Applicability of duty exemption under HTSUSA subheading 9801.00.10 to certain U.S.-origin articles rented in Canada.

HQ 557045 March 22, 1993 CLA-2 CO:R:C:S 557045 MLR CATEGORY: Classification TARIFF NO.: 9801.00.10 Mr. John G. White Olympic Laundry & Dry Cleaners Inc. 418 South Lincoln Street Port Angeles, Washington 98362 RE: Applicability of duty exemption under HTSUSA subheading 9801.00.10 to certain U.S.-origin articles rented in Canada. Dear Mr. White: This is in reference to your letter of November 24, 1992, requesting a ruling on the applicability of subheading 9801.00.10, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), to certain U.S.-origin articles rented in Canada and returned to the U.S. FACTS: Pursuant to your letter and a telephone conversation with a member of my staff, you state that you are proposing to start a rental business in Victoria, British Columbia, Canada. Various U.S.-origin articles, mainly consisting of wearing apparel, will be shipped to a warehouse in Victoria, where they will be rented for a fee. After the rented articles are returned to the warehouse, they will be shipped back to the U.S. for cleaning so that they may be rented again in Canada. After the useful life of an article, it will be destroyed in the U.S. When the U.S.- origin articles are returned to the U.S., after being rented in Canada, it is contended that they are entitled to duty-free treatment as American Goods Returned. ISSUE: Whether certain U.S.-origin articles, rented in Canada and returned to the U.S., are entitled to duty-free treatment under subheading 9801.00.10, HTSUSA. LAW AND ANALYSIS: Subheading 9801.00.10, HTSUSA, provides for the free entry of products of the United States that have been exported and returned without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, provided the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1, copy enclosed), are met. While some change in the condition of the product while it is abroad is permissible, operations which either advance the value or improve the condition of the exported product render it ineligible for duty-free entry upon return to the United States. Border Brokerage Company, Inc. v. United States, 314 F. Supp. 788 (1970), appeal dismissed, 58 CCPA 165 (1970). In determining whether an advancement in value or improvement in condition exists at the time of importation, the overall value and condition of the article at the time it was exported from the U.S. shall be compared with its overall value and condition at the time of return to the U.S. However, each case must be decided on its own facts. See Headquarters Ruling Letter (HRL) 091610 dated June 7, 1963. In HRL 063433 dated December 12, 1979, recreational vehicles of U.S. manufacture were leased in Canada for nine months, and used to travel through the U.S. to Florida once each year, remaining in the U.S. for a maximum of three months. Subsequently, the vehicles were returned to Canada. It was determined that these vehicles would be entitled to duty-free entry pursuant to item 800.00, Tariff Schedules of the United States (TSUS) (now subheading 9801.00.10, HTSUSA). In the instant case, it is stated that the articles, mainly consisting of wearing apparel, will be exported to Canada for rental purposes in a finished condition and will not be subjected to any foreign processing prior to their return to the U.S. Therefore, as long as the articles are returned to the U.S. in the same condition as exported, they may receive duty-free treatment under subheading 9801.00.10, HTSUSA, provided the district director of Customs is satisfied of their U.S. origin, and the documentation requirements of 19 CFR 10.1 are satisfied. HOLDING: On the basis of the information submitted, the U.S.-origin articles exported to Canada for rental, are eligible for duty- free treatment under subheading 9801.00.10, HTSUSA, upon their return to the United States, provided they will not be advanced in value or improved in condition while abroad, and the documentation requirements of 19 CFR 10.1 are satisfied. With regard to your questions concerning Canadian Customs requirements, we suggest you contact Chrystia Chudezuk in the Ministry of Finance, Ottawa, at (613) 996-5887. Sincerely, John Durant, Director Commercial Rulings Division