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HQ 560290




May 10, 2000

CLA-2 RR:CR:SM 560290 MLR

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.50

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

RE: Internal Advice; applicability of duty exemption under HTSUS subheading 9802.00.50 to Kodak Model D copier from Model A copier; Mexico; 19 CFR 181.64(c)

Dear Sir/Madam:

This is in reference to letters dated April 7 and 20, March 10, and January 15, 1998, and June 2, March 4, and January 27, 1997, from S.K. Ross & Assoc., P.C. (“Ross”), prepared on behalf of Eastman Kodak Company (“Kodak”), and letters dated August 15 and June 2, 1997, from Siegel, Mandel & Davidson, P.C. (“SMD”), prepared on behalf of Danka Office Imaging Company (“Danka”), concerning the applicability of subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), to photocopiers from Mexico. A meeting was held at the Office of Regulations & Rulings on January 27, 1998, and March 19, 1999. We regret the time we have taken with our response.

FACTS:

It is stated that Kodak or one of its customers exports used model A copier-duplicators which are no longer operational to Mexico, performs various processes to these copiers, and imports model D copier-duplicators to the U.S. It is claimed that the processes performed in Mexico are “repairs and alterations” and that the returned articles qualify for duty-free entry under subheading 9802.00.50, HTSUS. Other copier decisions Customs has issued include Headquarters Ruling Letter (HRL) 559405 dated July 11, 1996; HRL 559418 dated December 12, 1996; HRL 559483 dated October 17, 1996; HRL 559485 dated October 17, 1996; HRL 559672 dated December 17, 1996; HRL 559770 dated January 10, 1997; and HRL 560006 dated March 21, 1997.

In the Ross submission dated January 27, 1997, it is claimed that the copiers are eligible for preferential tariff treatment under the NAFTA, and Ross, on behalf of Kodak, states that Kodak reserved its right to augment its presentation on the NAFTA issue should classification under subheading 9802.00.50, HTSUS, be denied. A protest and application for further review, in part on the NAFTA issue (file number 561111 is being considered by this office).

The various submissions from both parties indicate that the conversion from a model A to a model D involves the following operations:

1. The toning station (also referred to as the developer station) is replaced with a new toning station to provide enhanced image quality. SMD states that the toning station on the model D operates more efficiently by repositioning the developer roller closer to the image loop, incorporating an internal scavenger which attracts the developing solution, and changing the rotation of the toning roller with respect to the direction of the image loop. The new toning station also permits the use of an improved developer and more refined toner.

2. Paper level indicators are added to the paper supply drawers which help the customer determine the amount of paper in each drawer without having to stop operations. These are stated to simply be a series of LEDs mounted on the outer front panel which receive electrical signals from the various paper supplies indicating the amount of paper remaining in each drawer.

3. A new tri-modal document feeder is added, including an improved latch, allowing for smoother operation.

4. New trade dress is applied.

5. The copier speed is enhanced from 70 to 85 copies per minute by replacing three sprockets and a chain.

6. Noise is reduced by adding a muffler in the vacuum system and a damper from the paper stop gate.

In addition, the following description of some of the operations performed at various stations is provided:

Station 10: Cabinetry and feeder removal: The top hopper, feeder cover, and logic molding covers are replaced with new panels. All other panels will be reused but painted a different color.

Station 30: Tear down, main frame alterations and cleaning: Drilling operations are performed to the main frame to accommodate harness modifications and unique components of the model D.

Subassemblies:
The registration assembly is altered to accommodate the addition of the Pressure Assist Corona Transfer (PACT) modification. The PACT modification is stated to keep the paper flatter as it works its way through the imaging process, but allegedly does not change the copier’s function. Two new subassemblies are added, a document positioner hopper and a paper supply cover. In the logic and control assembly, the EPROMs are erased and reprogrammed with new software, including an energy saving feature that puts the copier in stand-by mode. The developer station is totally replaced with a new high definition grain station, which allows for superior image quality. The document feeder is replaced with a trimodal feeder that incorporates a semi-automatic positioner.

