H293258

90 K Street, N.E., Washington, D.C. 20229-1177 U.S. Customs and Border Protection HQ H293258 September 13, 2021 CON 9-04 OT: RR: CTF: ER H293258 HvB Ms. Elizabeth Deaton Argents Air Express 4115 Dorchester Rd. Bldg. 600 N. Charleston, SC 29405 Re: Request for a Ruling; Computer Numerical Control (“CNC”) Lathes; Temporary Importation under Bond (TIB); 9813.00.05; Duty Deferral under NAFTA and USMCA Dear Ms. Deaton: This is in response to your request for a ruling, dated November 29, 2017, submitted on behalf of EMAG, LLC, (“EMAG”) as to whether certain CNC Lathes qualifies for entry under a temporary importation under bond (“TIB”), in subheading 9813.00.05, Harmonized Tariff Schedule of the United States (“HTSUS”), as articles to be altered or processed. The National Commodity Specialist Division (“NCSD”) forwarded your request for a decision. We also took into consideration your correspondence of January 28, 2018, and April 22, 2020. We apologize for the delay. Our decision, based upon your submissions, follows. FACTS EMAG wishes to import CNC Lathes from the People’s Republic of China (“PRC”) and Germany. The CNC Lathes at issue are turning/finishing vertical lathes, i.e., the VLC 200 GT and similar machines. EMAG’s customers use the lathes to manufacture mechanical components, for example, couplers, automotive brakes, engines, and transmission parts. EMAG’s customers are members of various industries, including the automotive, oil, and aerospace manufacturing industries. Upon arrival to the United States, the lathes are fully functional, as the machines have a standard attachment added at the factory so that they are ready to make standard part. The standard attachment piece allows an unfinished metal part to be machined, using consumable tooling, without a traditional chuck. While many of EMAG’s customers in Canada or Mexico purchase these machines in this readymade condition, as the machine is able to run and fully function, other customers require that the CNC Lathes be modified to suit their particular machining needs. Upon importation into the United States, EMAG will modify the lathes in one of three ways to accommodate these customers. First, in order to comply with workplace safety requirements, EMAG may add equipment such as fences, guarding, and/or ladders to the lathes. Second, electrical components including electronic breakers sometimes must be added to make sure that the machinery meets the applicable standards of the country in which the customer is located. Third, EMAG tailors the machine to the customer’s specific requirements. EMAG will either receive the required chuck and tooling from the customer (which is located in Canada or Mexico) or purchase it themselves and add it to the machine and program the machine in the United States. The chuck holds the specific piece being worked by the machine as it is processed. The chuck is not a generic part, as it must be built to allow the piece being worked to be turned, rotated, and moved through the machine until all processes are finished. In addition, EMAG may add tools to the machinery which enable it to grind or cut the metal. On its website, EMAG lists various examples of the “available technology modules” that can be added to the VLC 200, such as a “12-position tool turret and “combined hard turning + OD grinding.” As with the chuck, these specialized parts are added to tailor the machine’s processes to the specific requirements of the purchaser. We note that EMAG advertises its ability to customize the CNC lathes to suit its customers’ needs: “Technologies from the full portfolio of the EMAG Group can be installed on the VLC 200, making it one of the most versatile vertical CNC turning machines in the EMAG machine catalog.” Once the modifications are finished, EMAG asserts that final tests are done to ensure that the machine works according to the required specifications. The goods are then sold in the U.S. for export to Canada or Mexico. EMAG states that the goods will not remain in the U.S. for more than one year. ISSUES: Whether EMAG’s proposed modifications for its CNC Lathes qualifies as a repair, alteration or process for entry under subheading 9813.00.05, HTSUS, as a TIB. Whether EMAG’s CNC Lathes are subject to the NAFTA and USMCA lesser of duty rule. LAW AND ANALYSIS: Whether EMAG’s proposed modifications for its CNC Lathes qualifies for entry under subheading 9813.00.05, HTSUS, as a TIB? Pursuant to General Note 1, Harmonized Tariff Schedule of the United States (“HTSUS”), all merchandise imported into the United States is subject to duty unless specifically exempted. Under subheading 9813.00.05, HTSUS, articles to be repaired, altered or processed (including processes that result in articles manufactured or produced in the United States), may be entered temporarily free of duty, under a bond for exportation within one year from the date of importation. This is referred to as a “TIB,” temporary importation under bond. The