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HQ 559483




October 17, 1996

CLA-2 RR:TC:SM 559483 MLR

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.50

Port Director
U.S. Customs Service
610 W. Ash St.
San Diego, CA 92188

RE: Application for Further Review of Protest No.2501-95-100033; Denial of duty exemption under HTSUS subheading 9802.00.50 to Kodak Model C copier; Mexico; 19 CFR 181.64(c)

Dear Sir/Madam:

This is in reference to a protest and application for further review filed by Ross & Associates, on behalf of Eastman Kodak Company ("Kodak"), contesting the denial of the duty exemption under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), to photocopiers imported from Mexico. A meeting was held at the Office of Regulations & Rulings on April 22, 1996, and charts and photographs were submitted at that time.

FACTS:

The articles covered by this protest were entered October 1994, they were reliquidated either March 30 or April 14, 1995, and the protest was timely filed on May 18, 1995. It is stated that Kodak exported used model B copier-duplicators to Mexico, performed various processes to these copiers, and imported model C copier-duplicators to the U.S. It is claimed that the processes performed in Mexico were "repairs and alterations" and that the returned articles qualified for duty-free entry under subheading 9802.00.50, HTSUS. Before describing the processes performed to make a model B into a model C, counsel describes the processes performed on a model B when there was no change in model number, as it is stated that the processes employed were almost identical to those employed when the model B becomes a model C.

The model B processes performed when there is no change in model number involve disassembling the copiers, cleaning them, and replacing worn parts. It is also stated that if there was an engineering enhancement, newer model parts were installed to replace old and outdated ones. The disassembled subassemblies were routed through subassembly work stations with unique identifiers so that the repaired subassemblies could be installed into the same copier during the reconditioning phase. According to protestant, the Mexican plant did not perform optical alignments; therefore, the reassembly process kept subassemblies together which had been mated at the time of original manufacture. The copier underwent a set-up and test process. It is alleged that the reconditioned model B copier was returned to the U.S. without change to its essential components (the image capture system (lenses and film handling assembly)). Both of the copiers are stated to be referred to as "indirect process electrophotostatic copiers," and six Erasable Programmable Read-Only Memory chips ("EPROMS") were erased and reprogrammed to accommodate updated operating instructions triggered by the new document feeder.

Next, counsel presents the processes performed to convert a model B to a model C. It is stated that none of the operations sped up the photocopier or altered the type or size of paper the copier is able to process. Speed and paper size and type are stated by protestant to be the criteria in the marketplace to determine whether or not a copier has been upgraded. The only features which appeared on the model C which did not appear on the model B were the specific document feeder and the Pressure Assist Corona Transfer (PACT). The document feeder incorporates a semi-automatic positioning feature. The PACT modification keeps the paper flatter as it works its way through the imaging process but allegedly does not change the copier's function. When the document feeder was installed, it required a modification to the static eliminator harness in the duplex tray and the positioner interlock harness in the cabinetry as the remaining internal space was diminished. As a result, a new wire harness was inserted to make the static eliminator smaller.

Counsel also states that new circuit boards were substituted whether or not the processes resulted in a change in model number. However, the model C required different circuit boards. The existing EPROMS were reprogrammed and the input/output boards were modified by soldering an additional wire which allowed the machine to operate either as a model B or a model C. The EPROMS reprogramming supposedly arose to accommodate the new document feeder.

The chart of the model B to model C process indicates that in regard to the Imaging Assemblies, the film belt and worn components were replaced in the film belt and handling assembly; worn components were replaced in the toner and developer assembly and in the charging assemblies; and an upgraded cleaning housing was added to the cleaning assembly. In regard to the Optics Assemblies, worn components were replaced in the lens/mirror assembly, and worn components and the platen glass was replaced in the platen glass and illumination housing. In regard to the User Control Assemblies, worn components were replaced in the operator control panel assembly, and a new display panel was installed along with a new color scheme. In regard to the Paper Handling Assemblies, a new document feeder/positioner assembly was made reusing some components and incorporating a semi-automatic positioning feature; worn components were also replaced in the paper supply assembly, registration assembly (along with the PACT change), duplex paper path assembly, transport assembly, and worn vacuum system components were replaced. In regard to the logic and control unit, the EPROMS were reprogrammed to accommodate the semi-automatic positioning feature. Additionally, change occurred to the color scheme, the top cover was modified and a tray assembly and side hopper were installed to accommodate the positioner.