Station 35: Wiring:
The copier main harness is modified to accommodate the model D new features.

Station 40: Main frame reassembly:
Some main frame components are replaced such as the main drive motor sprocket, clutch, and developer drive sprocket assembly to speed up the copier’s performance. The vacuum system is modified to incorporate the ability to automatically duplex, accommodate heavier paper sizes, and reduce noise levels through the addition of a muffler. Two circuit boards are replaced on the operator control panel to include new features of the model D.

HY POT:
Because of design changes, new parts like a solenoid, wire harness, and circuit boards are tested for electrical safety.

Station 120: Functional set up and testing: Set-up and testing are performed to verify the function of the document positioner, wireform, duplex tray, and new developer station assemblies.

On January 15, 1998, two videos and a “key attributes matrix” were submitted showing the two models side-by-side and breaking down a copier into 185 attributes Kodak has identified as key to a copier. The similarities and differences between the two models are explained by focusing on the key subassemblies referred to in Additional Note 5, Chapter 90, HTSUS. The matrix shows many of the features to be the same. The differences include a change in copy speed. In the Imaging Assemblies, the changes are the removal of one electrically conductive magnetic roller, and a change in the bias voltage applied to the development mechanism. A change in voltage and magnetic rollers is done to improve development of half tones and image resolution. Although this change does alter and improve the imaging process, it is stated that the majority of the imaging technology and hardware remain the same. In the cleaning/erasing assembly, there is a new LED front side interframe erase bar, and a new vacuum magnetic scavenger roller assembly. A distinction between the two models is that in the model A, the bar is located to illuminate the back side of the film loop, whereas on the model D, the bar is located on the front side of the film loop. Both features serve the same function. Relocation in the model D was necessary to make space for the modified developer station. In the charging assembly, the original transfer was not pressure assisted so a PACT (Pressure Assisted Corona Transfer) is added. No differences are claimed between the two models in the Optics or Image Fixing Assemblies. In the User Control assemblies, there is one difference, the color of the LEDs. In the paper handling assemblies, the only difference is the model A has no paper level indicators. What is unique to the model A is its trade dress and the height of the operator control panel. Otherwise, it is stated that the two models are the same in terms of their features and characteristics. Of the 185 characteristics listed, 174 are stated to be the same, 11 are new in the model D, and 2 are unique to the model A.

In previous Kodak submissions, it was indicated that the major parts in the toner and developer assembly are the toner container, replenisher, developer, and magnet rollers, a gear box, sump casting, drive shaft plus a toner concentration monitor and miscellaneous gears, bearings and hardware, and that the function of the toner and developer assembly is to receive toner from a bottle and pass it to the image loop for transfer onto the paper on which the image results.

In the meeting on January 27, 1998, Customs also requested more details concerning the repairs performed, as prior Kodak submissions indicated the replacement of “worn parts.” Customs specifically requested a list of the parts that are replaced 100 percent of the time during the repair process.

In the Ross letter dated March 10, 1998, it is stated that there are approximately 3,100 parts making up a copier and they are separated into three categories: A parts costing more than $11.00 each; B parts costing between $2.50 and $11.00; and C parts costing less than $2.50. Of the parts that are replaced 100 percent of the time, it is stated that there are 143 parts replaced that are valued over $2.50; the C parts were entirely omitted. Of the 143 parts, 9 parts were listed: wire harnesses, muffler boxes, fuser assemblies, paper supplies, IQE stations, blowers, cabinetry, logic control units, and registrations. After Customs request for a more detailed list, on April 7, 1998, it was stated that 124 A and B parts from 877 A and B parts were replaced and the following parts were listed: solenoids, filters, switches, sensors, brushes, actuators, paper feed rollers, clutches, chains, bearings, brackets, pulleys, belts, valves, hoses, guide plates, circuit boards, labels, motors, casters, panels, and springs. On April 20, 1998, a complete list of all 124 A and B parts replaced was submitted, in what the letter referred to as “engineering short-hand.” Customs also requested information regarding whether a particular part was a consumable; however, this information was not provided. While the model A has a magnetic scavenger, when it is converted to the model D, the roller is replaced with a vacuum scavenger for the purpose of the reduction in image quality defects. The last difference between the two models is the addition of a document positioner. It allows the operator to feed single originals across the platen glass for imaging.

