Eligibility under Civil Aircraft Agreement of Parts for Military Aircraft

HQ 967954 NOVEMBER 23, 2005 CLA-2 RR:CTF:TCM 967954 JAS CATEGORY: Classification TARIFF NO.: None Mr. Randy Rucker Gardner Carton & Douglas LLP 191 N. Wacker Drive, Suite 3700 Chicago, Il 60606-1698 RE: Eligibility under Civil Aircraft Agreement of Parts for Military Aircraft Dear Mr. Rucker: In letters dated August 1 and October 19, 2005, on behalf of Raytheon Aircraft Company (RAC), you inquire as to the eligibility for duty-free treatment of certain parts and components under the Agreement on Trade in Civil Aircraft or Civil Aircraft Agreement (CAA). Our response follows. FACTS: Parts and components imported for use in the manufacture of civilian aircraft may, after importation, be diverted for use in fulfilling contracts with the United States government and the governments of foreign countries for the manufacture of military aircraft. These parts and components and the aircraft into which they will be incorporated will be manufactured pursuant to Type Certificates and Production Certificates issued by the Administrator of the Federal Aviation Administration under section 44702 of title 49, United States Code. ISSUE: Whether parts and components imported as described qualify for duty-free treatment under the CAA. - 2 - LAW AND ANALYSIS: Under General Rule of Interpretation (GRI) 1, Harmonized Tariff Schedule of the United States (HTSUS), goods are to be classified according to the terms of the headings and any relative section or chapter notes, and provided the headings or notes do not require otherwise, according to GRIs 2 through 6. Parts and components sought to be eligible for duty-free treatment under the CAA must satisfy the requirements of General Note 6, Harmonized Tariff Schedule of the United States, and section 10.183, U.S. Customs and Border Protection Regulations. Paragraph (b) of Note 6 states in relevant part as follows: *** (b) (i) For purposes of the tariff schedule, the term “civil aircraft” means any aircraft, aircraft engine, or ground flight simulator (including parts, components, and subassemblies thereof)-- that is used as original or replacement equipment in the design, development, testing, evaluation, manufacture, repair, maintenance, rebuilding, modification, or conversion of aircraft; and (1) that is manufactured or operated pursuant to a certificate issued by the Administrator of the Federal Aviation Administration (the “FAA”) under section 44704 of title 49, United States Code, or pursuant to approval of the airworthiness authority in the country of exportation, if such approval is recognized by the FAA as an acceptable substitute for such an FAA certificate; for which an application for such certificate has been submitted to, and accepted by, the Administrator of the FAA by an existing type and production certificate holder pursuant to section 44702 of title 49, United States Code, and regulations promulgated thereunder; - 3 - *** (ii) The term “civil aircraft” does not include any aircraft, aircraft engine, or ground flight simulator (or parts, components, and subassemblies thereof) purchased for use by the Department of Defense or the United States Coast Guard, unless such aircraft, aircraft engine, or ground flight simulator (or parts, components, and subassemblies thereof) satisfies the requirements of subdivisions (i)(A) and (i)(B)(1) or (2). U.S. Customs and Border Protection (CBP) acknowledges that provisions of the Miscellaneous Trade and Technical Corrections Act of 1996 (P.L. 104-295, 110 Stat. 3514 (Oct.11, 1996) expanded General Note 6(b)(ii), in part, by including within the definition of “civil aircraft” parts and components imported by or on behalf of the Department of Defense or the U.S. Coast Guard. Thus, parts or components imported by RAC for use as original or replacement equipment in the manufacture of civilian aircraft but diverted, after importation, for use in the manufacture of military aircraft for the Department of Defense or the U.S. Coast Guard, pursuant to Type Certificates and Production Certificates issued by the FAA under sections 44702 and 44704 of title 49, United States Code, and regulations promulgated thereunder, are within the term “civil aircraft” for purposes of eligibility for duty-free treatment under the CAA. The same result obtains for parts and components imported by RAC for use in the manufacture of military aircraft for another agency of the United States Government, upon compliance with the requirements of subdivisions (i)(A) and (i)(B)(1) or (2). Prior to 1996, issues of the eligibility under the CAA of parts and components imported for use in manufacturing military aircraft for sale to foreign governments were considered moot inasmuch as the FAA did not certify such parts and components for military use. See HQ 224013, dated October 19, 1992. Now, however, parts and components RAC imports for use in the manufacture of military aircraft for sale to foreign governments pursuant to Type Certificates and Production Certificates issued by the FAA, as discussed in the preceding paragraph, are eligible for duty-free treatment under the CAA. HOLDING: In the circumstances described above, parts and components which, upon importation, are classifiable in provisions of the Harmonized Tariff Schedule of the United States for which the rate of duty “Free (C)” appears in the “Special” - 4 - subcolumn, and which are found to be within the term “civil aircraft” in General Note 6(b)(ii), HTSUS, are eligible for duty-free treatment under the CAA upon compliance with the law and all CBP regulations. Sincerely, Gail A. Hamill, Chief Tariff Classification and Marking Branch