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HQ 562515




January 14, 2003

CLA-2 RR:CR:SM 562515 TJM

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.50

Port Director
U.S. Customs Service
Los Angeles CA 90731

RE: Revocation of HRL 560006; 9802.00.50 treatment to photocopiers; Kodak; essential identity; repair and alteration; HQ 558858; HQ 558859; HQ 555819; HQ 555117; HQ 557024; HQ 560245.

Dear Port Director:

This letter is to inform you that Customs has reconsidered Headquarters Ruling Letter (“HRL”) 560006, dated March 21, 1997, addressed to you, concerning the classification and eligibility of photocopiers exported to Mexico from the U.S. and returned for duty exemption provided under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS). After review of that ruling, we have determined that the operations in Mexico performed on certain Kodak copiers (“Model C”) resulting in “Model D” qualify as “repairs or alterations” as provided under 9802.00.50, HTSUS. For the reasons that follow, this ruling revokes HRL 560006.

FACTS:

In HRL 560006, dated March 21, 1997, the facts indicated that Kodak sent to Mexico certain copiers (“Model C”) which were no longer operational for repairs and modifications. When the operations were completed, the copiers were returned to the United States as Model D copiers.

In Mexico, the following operations were stated to be performed:

The process began with evaluating the incoming copier and its subassemblies. The unit was then partially disassembled, and the mainframe, parts and subassemblies proceeded to work stations where they were cleaned, worn parts were replaced or repaired, lubrication was applied, and any necessary testing was completed. All copiers had their cabinetry repainted in Mexico, but parts generally were repaired or replaced only as needed. Kodak stated that in the interest of customer satisfaction and decreased cost, certain parts which may otherwise be replaced during field servicing of the machines, such as belts, bearings, developer loops and image loops, which have limited lives, were also replaced at this time. Pursuant to the flow chart accompanying the submission, the following was performed:

Station 10: Cabinetry was removed and repainted;

Station 20: Major subassemblies were removed, including blowers, chargers, paper supply, and muffler box. These subassemblies are critical to the function of the paper supply and feeders. Minor subassemblies were also removed. Parts were replaced as required. For example, in the charger assembly, components which were replaced included the corona wires and the grill. Worn-out rollers which start the movement of the image loop around the film core area were also replaced.

Station 30: The mainframe underwent required modifications, and cleaning.

Station 35: Wiring and wiring harnesses were removed and replaced as required.

Station 40: At this station, the main drive was reconditioned, and other work was performed relating to illumination, fuser area core, and the optics subassembly.

Station 45: Cabinetry and feeder were installed and a functional test was performed.

Station 120: Feeder and paper run cabinetry were set up, and after certain other finishing steps were performed, the copiers were packed and sent out for distribution.

The modifications performed on the copiers were as follows:

The toning station (toner and developer assembly) was replaced with a new toning station to provide enhanced image quality. The function of the toning assembly is to receive toner from a bottle and pass it on to the image loop for transfer onto the paper on which the image results. Kodak stated that the key components in the older version were a replenisher housing and motor, station sump casting, two developer rollers with two magnet rollers, two mixing blenders and miscellaneous gears, bearings and hardware. The new version had only one developer roller and one magnet roller. It allowed for a different formulation of the developer because the formulation carrier size was reduced in the new version to a much decreased size. Additionally, in the old version, the magnetic properties were soft and not permanent while they were hard and permanent in the new version. Lastly, the developer roller is 200” from the image loop in the older version and .020” in the new version. Kodak stated that these alterations enhance the image quality;

Paper level indicators were added to the paper supply drawers which help the customer to determine the amount of paper in each drawer without having to stop the copier while it is running; and

An improved latch was added to the document feeder allowing for smoother operation; and

New trade dress was applied.

These modifications required certain wiring alterations, which included holes to the mainframe to accommodate the new wiring harnesses, and the reprogramming of six EPROMS. An additional energy saving feature was also added to the software. Kodak stated that with regard to the Optics Assembly, the platen glass was replaced and the illumination housing was repaired but the optics, lens and mirror assemblies were left intact.

Kodak also advised that the roller mechanism around the film core and portions of the charging system was not routinely replaced unless specific parts were worn. The bodies were repaired and the plastics replaced. Further, it was stated that the operations that took place in Mexico did not include any sophisticated calibrations, and those components that were not changed, in addition to the optics and related assemblies previously noted, included the Fuser Frame (Image Fixing), Film Core Structure (Imaging) and Document Feeder Frame (Paper Handling).

Upon completion of the repair and modification operations at the various workstations, the parts, subassemblies, and mainframe were moved to a functional checkout work station where the operator reassembled the copier and performed a complete functional test. Next, the copier went to a quality work station to receive a quality performance test. Lastly, the copier was packed and returned to the U.S. for distribution.

