Repair of generator stators

HQ 556419 March 20, 1992 CLA-2 CO:R:C:S 556419 RA CATEGORY: Classification TARIff NO.: 9802.00.50 Mr. William J. LeClair Administrative and Regulatory Advisor Trans-Border Customs Services, Inc. P.O. Box 800 Champlain, New York 12919 RE: Repair of generator stators Dear Mr. LeClair: This is in response to your letter of November 15, 1991, requesting a ruling on the applicability of the partial duty exemption in subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), to articles returned after exportation for repair abroad. FACTS: You state that your client Super Generator Canada of St. Hubert, Quebec, Canada, obtains burnt out generator stators from its U.S. subsidiary and returns them after repair. The repair operations consist of removing the burned out wire windings and insulation from the stators and replacing them with new materials. The repaired stators are dipped in varnish which serves as an insulator. The wire and insulators utilized in these operations are of U.S. origin and are cut to the exact length required. ISSUE: Are the repaired stators entitled to a partial exemption as articles returned after repairs abroad under subheading 9802.00.50, HTSUS? Is there any allowance for the value of the U.S.-made materials used in the repairs? -2- LAW AND ANALYSIS: Subheading 9802.00.50, HTSUS, provides a partial duty exemption for articles returned to the U.S. after having been exported to be advanced in value or improved in condition by means of an alteration or repair. Only completed or finished goods can qualify under this provision and the identity of the goods must not be lost or destroyed in the foreign process. We are of the opinion that the process of removing the burnt out windings and insulation, cleaning the stator core, replacing the old wire and insulation and applying a coating of varnish, constitutes a repair under the provisions of subheading 9802.00.50, HTSUS. These operations merely restore the stator to its original condition and permit it to be used again. Articles entitled to the partial exemption are dutiable only on the cost or value of the foreign repairs, provided the documentary requirements of section 10.8, Customs Regulations (19 CFR 10.8, copy enclosed) are satisfied. Section 10.8(1) provides that the cost or value of domestic as well as foreign articles used in the processing must be included in arriving at the basis for the assessment of duty. Accordingly, no allowance in duty can be authorized for the value of the U.S.-made wire and insulating material utilized in repairing the stators. HOLDING: On the basis of the described foreign operations, the repaired stators will be eligible for the partial duty exemption under HTSUS subheading 9802.00.50, but no allowance can be made for U.S.-made materials used in the processing abroad. This presumes compliance with the documentation requirements of 19 CFR 10.8. Sincerely, John Durant, Director Commercial Rulings Division Enclosure