: Whether the cleaning operation constitutes an acceptable "repair" of the resin material contained in water treatment equipment, for purposes of HTSUS subheading 9802.00.40 or 9802.00.50, thereby rendering the returned equipment eligible for the partial duty exemption available under the appropriate tariff provision. LAW AND ANALYSIS: Articles returned to the U.S. after having been exported to be advanced in value or improved in condition by repairs or alterations may qualify for the partial duty exemption under either HTSUS subheading 9802.00.40 (repairs or alterations made pursuant to a warranty) or subheading 9802.00.50 (other repairs or alterations), provided the foreign operation does not destroy the identity of the exported articles or create new or different articles. Articles entitled to this partial duty exemption are dutiable only upon the cost or value of the foreign repairs or alterations, provided the documentary requirements of section 10.8, Customs Regulations (19 CFR 10.8), are satisfied. Mere cleaning operations which restore exported merchandise to its original efficiency so as to prolong its usefulness have long been considered "repairs" for purposes of HTSUS subheading 9802.00.50 and its precursor provision, item 806.20, Tariff Schedules of the United States (TSUS), so long as the identity of the merchandise exported was not destroyed, nor a new or different article created. See, T.D. 56516(1), 100 Treas.Dec. 693 (1965) (cloth "scoured" in England by passing it through a solvent of boiling trichloroethylene to remove waxes and fatty material, and further processed to remove remaining trichloro- ethylene and any water-soluble materials, was entitled to the partial exemption from duty under TSUS item 806.20, as the processing abroad was considered a repair or alteration); and Headquarters Ruling Letters 555318 (September 20, 1989) (textile articles soiled in the U.S. and sent to Mexico for laundering, which included washing, drying and pressing, were eligible for HTSUS subheading 9802.00.50 treatment) and 067432 (October 6, 1981) (industrial work gloves exported to Canada for cleaning were entitled to TSUS item 806.20 tariff treatment). Consistent with these precedents, we find that the resin cleaning operation in the present case constitutes a repair of the resin, within the meaning of HTSUS subheading 9802.00.50 (HTSUS subheading 9802.00.40 is inapplicable because no warranty is involved), as dirty resin is merely restored to its original condition for continued customers' use. Accordingly, the water treatment equipment will be eligible for the partial duty exemption under HTSUS subheading 9802.00.50, provided the documentary requirements of 19 CFR 10.8 are met. CONCLUSION: On the basis of the described foreign operation, the water treatment equipment, consisting of a set of 8 resin-filled canisters, will be eligible for the partial duty exemption under HTSUS subheading 9802.00.50 when returned to the U.S., upon compliance with the documentary requirements of 19 CFR 10.8. Sincerely, John Durant, Director Commercial Rulings Division