Kodak stated that the partially disassembled copier had unique identifiers so that the parts could be reassembled with matched subassemblies after the reconditioning processes were completed. Therefore, the reassembly process kept together subassemblies which had been “mated” at the time of original manufacture, and no commingling with parts of other copiers took place.

ISSUE:

Whether the operations performed in Mexico, as described above, constitute “repairs or alterations” under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS).

LAW AND ANALYSIS:

Subheading 9802.00.50, HTSUS, provides a complete or partial duty exemption for articles returned to the U.S. after having been exported to be advanced in value or improved in condition by means of repairs or alterations. Articles returned to the U.S. after having been repaired or altered in Mexico, whether or not pursuant to warranty, are eligible for duty-free treatment, provided the documentation requirements of section 181.64, 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, describing the operations performed and the value and cost of such operations, and including a statement that “no substitution whatever had been made to replace any of the goods originally received.”

Entitlement to the benefits of subheading 9802.00.50, HTSUS, are precluded in circumstances where the operations performed abroad destroy the identity of the articles or create new or commercially different articles. See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956); Guardian Industries Corp. v. United States, 3 CIT 9 (1982). Tariff treatment under subheading 9802.00.50, HTSUS, is also precluded where the exported articles are incomplete for their intended use prior to the foreign processing. Guardian; Dolliff & Company, Inc. v. United States, 81 Cust. Ct. 1, C.D. 4755, 455 F. Supp. 618 (1978), aff’d, 66 CCPA 88, C.A.D. 1225, 82, 599 F.2d 1015, 1019 (1979).

In Press Wireless v. United States, 6 Cust. Ct. 102, C.D. 438 (1941), the Customs Court held that repairs are operations necessary to restore articles to their original condition, but cannot be so extensive as to destroy the identity of the exported article or create a new or different article. (See also 19 CFR § 181.64, which defines “repairs or alterations” 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.).

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 identify of the article remain intact throughout the repair process. For example, in HRL 554731, dated February 2, 1989, Customs considered fuel injectors which involved the replacement of parts and cleaning after disassembly. Customs determined that the fuel injectors qualified for subheading 9802.00.50, HTSUS, treatment, as long as the adapter and retainer of the fuel injector were not replaced and remained together as a matched set, as these constituted the essential identity of the fuel injector.

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 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 scrapped. Next, the fuser, developer houser 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 removed from the hulk frame during the repair 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. It was found in that case that the essential components of the copiers remained intact throughout the repair process, and did not lose their identify as result of the Mexican operations.

In HRL 558858/558859, 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 EPROMS, which upgraded the copiers to conform to current industry standard, Customs determined that this did not change the identify of the exported articles, but rather improved the product and advanced its value. Accordingly, Customs found in that case that the copiers qualified for subheading 9802.00.50, HTSUS, treatment.

We note that in HRL 558858/558859, Customs stated that subheading 9802.00.50, HTSUS, is applicable to articles subject to both partial and complete disassembly, where parts are replaced, as long as the essential components and therefore the identity of the article remains intact throughout the repair operation. As determined in HRL 558858/558859, the copiers were found not to have lost their identity as a result of the foreign operations. We note that in HRL 555819, dated October 11, 1991, it was stated that the replacement and/or addition of parts to restore products to their original condition may constitute repair operations for purposes of subheading 9802.00.50, HTSUS, if the particular article does not lose its identity and the replacements and/or additions are not so extensive as to create a new or different article. In HRL 555117, dated December 22, 1988, the essential components were also required to be tagged as a matched set.

On the issue of enhanced copier quality, we note that the Court in Royal Bead Novelty Co., Inc. v. United States, 68 Cust. Ct. 154, C.D. 4353 (1972) and Customs in HRL 559648 dated May 20, 1996, concluded that a change in the quality of an article resulting from further processing does not preclude application of 9802.00.50. See also HRL 557024 dated June 30, 1993 (involving the enhancement of stock computers in Canada), HRL 560245 dated April 4, 1997 (installation of Mobile satellite communications tracking system on trucks in Canada).

It was claimed that the heart of an electrophotographic copier is the electrophotographic process used. The various models shared the same photoconductor (film loop), toner and developer concept (dual component), as well as the erase, cleaning, charging, exposure and optics system. Only the transfer and scavenging systems and the development process were modified. Measured against the 50 imaging attributes for these named sub-assemblies identified, it was claimed that the five changes mentioned are minor. The overwhelming majority of these characteristics, if they are handled at all (and only about 50 percent on average of any given copier is subject to repair and alteration) while the copier underwent modification, as claimed, were simply repaired during the refurbishing process. It is stated that the few alterations which were made are minor and did not change the essential nature of the electrophotographic process, paper handling, document handling or user interface systems or indeed even the structure of the original machine. Some of the changes were made at the plant for convenience rather than later at the customer’s premises, for example, the upgrades which involved the PACT, the cleaning station assembly, the 15 volt power supply and the replacement of carbon fiber brushes with stainless steel antistatic brushes.

