HQ 222075: Entry of LEOMACS casting machine produced by the Toshiba Machine Corporation

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 222075

                          March 7, 1990

ENT-1-01-CO:R:C:E  222075 GG

CATEGORY:  Entry

Stephen J. McDermott
Customs Administrator, Tax Staff
General Motors Corporation
General Motors Building
3044 West Grand Boulevard
Detroit, Michigan 48202

RE:  Entry of LEOMACS casting machine produced by the Toshiba
     Machine Corporation

Dear Mr. McDermott:

     This is in response to your letter dated January 22, 1990,
in which you request a ruling on the subject of a planned
importation of a LEOMACS casting machine produced by the Toshiba
Machine Company.  Specifically, you ask whether the machine can
be imported under one of the exceptions to the import sanctions
imposed on products of that company. 

FACTS:
  
     Central Foundry, a division of General Motors Corporation
(GMC), signed a binding purchase agreement on September 2, 1988,
for a 250 ton LEOMACS casting machine manufactured by the Toshiba
Machine Company (TMC).  TMC reportedly is the sole supplier of
this machine, which is used for the development of aluminum
blocks, heads, and other castings and advanced materials. 
Central Foundry allegedly acquired this machine for the purpose
of completing its research and development on a new casting
process.  The machine will soon be shipped to the United States. 
Alternate arrangements have been made to place the machine in a
GMC facility in Canada in anticipation of a decision that
permission for importation will be denied.

ISSUE:

1)  Can Central Foundry enter the LEOMACS machine under a regular
consumption entry as an exception to the prohibition on the
importation of TMC products for information and technology?

2)  In the alternative, does the LEOMACS machine qualify for
temporary importation under bond pursuant to 19 CFR 12.142(i) and
subheading 9813.00.30 of the Harmonized Tariff Schedule?  If so,
could the temporary importation bond be cancelled, if, subsequent
to its importation, the importation qualifies for an Department
of Defense exception to the importation prohibition? 

3)  Central Foundry wants to import component or spare parts made
by both TMC and other, non-sanctioned companies.  All of these
items, including those not manufactured by TMC, would be imported
directly from TMC.  Would the presentation of affidavits from
both the non-sanctioned manufacturer and TMC, satisfy Customs
documentation requirements concerning the identity of the parts? 
Can Central Foundry import the component and spare parts under a
temporary importation bond?

LAW AND ANALYSIS:

     In response to the first issue, there is no exception which
would allow the importation under a regular consumption entry of
TMC merchandise qualifying as "technology", unless such
technology is a product contracted for prior to June 30, 1987. 
19 CFR 12.142(i) provides an exception for the importation of TMC
technology as long as it is entered under a temporary importation
bond of the kind described in subheading 9813.00.30 of the
Harmonized Tariff Schedule (HTS).  The requirement that
technology be entered under the restraints of this temporary
importation provision was imposed to guard against the
unrestricted entry of all finished TMC products which otherwise
might qualify as technology.  Importation under subheading
9813.00.30, HTS meets the purpose of the exception without
eliminating the ban on the importation of sanctioned products.

     The second issue raises the question of whether the LEOMACS
machine does in fact qualify for temporary importation under 19
CFR 12.141(e) and subheading 9813.00.30, HTS.  19 CFR 12.141(e)
states that the importation prohibition on TMC products shall not
apply to information and technology.  "Information and
technology" is defined in 19 CFR 142(i) as
     
     "includ[ing] plans, drawings, and other written and
     pictorial data in any form or medium, and personal
     transmissions of any of the foregoing.  The term shall
     also include component parts, finished products, or
     other articles to which these prohibitions would
     otherwise apply if temporarily imported under the
     provisions of subheading 9813.00.30, HTS solely to
     demonstrate such technology and which are thereafter
     exported."

Subheading 9813.00.30, HTS permits the temporary duty-free
importation under bond of "articles intended solely for testing,
experimental or review purposes, including specifications,
photographs and similar articles for use in connection with
experiments or for study".  Articles imported under this
provision cannot be imported for sale or for sale on approval and
must be exported within one year of the date of importation, a
time which upon application may be extended for up to a total of
3 years.

     The purposes to which Central Foundry plans to put the
machine appear to fall within the scope of activities envisioned
by subheading 9813.00.30, HTS.  Specifically, Central Foundry
plans to conduct material R&D programs for aluminum, magnesium,
aluminum and magnesium metal matrix composites and aluminum and
magnesium cermets, and to demonstrate the capability of the
machine to produce products using the above materials with or
without sand cores and steel inserts; to evaluate and optimize
the LEOMACS mechanical, electrical, and ceramics systems to
minimize downtime and to increase repeatability, efficiency and
flexibility in order to meet customer requirements; to develop
and optimize die design and maintenance procedures; to produce
experimental, prototype, and low volume evaluation products; and
to demonstrate product capabilities at customers' plants.  From
this description it is possible to conclude that the machine is
being imported for two purposes:  1) to test its adaptability or
suitability to Central Foundry's casting operations; and 2) to
test, review and demonstrate its production capabilities.  Such
uses would be permitted under subheading 9813.00.30, HTS, and for
this reason Central Foundry can temporarily import the LEOMACS
machine under the technology exception of 19 CFR 12.142(i).

