Car Parts Temporarily Exported for Sale at Auto Races Might Re-Enter Duty-Free, CIT Says

Porsche Motorsport exported three shipments of “automotive replacement and repair tools, parts and accessories” in a trailer to Canada as “emergency” support to Porsche race teams at three GT3 Cup Challenge races in 2014. For each trailer, it filed CBP Form 4455 Certificates of Registration indicating its intent to temporarily export them and the reason for doing so. The parts were sold only to race teams, not the general public, but sold parts were not subsequently returned to Porsche Motorsport. After each of the three races, Porsche Motorsport reimported the remainder of the shipments.

After extending liquidation, CBP eventually classified the car parts and tools in their regular respective subheadings in the tariff schedule, assessing $122,605.12 in duties, taxes and fees on Porsche Motorsport. Porsche Motorsport protested, arguing the goods should have instead been classified in the duty-free subheading 9801.00.85.00 as “… tools of trade, occupation or employment, when returned to the United States after having been exported for use temporarily abroad, if imported by or for the account of the person who exported such items.”

Before the court, the government argued the shipments don’t qualify for the special classification. The entries were not “tools” used in Porsche Motorsport’s “trade, occupation or employment,” and hadn’t been exported to be used in repairs, but rather to be sold, it said. According to the government, the entries consisted of “a bunch of loose automobile parts being shipped across the border for sale, like a kiosk.”

For its part, Porsche Motorsport cited three rulings, one of which said subheading 9801.00.85 only requires export for temporary use abroad and importation by the original exporter, but does not require the merchandise to be used by the person who exported it. The other two said “kits” for repairing aircraft or engines that included parts that are re-imported with some of those parts missing are also classifiable in the duty-free subheading.

CIT found no issue with how the parts and tools were “used.” A trailer of replacement parts made available at races in an emergency is a use that is at least “theoretically” covered by subheading 9801.00.85, it said. But neither Porsche nor the government had presented enough evidence as to whether the goods could be considered “tools of the trade.”

The court cautioned that, in their further arguments, the government and Porsche should keep in mind that double taxation “is not a preferred result.” Double taxation “may be said to exist when both taxes have been imposed in the same year, for the same purpose, upon property owned by the same person, and by the same taxing authority,” CIT said. “The court has drawn no conclusions as to whether the entries at bar are or are not to be classified in subheading 9801.00.85.00, but the parties should bear the foregoing in mind as they consider the alternatives and return to negotiations to move the case forward,” it said.

Porsche Motorsport had also argued that the entries should have deemed liquidated and been classified as entered in subheading 9801.00.85 because the government waited more than a year to extend liquidation, but CIT said the timeline is in dispute, and can’t be determined without further trial. Porsche Motorsport also said deemed liquidation should have occurred because the government didn’t give a reason for the extensions in its notices, as required by law. But “the current state of law, however, is that the failure to include a reason for an extension on such notice constitutes harmless error and does not invalidate the extension notice,” CIT said.

(Porsche Motorsport North America, Inc., v. U.S., CIT # 16-00182, Slip Op. 18-105, dated 08/22/18, Judge Musgrave)

(Attorneys: Carl Cammarata of the Law Offices of George R. Tuttle for plaintiff Porsche Motorsport North America, Inc.; Stephen Josey for defendant U.S. government)