In regard to the previous Kodak submissions, your office stated that the exported copiers did not possess the necessary mechanical hardware, circuitry, document positioner, tri-modal feeder, auto-sizing capabilities, PACT and programming required by the imported copier. Your office states that the 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. The PACT is also 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. Your office states that the registration assembly (mechanical) was altered to accommodate the addition of the PACT. 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.

Your office states that Kodak has failed to include either entry-by-entry details or an inventory accounting method as to the exact repairs and alterations performed on each and every copier converted.

ISSUE:

Whether the conversion of a Kodak Model A copier to a Kodak Model D 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 D 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.

It is claimed that the modification of the model A to the model D does not change the characteristics of the machine so as to alter its use and handling as a high volume copier, and the additional features and improved copy quality do not change the performance characteristics which define the article as a copier.

In prior Kodak rulings, including HRL 559672; HRL 559418; HRL 559770; HRL 559483; HRL 559485; and HRL 560006, Ross acknowledges that Customs relied upon Additional Note 5, Chapter 90, HTSUS, (a) through (e), in that order, as indicative of the copier assemblies’ significance to the copier. Additional Note 5, Chapter 90, HTSUS, provides for:

(a) Imaging assemblies, incorporating more than one of the following: photoreceptor belt or cylinder, toner receptacle unit, toner distribution unit, developer receptacle unit, developer distribution unit, charge/discharge unit, cleaning unit; (b) Optics assemblies, incorporating more than one of the following: lens, mirror, illumination source, document exposure glass; (c) User control assemblies, incorporating more than one of the following: printed circuit assembly, power supply, user input keyboard, wiring harness, display unit (cathode ray type or flat panel); (d) Image fixing assemblies, incorporating more than one of the following, fuser, pressure rollers, heating elements, release oil dispenser, cleaning unit, electrical controls;

(e) Paper handling assemblies, incorporating more than one of the following, paper transport belt, roller, print bar, carriage, gripper roller, paper storage unit, exit tray; or (f) Combination of the above specified assemblies.

In previous Kodak submissions, Ross stated that a copier’s essential components are the image capture system (lenses and film handling assembly). Ross now states that the essential components of a copier are its imaging and paper handling processes, both of which remain unchanged.

In HRL 559672, Customs considered the conversion of the model F into a model D. As in this case, among the changes made to the model F copier, in the imaging assemblies, the toning station was replaced which enhanced the image quality; the film belt and worn components were replaced, and a new LED erase bar was installed in the photoreceptor belt and handling assembly; worn components were replaced in the charging assemblies; and an upgraded cleaning housing was added and a new scavenger was installed in the cleaning assembly. The scavenger was also replaced in the cleaning assembly with one of a more efficient design. In the paper handling assemblies, an upgraded trimodal document feeder that incorporated a semi-automatic positioner was installed including an improved latch to allow for smoother operation; paper level indicators were added to the paper supply drawers to help customers determine the amount of paper in each supply drawer without having to stop copier operations; the paper supply was modified to allow for automatic duplexing which resulted in the addition of a duplex tray and the inclusion of duplex paper path assemblies; the registration assembly was also altered to accommodate the addition of the PACT; holes were added to the mainframe to accommodate new harnesses; and noise reduction was achieved by adding a muffler in the vacuum system and a damper from the paper stop gate. In the logic and control unit, reprogrammed EPROMS were installed to allow the software to relate to all of the new functions; plus an additional energy saving feature was added to the software. Additionally, the copier received a new trade dress and the copier speed was enhanced from 70 to 85 copies per minute by replacing three sprockets and a chain. In HRL 559672, Customs found that all of these operations went beyond repairs and alterations within the meaning of subheading 9802.00.50, HTSUS.

