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HQ 562187

February 21, 2002

CLA-2 RR:TC:SM 562187 KSG


TARIFF NO.: 9802.00.50

Ron Reuben
Danzas AEI Customs Brokerage Services
5510 West 102nd Street
Los Angeles, California 90045

RE: Subheading 9802.00.50, HTSUS; used engine; repair; essential identity;

Dear Mr. Reuben:

This is in response to your letter of July 16, 2001, asking for a binding ruling regarding the country of origin of imported used aircraft engines classified in subheading 9802.00.50 of the Harmonized Tariff Schedule of the United States (“HTSUS”).


This case involves imported used aircraft engines. Mitsubishi Motor Sales of America, Inc. intends to enter into a program with VW Canada in which it will ship used engines taken from Mitsubishi cars in the U.S. to VW Canada in Ontario, Canada. VW Canada will repair the engines and then ship the remanufactured engines back to Mitsubishi in the U.S.

You have provided a copy of a booklet prepared by VW Canada describing the “repair” or remanufacturing process. This process consists of four main operations: disassembly, machining, assembly, and testing. In the disassembly process, the engines are dismantled and the pistons, rings, pins, bearings, seals, gaskets, and timing gears are discarded. The retained parts are cleaned in an automated washing system. The steel and aluminum components are cleaned separately. Next, they are wheelabrated, blasted and wire brushed to remove any final traces of grease, dirt or rust. Cylinder blocks are painted in a specialized water wash spray booth.

The machining process then follows. Separate machining lines are maintained for air and water cooled engines, cylinder heads, crankshafts, flywheels, and other small components. Cylinder blocks are honed to finished size on dedicated honing machines, using special diamond honing stones. Cylinder blocks are then matched with new pistons and rings. The crankshafts are ground to specific sizes on separate original factory crankshaft grinders, with accuracy assured by continuous electronic sizing control. The polishing of the crankshafts is done on custom built multi-belt polishing equipment. After the machining, the cylinder blocks are washed and pressure tested.

The assembly process includes fitting the crankshaft and new pistons into the engine housing, and installing the cylinder heads, sheet metal parts, oil pump, timing components, oil pan, and valve covers. The assembly line uses torque-controlled air power tools and stall wrenches. The valves are then adjusted.

The engines are tested by a computerized SIMTEST testing system. It tests each engine against pre-set parameters for oil pressure, volume of oil flow, temperature and compression. In addition, the oil flow pattern, noise, valve action and timing, and any oil leaks are observed.

On average, 7.5 man-hours are needed to rebuild a four cylinder engine, while 9.5 man-hours are needed for the six cylinder engine.

You advise that the two most significant and expensive components of the engine assemblies are the cylinder block assembly (“engine block”) and the crankshaft, both of which are repaired rather than replaced. These two components account for at least 88 percent of the value of the components found in a new engine. You state that the cylinder block assembly alone accounts for between 65 and 70 percent of the value of the complete engine.

You state that the repaired engines have the same use as the original engines and are sold as replacement parts for the same Mitsubishi vehicles in which the engines were original equipment.

The repaired engines retain the original engine serial number inscribed on the short block.


What is the proper country of origin for repaired aircraft engines ented under subheading 9802.00.50, HTSUS.


Articles exported from and returned to the U.S., after having been advanced in value or improved in condition by repairs or alterations, may qualify for a partial duty exemption under subheading 9802.00.50, HTSUS, provided the foreign operation does not destroy the identity of the articles or create new or commercially different articles. See A.F. Burstrom v. United States, 44 CCPA 27 (1956) and Guardian Industries Corporation v. United States, 3 CIT 9 (CIT 1982). Subheading 9802.00.50, HTSUS, treatment is also precluded where the exported articles are incomplete for their intended use and the foreign processing operation is a necessary step in the preparation or manufacture of finished articles. See Dolliff & Company, Inc. v. United States, 455 F. Supp. 618 (1978). 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.