Your office states that the model B did not possess the necessary mechanical hardware, circuitry, document positioner, tri-modal feeder, auto-sizing capabilities, PACT and programming required for the model C to exist. Your office states that the model B was known as a copier-duplicator, while the model C was known as an offset copier-duplicator. The model C's tri-modal feeder takes normal paper weights and sizes automatically through the recirculating feeder, or it copies odd size and weight originals through the semi-automatic positioner, or it allows for manual copying. The auto-sizing capabilities reduce the image size of the original to fit the selected paper supply, and it is capable of offset stacking.

Thus, your office disagrees with protestant that the only features on the model C that were not on the model B copier, were the document feeder and PACT. Your office states that the PACT is not a simple mechanical device which holds a piece of paper in place to enhance the quality of the copy produced during the imaging process, but rather its purpose is to aid in preventing white spots on the second side of duplex copies in low humidity environments. This modification not only enhanced the second side transfer characteristics by adding hardware, a solenoid, circuit board, harness, and a mylar flap, but further contributed to the creation of the model C with its tri-modal feeder and new document positioner.

Your office states that the registration assembly (mechanical) was altered to accommodate the addition of the PACT, if the model B received from the U.S. did not already have this modification installed. Registration assembly was done by installing a new circuit board and wire harness in the main frame. A paper supply cover and a document positioner hopper were created to guide and capture originals because the model C is a tri-modal feeder. The EPROM reprogramming contained the latest software enhancements made to the model B software plus the additional feature of auto paper size reduction.

The brochure describing the model B copier states that it delivers 85 copies per minute. Special features include the margin shift, an edge erase, automatic chapterization which inserts divider pages, and interleaf of transparencies. The model B uses 8 x 10 through 8 « x 14 inch copy paper which is commercially available xerographic and duplicator bond. The brochure describing the model C copier states that it delivers 85 copies per minute, but that it also handles different paper weights (onion skin to 110 pound index) and different paper sizes (memo size 7.5 x 7.5 inches to computer printouts up to 11 x 17 inches) through the positioner, whereas the 8 x 10 to 8 « x 14 documents are handled through the feeder. Along with the other features of the model B copier, the brochure states that the model C has auto-sizing which automatically reduces the image size of the original to fit the paper supply selected.

ISSUE:

Whether the conversion of a Kodak Model B copier to a Kodak Model C copier constituted a repair or alteration within the meaning of subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), thereby qualifying the returned Model C copier for the duty exemption under this tariff provision.

LAW AND ANALYSIS:

Articles exported from and returned to the U.S., after having been advanced in value or improved in condition by repairs or alterations in Mexico, may qualify for a duty exemption under HTSUS subheading 9802.00.50, provided the foreign operation does not destroy the identity of the exported articles or create new or commercially different articles through a process of manufacture. See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956), aff'g C.D. 1752, 36 Cust. Ct. 46 (1956); Guardian Industries Corp. v. United States, 3 CIT 9 (1982). Articles are entitled to this duty exemption provided the documentary requirements of section 181.64(c), Customs Regulations (19 CFR 181.64), are satisfied. In particular, the documentation required includes a declaration from the person who performed the repairs or alterations, which describes the operations performed and the value and cost of such operations and which includes a statement that "no substitution whatever has been made to replace any of the goods originally received."

"Repairs or alterations" are defined in 19 CFR 181.64 as the restoration, addition, renovation, redyeing, cleaning, resterilizing, or other treatment which does not destroy the essential characteristics of, or create a new or commercially different good from, the good exported from the U.S.