Ross makes reference to Kodak’s application for further review concerning the model B to Model C process (HRL 559483) and states that the arguments made therein are applicable to this case concerning the model A to D conversion. Ross states that tri-modal feeders, the PACT, and necessary programming changes, along with changes in the paper handling capability, document feeder, registration assembly, and the addition of a paper supply cover, document positioner hopper, accompanied by EPROM reprogramming, have already been approved as repair or alteration processes under subheading 9802.00.50, HTSUS, in HRL 559483. It is also claimed that HRL 559483 and HRL 558858/558859 approved the general repair and maintenance required to allow copiers to be reconditioned for further use, as well as the addition of upgraded parts, once the copier’s original condition deteriorates to the point of being non-operational. Further, it is claimed that in HRL 555046, Customs approved the reprogramming of copier memory boards and EPROMS and the addition of a feeder, stacker, and enhanced control panel as an alteration under subheading 9802.00.50, HTSUS. A new document positioner was allowed in HRL 559483. Changes in trade dress were approved in HRL 559770. A change in the height of the operator control panel was approved in HRL 559483.

SMD states that in HRL 557530 dated December 15, 1993, Customs approved modifications that increased the copy speed from 70 to 85 copies per minute by replacing four gears, three chains, and a CPU board. In HRL 559485 dated October 17, 1996, the conversion of the model B to model E was acceptable, which included adding new circuit boards, reprogramming existing memory chips to accommodate a new “tri-modal” document feeder, and adding or changing the PACT, cleaning housing, wire harness, display panel, and color scheme. It is claimed that all these upgrades, as well as an increase in copy speed are also involved in the process of converting the model A to model D.

SMD states that it believes that in prior adverse Kodak rulings, Customs considered the cumulative effect of the modifications to each of the major systems in deciding that they were not acceptable repairs or alterations. SMD also states that the installation of a new toning station resulting in improved copy quality predisposed Customs to conclude that the essential identity of the exported copiers was lost. It is claimed that these adverse rulings fail to recognize that high volume copiers are mechanically complex machines and are subject to constant wear, and, therefore, require frequent maintenance and repair, including the replacement and routine upgrade of numerous mechanical parts. It is also claimed that the adverse rulings fail to consider that the efficiency of a copier, including copy quality, can readily be improved without changing the fundamental nature of the copier. Moreover, SMD claims that identifying almost every system as crucial to the essential identity of a copier erroneously assumes that the individual components of a copier are greater than the sum of the parts. While copy quality improvement is noticeable, the model D and model A copiers are commercially interchangeable machines, both identified as high volume copiers. It is also stated that the adverse rulings fail to consider that the improvement in picture quality is attributable to relatively minor improvements which do not alter the fundamental nature of the copier. The changes, such as repositioning the developer roller a fraction of an inch in the developing station incorporated in the model D are not drastic. Other refinements such as repositioning an LED erase bar, and using an improved cleaning assembly may also be accomplished at the customer’s site.

It is stated that the courts have liberally applied subheading 9802.00.50, HTSUS, and its predecessor provisions, as long as intermediate processing operations are not conducted in order to manufacture a finished article, and that alterations can change the name and appearance of an article and its marketability, provided the changes are not the result of intermediate manufacturing performed on unfinished articles. SMD cites many court decisions, including Gilbert W. Green v. United States, 13 Cust. Ct. 273, Abstract 49676 (1944), where a woman’s platinum and diamond solitaire engagement ring was exported, the diamond and filigree setting was excised and superimposed on top of a man’s white gold ring with opal and bloodstone setting at either end. While the duty benefit was disallowed for failure to register the exported ring, the court concluded that the modification of the woman’s ring was an alteration since additions may be made provided there is no conversion into something else. In LeGran Manufacturing Company v. United States, 59 Cust. Ct. 58, C.D. 3070 (1967), the court mentioned the Green decision and stated that a “ring was exported and an altered ring was imported.” In Press Wireless, Inc. v. United States, 6 Cust. Ct. 102, C.D. 438 (1941), the court stated that the use of an improved type of material in the restoration was immaterial, and that it was of no consequence that the returned product was to some degree more efficient. SMD also claims that neither was there any indication that the replacement of what was obviously the single most important component of the tube, the filament, destroyed its identity. In G.L. Ramsey a/c The Juvenile Mfg. Co., Inc. v. United States, 26 Cust. Ct. 603, Reap. Dec. 7978 (1951), it was held that embroidering dress fronts in Mexico constituted an alteration since complete and finished dress fronts were exported and returned. In Wilbur G. Hallauer v. United States, 40 CCPA 198 (1953), the court concluded that ungraded apples covered with a film of insecticide spray residue were altered by cleaning, grading, etc., recognizing a change in condition and marketability. In Amity Fabrics, Inc. v. United States, 43 Cust. Ct. 64, C.D. 2104 (1959), the court allowed redyeing of pumpkin colored fabric which created a market for fabric that otherwise could not be sold.

