CBP Says Classification Unimportant When Considering Duty Exemptions for Repairs, Alterations
The use of the same Harmonized Tariff Schedule of the United States (HTSUS) subheading upon export from and import into the U.S. is of "little importance" to CBP when considering eligibility of duty exemptions for goods returned to the U.S. after repairs or alterations, CBP said in a Jan. 2 ruling. CBP's ruling came in response to a request from FedEx Trade Networks, Transport and Brokerage (Canada) about trucks outfitted with document shredders. A Canadian shredding company, Shred-Tech, has a U.S. customer of that would like to purchase shredding trucks from Shred-Tech, FTN told CBP.
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The U.S. customer would like to "supply the chassis from Japan and export it to Canada, where both trucks will be assembled," CBP said. Shred-Tech asked CBP about whether the chassis portion of the shredding trucks will be eligible in subheading 9802.00.50. That subheading allows for full or partial duty exemptions on articles returned to the U.S. after being advanced in value or improved through repairs or alteration. To be eligible for the subheading, the repairs or alteration must not destroy the essential character or create a commercially different good, CBP said.
Shred-Tech argued that "since the chassis is exported into Canada under tariff heading 8704.22 and then, after assembly, imported back into" the U.S. with the same classification, the chassis is eligible. The use of the same subheading shows "the assembly abroad does not destroy the identity of the chassis or create a new commercially different article," the company told CBP. But "CBP gives little importance to the article’s classification" to determine eligibility for the duty exemptions, it said.
Instead, CBP looks at "whether the article is complete for its intended use when exported," it said. Here, the chassis will be exported to Canada for the mounting of the mobile shredder, CBP said. "Although the chassis alone could be used for other purposes, the chassis cannot shred or collect documents until the mounting operations are performed," it said. "Thus, the chassis will be incomplete for their intended use when exported to Canada and the mounting operations will not constitute a repair or alteration."