Your office contends that rulings allow for programming and reprogramming of an article's PROMs and EPROMs under 9802.00.50, HTSUS, where the article's performance characteristics upon foreign processing are upgraded and enhanced, and do not alter the exported article's handling and uses over that which earlier prevailed. It is your view that these rulings are distinguishable from the copier at issue since the foreign processing of the model B altered its handling and uses over that which earlier prevailed, and the replacement and reprogramming of the EPROMS created a new and different article of commerce with attributes and functions that are unique to the model C.

Counsel claims that the essential components of a copier are its imaging and paper handling processes, both of which are stated to remain essentially unchanged except for the descriptions noted in the model B to Model C process. Specifically, counsel has noted that the image capture system refers to the "lenses and film handling system." Rather, counsel claims that some minor mechanical devices were added to the model B and its six EPROMs were reprogrammed.

We note that under Additional Note 5, Chapter 90, HTSUS, copier assemblies are grouped as follows: (a) Imaging assemblies; (b) Optics assemblies; (c) User control assemblies; (d) Image fixing assemblies; (e) Paper handling assemblies; and (f) Combination of the above specified assemblies. In our opinion, the order of the listed assemblies, (a) through (e), reflected in U.S. Note 5, is indicative of their significance to the copier. Therefore, for purposes of our determination of eligibility for subheading 9802.00.50, HTSUS, treatment, we have focused upon the effect of the operations performed abroad upon the above copier assemblies.

Repairs

Repairs are operations aimed at restoring articles to their original condition, but cannot be so extensive as to destroy the identity of the exported article or to create a new and different article. Press Wireless, Inc. v. United States, 6 Cust. Ct. 102, C.D. 438 (1941). In Press Wireless, radio tubes were sent abroad for repairs which involved the use of heavier filament than that used in the original manufacture of the tubes. Also, the markings on the articles were erased, and new numbers were substituted to facilitate matching the tubes for use in transmitters. The court held that the use of improved materials in the restoration was immaterial, as long as the article was not considered a new and different article of commerce or its identity was destroyed.

In previous rulings, we have held that subheading 9802.00.50, HTSUS, will be applicable to articles subject to both partial and complete disassembly, where repairs are made and parts are replaced as long as the essential components and, therefore, the identity of the article remains intact throughout the repair process. See HRL 557991 dated October 17, 1991.

In HRL 558858/558859 dated March 11, 1996, Customs considered seven models of used copier "hulks" which were repaired, upgraded, and/or modified in Mexico. In each case, the frame of the "hulk" remained intact, and the components such as the wiring harnesses, optics assemblies, printed circuit boards, and other electronic subassemblies remained assembled to the hulk at all times. The operations performed in Mexico involved removing the covers, feeder assembly, fuser, developer houser, xerographic motor, control panel, bypass, platen glass, coroton, copy cartridge and bypass tray assembly. The covers were sanded and painted, and the platen glass and other non-repairable parts were scraped. Next, the fuser, developer housing and bypass were sent to subassembly stations for repair. The partially torn-down hulk was then sent to an assembly and repair area where the enabler, low and high voltage power supplies, power cord, main printed wiring board assemblies (pwba), paper size pwba, feeder motor, copy cartridge, counter solenoid, counter, balance spring, half rate cartridge, and front/rear rail were removed, repaired, and reassembled along with the previously removed parts.

During the period of 1992-1993, in HRL 558858/558859, the frames, optics, wiring harnesses, optical control boards, optical drive motor, noise filter, fans, blower, discharge lamp, lower cover base, paper feeder motor, ac driver and sensor pwbas, and the low and high voltage power supplies were left intact on the hulk. During the period of 1993-1995, the paper feeder motor, ac driver and sensor pwbas and the low and high voltage power supplies were removed from the hulk frame during the repair and assembly process. However, such parts were identified by bar code, and new parts were either used if required, or the used repaired parts were returned to the same model number.