SMD also cites several rulings as support, including HRL 559740 dated October 3, 1996, where a transformer was found not to have undergone a change in character and use and retained its identity as a power transformer when returned to the U.S. We note that the ruling pertained to the article’s eligibility under the Generalized System of Preferences (GSP), and, therefore, is not applicable. The same holds true for counsel’s citation of HRL 554539 dated August 25, 1987, which also considered the GSP; however, as noted by counsel, the ruling stated that the restored pumps were ineligible for item 806.20, TSUS, treatment, as the identity of the individual exported steering pump could not be maintained by the unstructured reassembly process even though a pump was exported and a pump was imported.

SMD states that in HRL 559197 dated September 1, 1995, Customs also stated that since the units do not undergo complete disassembly, the concept of essential identity does not apply. Ross states that Customs in HRL 558858/558859 dated March 11, 1996, applied the “essential identity” requirement to both partial and complete disassembly, including the replacement of worn parts or upgrade of parts, so long as the essential components, and therefore, the identity of the copiers remained intact throughout the repair or alteration operation. Regardless whether there is a partial or complete disassembly, we note that 19 CFR 181.64 provides that the repair and/or alteration cannot destroy the essential characteristics of the exported article. In Press Wireless, supra, the court also 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 HRL 558858/558859, 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, 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. 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, it was determined that this did not change the identity of the exported articles, but rather improved the product and advanced its value. 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. Accordingly, the copiers qualified for subheading 9802.00.50, HTSUS, treatment.

Counsel believes that Customs found the relevant factors underlying the adverse Kodak decisions to be based on the fact that there was a different name (presumably model number), characteristics (better copy quality is specifically mentioned), and sales of the resulting model to a different market. Counsel also states that in HRL 559672, Customs relied upon the fact that two-sided copying was not possible. However, counsel notes that the model A has the ability to perform automatic two-sided copying so there is no upgrade involved with the model D copier.

SMD claims that if better quality copies were a critical factor, no photocopier could ever be repaired. Further, a change in copier quality is a result in each of the favorable rulings already issued to Kodak. Regarding a change in the sales market, it is stated that the model A was the top of the line in its infancy. As a result of its reconditioning into a model D copier, the resulting model is again at the top of the product line. The heart of an electrophotographic copier is the electrophotographic process used. The model A and D share the same photoconductor (film loop), toner and developer concept (dual component), as well as the erase, cleaning, charging, exposure and optics systems. Only the transfer and scavenging systems and the development process have been modified. Measured against the 50 imaging attributes for these name subassemblies identified on the matrix, it is claimed that the 5 changes mentioned are minor and are alterations.

In the prior Kodak rulings, we stated that the major components of a typical high-volume photocopier include the photoconductor, a primary charger, and systems for exposure, toning, transfer, erasing, and cleaning. McGraw Hill Encyclopedia of Science & Technology, Vol. 13 (1987). We also recognize that the copy process is one continuous chain of events involving eight main steps: (1) charging, (2) exposing, (3) developing, (4) transferring, (5) separating, (6) fusing, (7) cleaning, and (8) erasing. E. Kuaimoku, Photocopier Maintenance and Repair Made Easy (1994). We also noted in prior Kodak rulings that cartridges and developer, fuser rollers and oil, the photoconductor belt, and cleaning brush are consumables which are replaced approximately every 300,000 copies (except for the cartridges which are replaced about every 10,000 copies). Therefore, for purposes of our determination of eligibility for subheading 9802.00.50, HTSUS, treatment, we focused upon the effect of the operations performed abroad upon the above copier assemblies, and as SMD accurately recognizes, the cumulative effect of the modifications made. We also stated that 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 supra.