one year period may be extended for additional periods, which when added to the initial period do not exceed three years. See U.S. Note 1(a) of Subchapter XIII, Chapter 98, HTSUS. To satisfy the requirements for the TIB, the imported article must be timely exported. Id. Additionally, to qualify under this provision, the merchandise imported may not be imported for the purpose of sale or sale on approval. Id. Moreover, CBP regulations, specifically 19 C.F.R. § 10.38, require that an application for exportation be made on CBP Form 3495. As we explained in Headquarters Ruling (“HQ”) H227704, dated February 22, 2000, the TIB laws provide an exemption from the general imposition of duty on imported merchandise. A general requirement of the TIB laws is a prohibition against sale. The sale for export exemption from that general prohibition is an exception to that prohibition. See U.S. Note 1(a) of Subchapter XIII, Chapter 98, HTSUS. Therefore, any lathes which are sold in the United States for domestic use or consumption in the United States are ineligible for entry under a TIB. Because EMAG states that it plans to export the CNC Lathes to Canada or Mexico, we must consider the United States-Mexico-Canada Agreement Implementation Act. Pub. L. 116-118; 19 U.S.C. § 4534. In addition, since EMAG filed its request when the North American Free Trade Agreement (“NAFTA”) was in effect, we begin with the NAFTA provisions. Section 203 of NAFTA, Pub. L. 103-182; 107 Stat. 2057, 2086; 19 U.S.C. § 3333, provides that all goods imported into the United States that are exported to Canada or Mexico are subject to the NAFTA drawback restrictions, i.e., the lesser of duty rule, unless a specific exception applies. The lesser of duty rule, in the specific context of subheading 9813.00.05, is contained in U.S. Note 1(c), Chapter 98, Subchapter XIII, HTSUS. If this rule were applicable, a consumption entry must be filed and duty would be collected. However, Article 307(2) of NAFTA provides that “[n]otwithstanding Article 303, no Party may apply a customs duty to a good, regardless of its origin, imported temporarily from the territory of another Party for repair or alteration.” Section 208 exempts merchandise exported to a USMCA party, in the same condition as when it is imported, from USMCA Drawback and the lesser of duty rule, allowing full drawback of U.S. duties upon exportation. 19 U.S.C. § 4534(a)(2). With regards to NAFTA, 19 C.F.R. § 181.53(b)(5) provides: Except in the case of a good imported from Canada or Mexico for repair or alteration, where a good, regardless of its origin, was imported temporarily free of duty for repair, alteration or processing (subheading 9813.00.05, Harmonized Tariff Schedule of the United States) and is subsequently exported to Canada or Mexico, duty shall be assessed on the good on the basis of its condition at the time of its importation into the United States. Therefore, because the CNC Lathes will be exported to Canada or Mexico, if 

Whether EMAG’s proposed modifications for its CNC Lathes qualifies for entry under subheading 9813.00.05, HTSUS, as a TIB? Pursuant to General Note 1, Harmonized Tariff Schedule of the United States (“HTSUS”), all merchandise imported into the United States is subject to duty unless specifically exempted. Under subheading 9813.00.05, HTSUS, articles to be repaired, altered or processed (including processes that result in articles manufactured or produced in the United States), may be entered temporarily free of duty, under a bond for exportation within one year from the date of importation. This is referred to as a “TIB,” temporary importation under bond. The one year period may be extended for additional periods, which when added to the initial period do not exceed three years. See U.S. Note 1(a) of Subchapter XIII, Chapter 98, HTSUS. To satisfy the requirements for the TIB, the imported article must be timely exported. Id. Additionally, to qualify under this provision, the merchandise imported may not be imported for the purpose of sale or sale on approval. Id. Moreover, CBP regulations, specifically 19 C.F.R. § 10.38, require that an application for exportation be made on CBP Form 3495.As we explained in Headquarters Ruling (“HQ”) H227704, dated February 22, 2000, the TIB laws provide an exemption from the general imposition of duty on imported merchandise. A general requirement of the TIB laws is a prohibition against sale. The sale for export exemption from that general prohibition is an exception to that prohibition. See U.S. Note 1(a) of Subchapter XIII, Chapter 98, HTSUS. Therefore, any lathes which are sold in the United States for domestic use or consumption in the United States are ineligible for entry under a TIB. Because EMAG states that it plans to export the CNC Lathes to Canada or Mexico, we must consider the United States-Mexico-Canada Agreement Implementation Act. Pub. L. 116-118; 19 U.S.C. § 4534. In addition, since EMAG filed its request when th