In regard to the repairs performed, in HRL 558858/558859, the frame of the hulk remained intact throughout the repair process, and components such as the optics, optical control board, optical drive motor, wiring harnesses, noise filter, fans, blower, discharge lamp, and printed circuit boards, remained assembled to the hulk at all times. The teardown included covers, feeder assembly, fuser, developer houser, xerographic motor, control panel, bypass, platen glass, coroton, copy cartridge and bypass tray assembly. Beginning in 1994, additional parts were removed, including the paper feeder motor, ac driver, sensor pwbas, and the low and high voltage power supplies. These parts were repaired and commingled with parts of the same model copier. It was found that the essential components of the copiers remained intact throughout the repair process, and did not lose their identity as a result of the Mexican operations.

In the instant case, protestant alleges that major components of the Imaging, Optics, Image Fixing, and Paper Handling systems were not replaced during the repair process. Evidence to the contrary in the record has not been presented by your office, nor has evidence been presented that the repairs otherwise changed the essential identity of the returned copiers. As a result, we find that, provided the documentary requirements of 19 CFR 181.64 are satisfied, the operations performed in Mexico constitute "repairs" within the meaning of subheading 9802.00.50, HTSUS.

Alterations

Additionally, in HRL 5558858/558859, three models of copiers underwent certain upgrades and modifications. The EPROMS contained in the copier's control panel were replaced or reprogrammed so that the copier could perform upgraded tasks, such as operating a noise reduction package or an automatic stapler.

In regard to the replacement or reprogramming of the EPROMS, which upgraded the copiers to conform to current industry standards, in HRL 558858/558859, it was determined that this did not change the identity of the exported articles, but rather improved the product and advanced its value. Accordingly, the copiers qualified for subheading 9802.00.50, HTSUS, treatment.

In HRL 555046 dated August 5, 1988, Customs held that the reprogramming of a copier's memory board and EPROM and the addition of a feeder, stacker, and enhanced control panel did not qualify as an alteration under item 806.20, Tariff Schedules of the United States (TSUS) (now subheading 9802.00.50, HTSUS). However, pursuant to 19 U.S.C. 1625(c)(1), on May 24, 1995, Customs notified the public in the "Customs Bulletin" that it was revoking HRL 555046, and that the reprogramming of a copier's memory board and EPROM and the addition of a feeder, stacker and enhanced control panel, qualified as an alteration under subheading 9802.00.50, HTSUS. [It was, however, noted that HRL 555046 should not be relied upon as establishing that the copiers described therein either qualify or do not qualify for subheading 9802.00.50, HTSUS, treatment, as the facts in HRL 555046 indicated that additional operations unknown to Customs were performed. We also note that "Library Technology Reports," Vol. 30,
No. 5 (September 1994), indicates that the model C is "essentially an upgraded model B with a newly-designed" standard recirculating document handler with a built-in single-sheet positioner (side feeder).]

Accordingly, since by the May 24, 1995 General Notice, Customs has specifically revoked HRL 555046 and indicated that the reprogramming of a copier's memory board and EPROM and the addition of a feeder, stacker and enhanced control panel, qualified as an "alteration" under subheading 9802.00.50, HTSUS, it is our opinion that a similar finding must be found in this case. Therefore, provided the documentary requirements of 19 CFR 181.64(c) are satisfied, the model C copiers are eligible for duty-free treatment under subheading 9802.00.50, HTSUS.

HOLDING:

On the basis of the information submitted, it is our opinion that the Mexican operations enumerated above constitute "repairs" or "alterations" since the essential identity of the copiers is retained. Therefore, provided the documentary requirements of 19 CFR 181.64(c) are satisfied, the model C copiers are eligible for the full duty exemption under subheading 9802.00.50, HTSUS. If these documentary requirements are satisfied, the protest should be granted.

In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065 dated August 4, 1993, Subject: Revised Protest Directive, this decision should be attached to Customs Form 19, Notice of Action, and be mailed by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act and other public access channels.

Sincerely,

John Durant, Director
Tariff Classification Appeals

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