For purposes of the duty allowance under subheading 9802.00.50, HTSUS, the replacement and/or addition of parts to restore products to their original condition may constitute repair operations, provided that the particular article does not lose its identity and the replacement and/or additions are not so extensive as to create a new or different article. See Press Wireless, Inc. v. United States, 6 Cust. Ct. 102 (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. The court noted that the radio tubes were “restored to a condition which prolonged the use for which they were originally designed...as far as the plaintiff’s use thereof was concerned there was no difference between the tubes as originally imported and the repaired articles.”

Where, as here, the foreign repair operation entails the complete disassembly of the exported article and numerous component parts of the article are replaced, the concept of “essential identity” becomes relevant. This concept 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 components 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.

Thus, application of this tariff provision is precluded where the foreign operation destroys the identity of the exported article or creates a new or different commercial good. In Headquarters Ruling Letter (“HRL”) 554539, dated August 25, 1987, Customs stated that:

So long as the identity of [the exported unit] is maintained throughout the disassembly and repair process, and there is a genuine repair of parts carried out during the foreign process, these units may be entered under the repairs provision of item 806.20, Tariff Schedules of the United States (“TSUS”) [ the predecessor tariff provision to subheading 9802.00.50, HTSUS].

There are a number of Customs rulings in which Customs has considered the eligibility of automotive articles for a duty exemption under subheading 9802.00.50, HTSUS. In HRL 560022, dated February 12, 1998, fuel injection pumps reconditioned in Mexico were held to be eligible for a duty exemption under subheading 9802.00.50, HTSUS. Customs held that the housing component alone represented the essential identity of the exported article. Customs stated that :

The requirement of preserving an article’s ‘essential identity’ for purposes of qualifying for subheading 9802.00.50, HTSUS, treatment exists so that already completed articles do not undergo various processes which serve to destroy the identity of the article, but rather only undergo processes that serve only to repair or alter the article.

Front wheel drive axle assemblies exported to Mexico for repair were held to be eligible for a duty exemption under subheading 9802.00.50, HTSUS, upon importation into the U.S. See HRL 559968, dated May 7, 1997. Customs found that the inner and outer constant velocity joint housings created the essential identity of the finished axle assemblies because these housings are an integral element in the functioning of the finished article.

Power steering pumps exported to Mexico for remanufacturing were held to be eligible for a duty exemption under subheading 9802.00.50, HTSUS, upon importation into the U.S. See HRL 559970, dated January 7, 1997. The components of the defective power steering pumps were kept together except for all O-rings, gaskets and seals, which were replaced with new parts.

Gas turbine engine sub-assemblies exported to Mexico for remanufacturing were held to be eligible for subheading 9802.00.50, HTSUS, treatment upon importation into the U.S. See HRL 557969, dated October 14, 1994.

You argue in your submission of July 13, 1998, that the engine block imparts the essential character of the imported rebuilt automotive engines. You state that the engine block accounts for the majority of the engines’ bulk and value. Further, it provides structural support to the engine components, most of which are contained inside it or attached to it. You point out that two main features of the engines, the size and number of cylinders, are determined by the design of the engine block.

We concur with you that the engine block imparts the essential identity of the finished article based on three factors; (1) its value, (2) its role in providing the structural support to the engine components and (3) it determines two main features of an automotive engine; the size and number of the cylinders. As in HRL 560022, involving fuel injection pumps, discussed supra, we find that the processes performed in Mexico serve only to repair the article. Further, similar to HRL 559968, involving front wheel drive axle assemblies, discussed supra, the engine block is the most integral component with regard to the functioning of the finished article.


The automobile engines exported to Canada for disassembly and repair are eligible for a partial duty exemption under subheading 9802.00.50, HTSUS, upon importation into the U.S., provided the documentary requirements of 19 CFR 181.64(c) are satisfied.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.


John Durant
Commercial Rulings Division

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