Counsel relies on HRL 559483 and HRL 559485 as support that Customs found certain operations acceptable repairs and/or alterations. However, we note that in those rulings, Customs stated that the protestant claimed that major components of the Imaging, Optics, Image Fixing, and Paper Handling systems were not replaced during the process, and contrary information was not presented by the port. However in this case, in the course of reviewing several of the copier models and the changes made, it is Customs understanding that the same parts are not replaced in each machine and Kodak allegedly does not know, in all cases, what parts are replaced on a particular machine in order for Customs to determine on an entry-by-entry basis (or even on an inventory management basis according to the port) whether a particular machine qualifies for 9802.00.50. The duty exemption provided under 9802.00.50, HTSUS, is a privilege, and it is well settled that compliance with mandatory regulations is a condition precedent to recovery and that the burden of proof thereof rests on the protestant. See, F.W. Myers & Co., v. United States, 374 F.Supp. 1395 (Cust. Ct. 1974); H.F. Keeler v. United States, C.D. 1842, 38 Cust.Ct. 48 (1957); and, Pacific Customs Brokerage Co. v. United States, T.D. 48887, 71 Treas.Dec. 530 (1937).

Customs requested, and a list of parts was provided indicating that 124 out of 877 parts valued above $2.50 are replaced 100 percent of the time during the repair process. This indicates that approximately 15% of the copier’s parts valued over $2.50 are replaced as worn components, in addition to the upgrades and changes made to the machines, some of which appear on the list provided.

Many older court cases are cited; however, none of them have ever considered numerous changes made to a modern machine. While we recognize that the court in Press Wireless did note that an automobile repaired with materials of a heavier and superior quality than the worn-out parts would still be the same automobile, we also recognize that if many parts in a copier are replaced to such a degree that the copier essentially becomes a new one, the same copier exported is not the same copier imported. We also believe that a piecemeal analysis of all prior rulings where particular repairs and alterations were allowed, does not reflect the fact that subheading 9802.00.50, HTSUS, requires analysis of the particular article exported and reimported. As determined in Guardian Industries, glass was exported and glass was returned; however annealed glass made into tempered glass was not an alteration.

Based on the video and key attributes matrix, we agree that the two models are comparable; however, it appears that many parts and subassemblies were replaced, not only to the Paper Handling Assemblies, but a completely new toner and developer assembly, new LED erase bar, and an upgraded cleaning housing along with a scavenger were installed. It is our opinion that these are substantial changes to the Imaging Assemblies. Accordingly, we find, especially in conjunction with the other changes made to each of the major systems of the photocopier, such as reprogramming the EPROMS and modifying the copier main wiring harness in the user control assemblies, or the addition of the PACT in the image fixing assemblies, that the identity of the exported photocopier was destroyed and that a new and different photocopier was created. While we agree that making an article marketable again does not defeat 9802.00.50 treatment, the replacement of numerous components in each major assembly of the model copier in this case has the cumulative effect of changing the identity of the returned copier to such an extent that they would not be eligible for subheading 9802.00.50, HTSUS, treatment. Accordingly, it is our opinion that since the essential identity of the exported model A copiers has not been maintained in the returned model D copiers, they are not eligible for duty-free treatment under subheading 9802.00.50, HTSUS. We also note that the record does not contain any of the documents required by 19 CFR 181.64(c).

HOLDING:

On the basis of the information submitted, it is our opinion that the Mexican operations enumerated above do not constitute “repairs or alterations” since the essential identity of the copiers was not retained. Therefore, the model D copiers are not eligible for the full duty exemption under subheading 9802.00.50, HTSUS.

This decision should be mailed by your office to the internal advice requester no later than 60 days from the date of this letter. On that date 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
Commercial Rulings Division


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