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HQ 222863

July 1, 1991

CON-3-01 CO:R:C:E 222863 TLS


Mr. Michael J. Spain
Sonnenberg, Anderson, O'Donnell & Rodriguez 200 West Adams Street Suite 2625
Chicago, Illinois 60606

RE: Reimportation of merchandise under heading 9801 of the Harmonized Tariff Schedule of the United States Annotated

Dear Mr. Spain:

Your letter of October 3, 1990, requesting a binding ruling on the above-referenced matter has been forwarded to this office for consideration. We have considered the points raised in your submission and our decision follows.


You state that your client, Imperial World, Inc., is currently importing precious jewelry samples under heading 7113 of the Harmonized Tariff Schedule of the United States Annotated (HTSUSA). Included in these samples are gold rings, bracelets, necklaces, and pendants. Some of the articles are gem-set with precious or semiprecious stones, such as diamonds, sapphires, rubies, emeralds, topaz, and amethyst, among others.

Some of these articles are occasionally sent back to the factory where they were made so that they may be exhibited to customers visiting the manufacturing plant. You state that the merchandise sent back is used only for exhibition purposes; no further processing or manufacturing is done to these articles. You also state that Imperial World (hereafter, "Imperial" or "importer"), does this because it finds establishing inventories at both the manufacturing plant and in the United States to be too expensive.

After the merchandise has been exhibited at the manufacturing plant, Imperial reimports it back into U.S. Customs territory. The importer wishes to have the reimported merchandise classified under HTSUSA subheading 9801.00.20, which would entitle it to duty-free status. Imperial imports and reimports most of its jewelry through the port of Chicago and would like to have this ruling apply to prospective entries.


Whether the articles as reimported into Customs territory after being exhibited abroad are entitled to duty free treatment under HTSUSA heading 9801.


Under HTSUSA, the following is provided for:

9801.00.20 Articles, previously imported, with respect to which duty was paid upon such previous importation or which were previously free of duty pursuant to the Caribbean Basin
Economic Recovery Act or Title V of the Trade Act of 1974, if (1) reimported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, after having been exported under lease or similar use agreements, and (2) reimported by or for the account of the person who imported it into, and exported it from, the United States.....Free
(emphasis added.)

The predecessor of 9801.00.20 was item 801.00 of the Tariff Schedules of the United States (TSUS). That particular provision was amended in 1984 to provide for, inter alia, articles that had been exported under similar use agreements and leases to entities other than foreign manufacturers. Trade and Tariff Act of 1984, Pub. L. No. 98-573, 118, 98 Stat. 4922 (1984). Before the amendment, duty free treatment applied only to merchandise that had been exported under lease to foreign manufacturers.

In the present case, the importer makes no mention of a lease agreement between the manufacturer and itself. Rather, Imperial claims that it qualifies for the 9801 exemption under the similar use provision. The particular use in this case would be the exhibition of the articles at the manufacturing plant. The importer further states that the manufacturer does not pay for the use of the samples and that both parties benefit through customers' orders as a result of the exhibition. Upon reimportation, Imperial World is also the importer of record in this instance as well as during the original importing.

While there exists no court case precedent interpreting "similar use agreement" under 9801, and the legislative history of the provision does not provide a clear definition, we find "similar use agreement" to mean an agreement similar to that of a lease. We believe the provision was added to cover transactions that do not involve formal lease agreements but are very much like leases in most respects. In fact, in the legislative history of the House bill that introduced this particular amendment, it is stated that "[t]he intent of this legislation is to extend coverage of [801.00] to the reimportation of goods which were exported under lease to someone other than a foreign manufacturer..." H.R. Rep. No. 34, 98th Cong., 2d Sess. 157 (July 25, 1984). Given as much, we must now decide whether the agreement between Imperial and the manufacturer is similar to a lease agreement.

Imperial contends that the agreement between it and the manufacturer constitutes a "bailment" situation and further states that this is a type of similar use agreement referred to under 9801. The term "lease" has been defined as follows:

When used with reference to tangible personal property, [the] word "lease" means a contract by with one owning such property grants to another the right to possess, use and enjoy it for specified period of time in exchange for periodic payment of a stipulated price, referred to as rent. Black's Law Dictionary 800 (5th ed. 1979).

A lease may be distinguished from the present transaction by applying the following definition of "bailment":

A delivery of goods of personal property, by one person to another, in trust for the execution of a special object upon or in relation to such goods, beneficial to either to the bailor or bailee or both, and upon a contract, express or implied, to perform the trust and carry out such object, and thereupon either to redeliver the goods to the bailor or otherwise dispose of the same in conformity with purpose of the trust. (emphasis added). Black's Law Dictionary 179 (5th ed. 1979).

Specific kinds of bailment are further defined; a "gratuitous bailment" best describes the situation in the present case and it is defined as follows:

Another name for a depositum or naked bailment, which is made only for the benefit of the bailor and is not a source of profit to the bailee. Black's Law Dictionary 180 (5th ed. 1979).

The important distinction between the bailment situation the importer refers to and a formal lease agreement is the absence of a payment in a bailment arrangement. In this sense, a bailment is more like a use agreement. Referring back to the legislative history, we find that the expressed intent of the provision is to facilitate entry of the articles reimported without having been enhanced or further processed while abroad. In this sense, the distinction between those articles leased upon exportation and those merely subject to a "use" agreement of some kind is irrelevant to the purpose of the law. It is clear that with the 1984 amendment to 801.00 Congress intended to make the law less restrictive in meeting its goals. Accordingly, the spirit of the law indicates that we not concern ourselves with whether or not the importer leased the merchandise upon exportation. There is nothing in the law or legislative history, either expressed or implied, that suggests the application of 9801.00.20 hinged upon a transaction involving a payment. Therefore, in light of the importer's adherence to all of the requirements stated under the relevant law, we find that Imperial's reimportation of the subject merchandise is eligible for duty free status under subheading 9801.00.20.


The reimportation of articles of jewelry is eligible for duty free status under HTSUSA subheading 9801.00.20, being that duty had been previously paid on the merchandise, they were not advanced in value or improved in condition while abroad, and they were reimported by the party who exported them from the United States under a similar use agreement.


John Durant, Director

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