     The foregoing conclusion is based on the premise that
Central Foundry intends to export the LEOMACS machine within 3
years of importation, and not to sell or offer to sell the
machine during that time.  The intent of the importer at the time
of importation is a crucial factor in determining whether the
merchandise is eligible for entry under a TIB provision.  A later
determination of a different intent, occasioned by a breach of
the bond and backed by evidence such as a preexisting contract,
may subject the owner of the merchandise to a penalty claim in
addition to the assessment of liquidated damages.

     You indicate that Central Foundry intends to demonstrate
product capabilities at its customers' plants.  Although the
imported article itself is not being demonstrated, the
demonstration of its products should not preclude the importation
of the LEOMACS machine under subheading 9813.00.30, HTS.  As long
as the machine was imported solely for testing, review and
experimental purposes, and the production and subsequent
demonstration of products were merely incidental to any of these
permitted purposes, then temporary importation of the machine
under bond would be allowed.

     The Customs Service would not automatically cancel the
temporary importation bond if, after importation, the LEOMACS
machine subsequently qualified for a Department of Defense
exception to the importation prohibition.  Central Foundry or the
surety would have to tender the full amount of the liquidated
damages specified in the bond before the bond could be cancelled. 
As stated above, the discovery by the Customs Service that
Central Foundry had always intended that the machine would remain
in the United States under such an exception, may subject Central
Foundry to a penalty action as well as to a liquidated damages
claim.

     The sanctions target only products of Toshiba Machine
Company and Kongsberg Trading Company; accordingly, component or
spare parts manufactured by other, non-sanctioned companies would
not be subject to the sanctions, even if imported directly from
TMC or Kongsberg Trading Company.  In a situation where Central
Foundry is importing non-sanctioned articles from a sanctioned
company, Customs may require, under the authority vested in 19
CFR 12.143, documentation to show that these articles were not,
through an original manufacturing process or subsequent
substantial transformation, TMC or Kongsberg Trading Company
products.  The district director of the district where the
merchandise is being imported can more accurately ascertain, on a
case-by-case basis, exactly what kind of documentation would
suffice to establish that the merchandise being imported is not a
product of a sanctioned company.  Although the presentment of
affidavits from both the non-sanctioned manufacturer and TMC may
satisfy some Customs districts on the issue of who made the
machine, other district directors may require further proof, such
as a certificate of manufacture, to conclusively demonstrate that
the imported article was not a product of a sanctioned firm. 
Central Foundry may avail itself of the option, outlined in 19
CFR 141.63, of submitting all entry summary documentation for
preliminary review prior to the arrival of the imported articles.

    With respect to your question on whether Central Foundry may
import component and spare parts under a temporary importation
bond, it is the Customs Service's position that in this instance
such parts would be admissible under either subheading 9813.00.05
or 9813.00.30 of the Harmonized Tariff Schedule.  Parts imported
to repair domestic or imported articles have been ruled to be
admissible under the former as articles to be altered and/or
processed, while parts for an article entered under subheading
9813.00.30, HTS are entitled to entry under that law when
imported after the entry of the principal article and if
necessary for the experimental use of the principal article. 
Importation of component or spare parts made by a sanctioned
company would, of course, be subject to all of the other
conditions outlined in 19 CFR 12.142.

HOLDING:

1)  A machine that qualifies under the technology exception to
the Toshiba Machine Company products importation prohibition,
cannot be entered under a regular consumption entry.  A
qualifying machine must be entered temporarily under bond to
comply with 19 CFR 12.142(i).

2)  The LEOMACS machine, on account of the fact that it is being
imported solely to test its adaptability or suitability to a
specific use or uses, and to test, review and demonstrate its
production capabilities, is eligible for temporary importation
under bond pursuant to 19 CFR 12.142(i) and subheading
9813.00.30, HTS.  Customs would not automatically cancel the bond
if, subsequent to its importation, the machine were to qualify
for a Department of Defense exception to the importation
prohibition.  It may cancel the bond after the importer has
voluntarily tendered the full amount of liquidated damages
specified in the bond.

3)   The district director is responsible for determining what
kind of documentation is needed to substantiate that imported
spare or component parts were manufactured by a non-sanctioned
firm, in situations where an importer imports, directly from the
Toshiba Machine Company, component or spare parts made by a non-
sanctioned company.  Some districts might require other documents
in addition to affidavits to establish the identity of the
manufacturer of imported articles.  The importer may submit,
before the arrival of the parts, entry documentation for
preliminary review under the procedures outlined in 19 CFR 141.63
and 19 CFR 142.2(b)(1).  Component or spare parts may be entered
under the temporary importation under bond provisions of
subheading 9813.00.05 or 9813.00.30, HTS, provided that all of
the other conditions of 19 CFR 12.142 are adhered to.

                              Sincerely,



                              John Durant, Director
                              Commercial Rulings Division