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NY E86896

October 1, 1999

MAR-2 RR:NC:MM:109 E86896


Mr. K.G. Richards
Parkwood and Cavanaugh Limited
Pearson International Airport
Cargo Building B, Suite 104A
P.O. Box 142,
Toronto AMF, Ontario L5P 1A2


Dear Mr. Richards:

This is in response to your letter dated August 13, 1999, on behalf of North American Telephone Company, Toronto, Ontario, requesting a ruling on the classification of, and the proper country of origin and marking of recycled or refurbished telephones. You have asked whether these products qualify as U.S. goods returned. A marked sample was not submitted with your letter for review.

North American Telephone Company purchases and imports into Canada new, used, and reconditioned telephone equipment sourced in the United States. However, this equipment is not manufactured in the United States. North American Telephone Company performs certain operations, in Canada, described as recycling or refurbishing in order to return these devices to a saleable condition. The objective is to produce a functional device, with restored esthetics and appearance, in a new and current packaging mode. Many of these devices will in turn be sold and exported to the United States. Literature was submitted for several types of line telephones, cordless telephones, and caller ID boxes. The caller ID boxes were all equipped with displays.

The applicable subheading for the line telephones will be 8517.19.80, Harmonized Tariff Schedule of the United States (HTS), which provides for “[e]lectrical apparatus for line telephony[t]elephone sets[o]ther: [o]ther.” The general rate of duty will be 2.1% ad valorem.

The applicable subheading for the cordless telephones will be 8517.11.0000, Harmonized Tariff Schedule of the United States (HTS), which provides for “[l]ine telephone sets with cordless handsets.” The general rate of duty will be free.

The applicable subheading for the caller ID boxes will be 8531.20.00, Harmonized Tariff Schedule of the United States (HTS), which provides for “[i]ndicator panels incorporating liquid crystal devices (LCD’s) or light emitting diodes (LED’s).” The general rate of duty will be 0.5% ad valorem.

Your letter describes three levels of products and processing:

Level I: Consists of new or reconditioned equipment purchased from manufacturers. These items are purchased and sold in the same condition, with the exception that the items may be repackaged.

Level II: Products imported into Canada that were sourced on a per unit basis, and purchased complete and intact. These products are purchased for re-cycling and for re-sale. North American Telephone Company may be required to perform some or all of the following operations: · Checking/testing
· Cleaning
· Labeling
· Packing
· Include new or revised manuals
Certain telephones may require new cords, new batteries, and/or adapters.

Level III: These items are purchased in bulk usually on the basis of the “Gaylord.” A Gaylord is a container utilized for the collection and storage of used telephone equipment. This term is used to describe bulk quantities of telephone equipment offered for sale. North American Telephone Company may be required to perform some or all of Level II operations, and, in addition, may perform sorting and/or matching. In a telephone conversation with you, on September 30, 1999, you indicated that the product was sorted by set and maintained its essential identity. When necessary a user manual is written and included with each unit.

You indicate that the country of origin is usually marked on the equipment and is known to all parties, including the vendor and the purchaser. These products have not been substantially transformed in the United States, and their country of origin is known and marked on the equipment.

The marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article.

As provided in section 134.41(b), Customs Regulations (19 CFR 134.41(b)), the country of origin marking is considered conspicuous if the ultimate purchaser in the U.S. is able to find the marking easily and read it without strain.

With regard to the permanency of a marking, section 134.41(a), Customs Regulations (19 CFR 134.41(a)), provides that as a general rule marking requirements are best met by marking worked into the article at the time of manufacture. For example, it is suggested that the country of origin on metal articles be die sunk, molded in, or etched. However, section 134.44, Customs Regulations (19 CFR 134.44), generally provides that any marking that is sufficiently permanent so that it will remain on the article until it reaches the ultimate purchaser unless deliberately removed is acceptable.

The devices which are already marked with a foreign country of origin will be properly marked pursuant to 19 CFR 134.1(b) and will require no further marking as long as that marking is conspicuous, legible and permanent.

You indicate that these devices will be repackaged in Canada. However, you do not indicate if or how the container will be marked, whether the container is sealed or unsealed, or whether the container is normally opened by the ultimate purchaser prior to purchase. Therefore, when this information is available, you may wish to consider submission of a request on this subject.

While these products do not qualify as U.S. goods, they may be eligible for a partial duty exemption under 9802.00.50, HTS. Subheading 9802.00.50, HTS, provides a partial duty exemption for articles returned to the United States after having been exported to be advanced or improved in condition by means of repairs or alterations. Articles entitled to this partial duty exemption are dutiable only upon the cost or value of the foreign repairs or alteration, provided the documentary requirements are satisfied. Goods repaired or altered in Mexico or Canada are subject to the documentary requirements set forth in section 181.64(c), Customs Regulations (19 CFR 181.64(c)). We will consider each level separately.

Level I:

To qualify for a partial duty exemption under that subheading, the article itself must be advanced in value or improved in condition. In that regard, we have held that the mere repacking of an article does not advance its value or improve its condition. See HRL 555806, dated January 14, 1991. Therefore, the products described in Level 1, which are merely repackaged in Canada, will not be eligible for a partial duty exemption under subheading 9802.00.50, HTS.

Level II:

Section 181.64(a), Customs Regulations (19 CFR 181.64(a)), provides that:

For purposes of this section, “repairs or alterations” means 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.

Accordingly, the telephone equipment sourced and processed as described in Level II is eligible for a partial duty exemption under subheading 9802.00.50, HTS, upon importation into the U.S., provided the documentary requirements of 19 CFR 181.64(c) are satisfied.

Level III:

The concept of “essential identity” is employed in interpreting this tariff provision to insure that the article imported is the same as the article exported and operates by identifying certain component parts of an exported article as embracing the essential identity of the particular article exported. Component parts so identified are to be maintained together throughout the repair operation as a matched set. Thus, replacing any one of these essential components would violate the uniqueness of the matched set and result in a new article of commerce, thereby precluding eligibility for the partial duty exemption under subheading 9802.00.50, HTSUS. See HRL 555443, dated November 30, 1990. Since you have indicated that Level III products are sorted by set and maintained their essential identity, they are eligible for a partial duty exemption under subheading 9802.00.50, HTS, upon importation into the U.S., provided the documentary requirements of 19 CFR 181.64(c) are satisfied.

Pursuant to U.S. Note 3(d), Subchapter II, Chapter 98, HTSUS, goods returned after having been repaired or altered in Canada, other than pursuant to a warranty, are subject to duty upon the value of the repairs or alterations using the applicable NAFTA “CA” rate for the article. This applies “whether or not such goods are goods of Canada or goods of Mexico under the terms of general note 12 to the tariff schedule.” This applies to Level II and Level III products only.

This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 CFR Part 177).

A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Eileen S. Kaplan at 212-637-7048.


Robert B. Swierupski

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