H306350

U.S. Department of Homeland Security Washington, DC 20229 U.S. Customs and Border Protection HQ H306350 April 23, 2021 OT:RR:CTF:VS H306350 tmf CATEGORY: Valuation Michael Snarr Baker & Hostetler LLP Washington Square, Suite 1100 1050 Connecticut Avenue, N.W. Washington, D.C. 20038-5403 RE: Subheading 9801.00.25, and 9801.00.10, HTSUS; Exported to Canada and Returned to United States Dear Mr. Snarr: This is in response to your request dated September 19, 2019, for a prospective ruling on behalf of your client, Exertis Supply Chain Services Ltd. (“Exertis”) concerning the eligibility of certain merchandise under subheading 9801.00.25, Harmonized Tariff Schedules of the United States (HTSUS). FACTS: Exertis is a global distributor of a range of technology products that includes keyboards, cases and accessories to mobile phones and smart devices. You mention that this prospective ruling request is not for a specific product, but it covers “a range of technology products that include various products such as: keyboards, cases and accessories to mobile phones and certain ’smart’ devices (e.g., mugs and fitness products that connect to ’smart’ devices.” Your client is inquiring as to whether subheading 9801.00.25 would apply to the following scenario: Exertis will import technology products into the United States from the manufacturers for distribution to Exertis' U.S. customers. Exertis will be the Importer of Record. The products at issue typically will be manufactured in countries outside of North America. The technology products will be received by the U.S. customer and held in inventory. The U.S. customer takes title to those products upon removing them from Exertis’ inventory. The U.S. customer may export some or all those products outside of the United States to its end user customers, or to its retail centers in Canada where the products will be sold to end users in Canada. For products being shipped to Canada, Exertis’ U.S. customer will take title to the products when removing them from inventory to prepare them for export. The U.S. customer will be the owner of the products and will function as the Exporter of Record for those shipments outside of the United States. The end user will take title to the technology products upon receipt of them from Exertis' U.S. customer, either at a retail center in Canada or by direct shipment from the United States. Exertis will carry forward product warranties that are extended to the end user for the technology products. The agreement between Exertis and its U.S. customer will provide that both the U.S. customer and the U.S. customer's end user may return the products to Exertis if they are found not to conform to the order because the product is defective or fails to operate as specified. The end user would return the products to the U.S. customer and the U.S. customer would return the products to Exertis. When defective or non-conforming products are returned to Exertis, you claim that title to those products would transfer back to Exertis. You mention that the returned goods are shipped from the U.S. customer's retail centers in Canada to an Exertis warehouse in Canada.1 Title would pass in Canada and Exertis would export the products back to the United States. Exertis will function as the Importer of Record for the returned goods imported from Canada. Exertis may export the products from the United States to the original manufacturer or may scrap them. According to the scenario, you claim that the products that are exported for sale in Canada continue to be covered under warranty and may be returned to Exertis when there is something wrong with them or they do not conform to the consumer/end user’s expectations. 1 You state the warehouse in Canada is a “simple warehouse which lacks the systems and processes necessary for triaging & processing returns back to manufacturers.” The products have UPC codes or SKU numbers that are unique to a type of product, and while some of the products do have serial numbers or other unique marks that would allow Exertis to identify each specific unit of a type of product, some products do not have such unique numbers. The ones with the unique marks may be used to track and confirm that the products being returned are products sold by Exertis to its U.S. customer. Exertis may not necessarily be able to distinguish one unit of a product from another unit of a product that it sells to its customer, unless that unit of the product has a serial number and Exertis develops the capability to track product units by serial number. You state that because of Exertis’ contractual relationship with its U.S. customers, the types of products sold, and the UPC code/SKU identifiers, Exertis will know with certainty that each product being returned to Exertis is a product that was (a) imported by Exertis into the United States; (b) sold to Exertis’ customers in the United States; (c) and exported to Canada by that U.S. customer for sale to Canadian consumers. However, Exertis may not necessarily know when a U.S. customer exports the products to Canada. Exertis expects any product returned from Canada would be reimported into the United States within three years of the original importation into the United States. You also mention that it is possible that Exertis can track the goods by SKU numbers and quantities sold (for recordkeeping), by type and quantity of products shipped to its customers, as well as shipment dates. You state that Exertis’ re-imported technology products would be received in the same condition as they were exported and would not have been advanced in value or improved in condition by any means while in Canada. ISSUE: Whether the technology products from Canada may be exempt from duties under subheading 9801.00.25, HTSUS, or subheading 9801.00.10, HTSUS. LAW AND ANALYSIS: Generally, an importer must pay duty on previously imported merchandise that is exported and then re-imported into the United States. See 19 C.F.R. § 141.2. Chapter 98 of the Harmonized Tariff Schedule of the United States ("HTSUS") contains special provisions for goods returned that have not been advanced in value or improved abroad, classified under Heading 9801. Specifically, subheading 9801.00.25, Harmonized Tariff Schedule of the United States, provides duty-free treatment for: Articles, previously imported, with respect to which the duty was paid upon such previous importation if (1) exported within three years after the date of such previous importation, (2) reimported without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, (3) reimported for the reason that such articles do not conform to sample or specifications, and (4) reimported by or for the account of the person who imported them into, and exported them from, the United States. Exertis will import the products into the United States, as well as reimport them. However, when it concerns exportation to Canada, Exertis may not know when its customers will export them to Canada. To be eligible for subheading 9801.00.25, you are required to provide proof that the first importation matches the second importation, such that the specific product with its quantity, style, size, and color is the same as what is being reimported into the United States. In addition, to be eligible for duty-free treatment under subheading 9801.00.25, you should also be able to show that the originally imported products were also sold to customers in the United States, as well as duties paid on the re-imported entries at issue. However, in this case, you claim that the returned products are not all identified by serial/unique numbers or marks, and that Exertis may not necessarily know when the returned goods are exported by its customers to Canada, only that the products should be reimported into the U.S. within 3 years of original importation based on its initial production cycle. You state that when Ex

Generally, an importer must pay duty on previously imported merchandise that is exported and then re-imported into the United States. See 19 C.F.R. § 141.2. Chapter 98 of the Harmonized Tariff Schedule of the United States ("HTSUS") contains special provisions for goods returned that have not been advanced in value or improved abroad, classified under Heading 9801. Specifically, subheading 9801.00.25, Harmonized Tariff Schedule of the United States, provides duty-free treatment for:Articles, previously imported, with respect to which the duty was paid upon such previous importation if (1) exported within three years after the date of such previous importation, (2) reimported without having been advanced in value or improved in condition by any process of manufacture or other means whileabroad, (3) reimported for the reason that such articles do not conform to sample or specifications, and (4) reimported by or for the account of the person who imported them into, and exported them from, the United States.Exertis will import the products into the United States, as well as reimport them. However, when it concerns exportation to Canada, Exertis may not know when its customers will export them to Canada. To be eligible for subheading 9801.00.25, you are required to provide proof that the first importation matches the second importation, such that the specific product with its quantity, style, size, and color is the same as what is being reimported into the United States. In addition, to be eligible for duty-free treatment under subheading 9801.00.25, you should also be able to show that the originally imported products were also sold to customers in the United States, as well as duties paid on the re-imported entries at issue.However, in this case, you claim that the returned products are not all identified by serial/unique numbers or marks, and that Exertis may not necessarily know when the returned goods are exported by its customers to Canada, only that the products