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HQ 115878




April1, 2003

ENT-1:RR:IT:EC 115878 LLO

CATEGORY: ENTRY

Karl F. Krueger
Danzas AEI Customs Brokerage Services
29200 Northwestern Highway
Southfield, Michigan 48034

RE: Entry; Duty; Railcars; Canadian Repairs; 19 C.F.R. 141.4; Additional U.S. Note 1 to Chapter 86, HTSUS

Dear Mr. Krueger:

We received your letter dated November 12, 2002 requesting a ruling on the entry requirements for Canadian repairs done to railroad cars returned to the United States from Canada. Our ruling on the matter follows.

FACTS:

Procor, Ltd. is a manufacturer and lessor of railcars. The railcars are produced in Ontario and qualify for NAFTA benefits. These cars are frequently returned to Procor, Ltd. for repairs, both under warranty and not under warranty. You indicate that you have been informed that as a general rule Customs wants repairs entered as 9802 when goods qualifying for NAFTA Preference Override go to Canada for repair. You go on to note that this practice seems to conflict with the Additional U.S. Note 1 to Chapter 86 of the Harmonized Tariff Schedule of the U.S. (HTSUS).

ISSUE:

Whether entry is required for repairs done to the subject railcars in Canada.

LAW AND ANALYSIS:

Title 19 U.S.C. §1484 sets forth the requirement that entry of all merchandise be made, unless otherwise excepted. Under title 19 C.F.R. §141.4(a), which was implemented pursuant to 19 U.S.C. §1448 and 19 U.S.C. §1484, all merchandise imported into the U.S. is required to be entered unless specifically excepted.

Title 19 C.F.R. §141.4(b)(4) specifically excepts from entry, freight cars classified in heading 8606, HTSUS, on which no duty is owed. Title 19 C.F.R. §141.4(b)(4) makes reference to Chapter 86, Additional U.S. Note 1, HTSUS, 19 C.F.R. Part 123 and Chapter 99 Subchapter V, U.S. Note 9, HTSUS. Chapter 99, Subchapter V, U.S. Note 9, HTSUS, notes nothing having to deal with railway freight cars and locomotives, and is in fact noted as deleted in the HTSUS.

Additional U.S. Note 1 to Chapter 86, HTSUS, provides the following:

“Railway locomotives (provided for in heading 8601 and 8602) and railway freight cars (provided for in heading 8606) on which no duty is owed are not subject to the entry or release requirements for imported merchandise set forth in sections 448 and 484 of the Tariff Act of 1930. The Secretary of the Treasury may by regulation establish appropriate reporting requirements, including the requirement that a bond be posted to ensure compliance.”

For purposes not relevant to this case, the reference to section 448 above pertains to release of merchandise under the special permit for immediate delivery procedures.

To be excepted from entry, title19 C.F.R. §141.4(d) sets out the three requirements that railroad locomotives and freight cars described in Additional U.S. Note 1 of Chapter 86, HTSUS, and described in subheading 9905.86.05 or 9905.86.10, HTSUS must meet (as applicable). First, the importer must certify that the freight car was produced before July 1, 1999, or if admitted after July 1, 1994, that the freight car was produced not less that 3 years before the date of importation. Secondly, the importer must certify that the freight car will be exported within one year from the date of importation. Title 19 C.F.R. §141.4(d)(3), the third requirement, provides in pertinent part, that for railway freight cars described in Additional Note 1 of Chapter 86, HTSUS to be released in accordance with paragraph (b)(4) of section 141.4, the importer shall first file a bond on Customs Form 301 containing the bond conditions set forth in either §113.62 or §113.64 of this chapter.

If the subject freight cars meet the three aforementioned requirements, then they would not be subject to the entry requirements of 19 U.S.C. §1484. The foregoing regulations and Additional Note 1 to Chapter 86, HTSUS make it clear that the subject rail cars, if duty free under NAFTA and classifiable in Heading 8606, HTSUS, would not be subject to the entry requirement of 19 U.S.C. §1484, provided all of the applicable prerequisites under 19 C.F.R. §141.4(d) are met.

Notwithstanding the entry- free and duty-free status of the subject railcars discussed above, repairs done in Canada to such railcars are not excepted from entry under 19 C.F.R. §141.4(b). In addition, for trains proceeding in international traffic such repairs are subject to the reporting requirements of 19 C.F.R. §123.13 if other than “running repairs.”

HOLDING:

Entry is not required for the subject railcars manufactured and repaired in Canada provided they satisfy the requisite criteria as discussed in the Law and Analysis portion of this ruling. However, the repairs done to such railcars in Canada are not found in the list of exceptions to the requirement to make entry set forth in 19 C.F.R. §141.4(b) and therefore must be entered.

Sincerely,

Glen E. Vereb
Chief

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