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. We note 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 note 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 have focused upon the effect of the operations performed abroad upon the above copier assemblies.

The drum is the “heart” of the copier and almost every step involved with making a copy takes place around the drum. Kuaimoku, Photocopier Maintenance and Repair Made Easy (1st Ed. 1994). There are eight main steps in the copy process, all of which involve the imaging assemblies: (1) charging, (2) exposing, (3) developing, (4) transferring, (5) separating, (6) fusing, (7) cleaning, and (8) erasing. The charging corona unit applies the charge on the drum. The exposing step illuminates the document and projects the image on the drum and involves the platen glass, exposure lamp, reflectors, aperture, and manual exposure control. Also involved in exposure is the projection of the image onto the drum’s surface which involves the mirrors, scanner carriage, solid lens and drums of the optical system. The developer section involves the developer (toner and carrier mix); bucket roller; magnetic roller, bias circuit, toner-carrying screw, and developer section body. The transfer step removes the toner image from the drum and places it onto the copy paper by applying a strong electrical charge from the transfer corona to the back side of the copy paper.

With regard to the Model C to D process in the instant case, Customs found in HRL 560006 that installing a new toner and developer assembly, which produces a superior print quality, and a new primary charger, were significant changes to the imaging assemblies, which along with other changes in the paper handling assembly (paper level indicators), changed the copier’s essential identity.

It is now Customs view that the essential identity of the copiers was retained when processed in Mexico and partially disassembled. The review of the facts of the case indicate that among the major features which remained attached to the copier at all times were the mechanical frame, casters and wheel systems, film core, drive train, wire harnesses, noise filters, and logic and control units. Various minor features remained attached as well. It was stated that Kodak tracked which parts and subassemblies were removed from a given carcass through the use of unique inventory control numbers. As a result, parts could be reassembled with matched subassemblies after the reconditioning process.

With regard to the Model C to D process, the difference between the toner and developer assembly of the Model C and Model D, resulted in a more efficient presentation of the toner to the latent image. It is clear that many of the replaced parts were parts that can be serviced in the field, and that they are more akin to what we would consider to be “consumables”, or parts that wear out with time and need to be repaired or replaced to ensure the continued functioning of the photocopier.

The processing involving the charger, developer and optics assembly in the instant case was one in which many of the parts were replaced due to normal wear. For instance the worn-out rollers in the charger assembly was replaced. Counsel noted that the roller mechanism around the film core and portions of the charging system were not routinely replaced unless specific parts were worn. In the optics assembly, the platen glass was replaced and the illumination housing was repaired. However, the optics, lens, and mirror assemblies were left intact. Fuser Frame (Imaging Fixing), Film Core Structure (Imaging) and Document Feeder Frame (Paper Handling) were not changed.

A change that did occur was the toning assembly where the key components in the older version – replenisher housing and motor, station sump casting, two developer rollers with two magnet rollers, two mixing blenders along with miscellaneous gears, bearings, and hardware were replaced with a new version having one developer roller and one magnet roller.

This processing of the two assemblies which are noted above as the two most important assemblies in a photocopier are in our view not ones which suffice as altering the essential character of the copier. Although certain parts of these assemblies were replaced, the processing did not destroy the essential character of the copier. As we noted in HRL 555819, replacement and/or addition of parts that are not so extensive as to create a new or different article constitutes acceptable repair operations for purposes of subheading 9802.00.50, HTSUS. Also, as mentioned in HRL 558858/558859, subheading 9802.00.50, HTSUS, is applicable to articles subject to partial and/or complete disassembly as long as the essential components and the identity of the article remain intact.

Accordingly, with regard to the Model C to D process, it is now our opinion that, although the processing involved extensive reconditioning of numerous parts and replacement of a number of parts resulting in an enhancement of certain copier functions, the changes were not so extensive as to destroy the essential identity of the exported photocopier or create a new or commercially different article. Furthermore, the fact that many of the parts are identified as being able to be replaced in the field, indicates that the replacement of such parts restore the products to their original condition and, therefore, may be considered “repairs” within the meaning of subheading 9802.00.50, HTSUS.

HOLDING:

On the basis of the information submitted, it is our opinion that the Mexican operations enumerated above with regard to the Model C to D conversion operations constitute “repairs or alterations” since they did not destroy the identity of the exported copiers or create new or commercially different articles. Therefore, the imported Model D copiers which were exported as Model C copiers are eligible for the full duty exemption under subheading 9802.00.50, HTSUS. Consistent with this ruling, HRL 560006, dated March 21, 1997, is hereby revoked.

Sincerely,

Myles B. Harmon, Director
Commercial Rulings Division

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