us-cbp-cross-rulings-hq-220989•HQ 220989: Tariff classification of certain magnetic tapes, microfiche, and microfilm
HQ 220989: Tariff classification of certain magnetic tapes, microfiche, and microfilm
us-cbp-cross-rulings-hq-220989HQ 220989: Tariff classification of certain magnetic tapes, microfiche, and microfilmGuidance
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 220989
May 11, 1989
CLA-2-CO:R:C:E 220989 L
CATEGORY: Classification; Marking; Other
TARIFF NO.: General Note 4 (c)
John J. Scanlon, Jr., Esq.
Kemp, Smith, Duncan & Hammond
P.O. Drawer 2800
El Paso, Texas 79999-2800
RE: Tariff classification of certain magnetic tapes, microfiche,
and microfilm
Dear Mr. Scanlon:
Your inquiry dated October 7, 1988, JS No. 88-0538 concerns
the classification of certain magnetic tapes, microfiche, and
microfilm; their admission and use in a foreign trade zone (FTZ);
and the applicability of country of origin marking requirements.
FACTS:
A 5-page description of the processing of certain used
airline tickets, credit card receipts, and other associated
documents sent from the United States to Mexico has been
submitted. At the end of each processing cycle, also described
in the submission, data resulting from the processing is
transferred to blank magnetic tape said to be of United States
manufacture. Eventually, the same data is transferred to
microfiche or microfilm, also said to be of United States
manufacture.
The magnetic tape bearing the business data is then imported
into the United States, the data processed, the magnetic tape
reused with new data, and the tape returned to Mexico for further
use.
The data transferred either to microfiche or microfilm in
Mexico may be imported into the United States with or apart from
the magnetic tape.
At some point it is apparently contemplated that magnetic
tape bearing the above business data will be imported into the
United States temporarily free of duty under bond under
subheading 9813.00.05, Harmonized Tariff Schedule of the United
States (HTSUS; formerly item 864.05, Tariff Schedules of the
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United States) and then admitted into a foreign trade zone (FTZ).
In the FTZ the data from the imported tape would be copied onto
blank United States manufactured magnetic tape admitted to the
FTZ in domestic status. The tape onto which the data was copied
would then be transferred from the FTZ into the Customs territory
of the United States.
ISSUE:
Four issues are presented. The first is whether magnetic
tape, microfiche, and microfilm bearing business data are exempt
from general note 1, Harmonized Tariff Schedule of the United
States (HTUS) pursuant to general note 4(c), HTSUS.
The second issue is whether magnetic tape bearing business
data may be imported temporarily free of duty under bond for
processing in a FTZ, the process being the reproduction of the
data from the imported tape onto a tape of United State
manufacture admitted to the zone in domestic status, with
subsequent transfer of the copies into the Customs territory of
the United States free of duty taxes, and quota.
The third issue is whether the magnetic tape, microfiche,
and microfilm imported bearing business data are subject to
country of origin marking requirements pursuant, to 19 U.S.C.
1304.
The fourth issue is whether if the magnetic tape,
microfiche, and microfilm is marked with country of origin while
still blank the markings must be amended or removed when the
magnetic tape, microfiche, or microfilm bearing business data
transferred to it abroad is returned to the United States.
LAW AND ANALYSIS:
General Note 1 to the HTSUS provides that "[A]ll goods
provided for in this schedule and imported into the customs
territory of the United States from outside thereof are subject
to duty or exempt therefrom as prescribed in general notes 3
and 4."
General note 4(c) provides that for the purposes of general
note 1 "records, diagrams and other data with regard to any
business, engineering or exploration operation whether on paper,
cards, photographs, blueprints, tapes or other media. . .are not
goods subject to the provisions of the tariff schedule."
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The predecessor of general note 4(c) was General Headnote
5(e), Tariff Schedules of the United States (TSUS), identical in
wording to general note 4(c), HTSUS. General Headnote 5(e) TSUS,
was enacted into law in 1983, see Public Law 97-446 of January
12, 1983, section 201(a)(3), 96 Stat. 2329, which also provided
for the repeal of item 870.10, TSUS, a tariff provision similar,
but not identical to, General Headnote 5(e), TSUS.
Item 870.10, TSUS, provided for entry free of duty for
"[R]ecords, diagrams, and other data with regard to any business,
engineering, or exploration operation conducted outside the
United States, whether on paper, cards, photographs, blueprints,
tapes, or other media." General Headnote 5(e) as enacted was
identical to the repealed item 870.10, TSUS, with the exception
(and deletion) of the underlined portion.
Headquarters letter 071242SC, March 28, 1983, discussing the
enactment of General Headnote 5(e), TSUS, and repeal of item
870.10, TSUS, pointed out that "[T]he rulings made with respect
to document coverage, under the predecessor provision in item
870.10, TSUS, will still apply to business records imported as
intangibles, with the exception that under the new law the
operations need not be conducted outside of the United States."
In your description of the process you state, among other
things, that your client contracts with Airline Reporting
Corporation (ARC) to process airline tickets (and associated
documents) which various travel agencies throughout the United
States have sold on behalf of ARC. The records, therefore, do
not relate to a business operation conducted outside the United
States. However, as noted above, with the enactment of General
Headnote 5(e), TSUS, it is no longer necessary that the records
relate to business operation conducted outside of the United
States.
The next question is whether the business records imported
must be the business records of the importer or whether, as in
this case, they can be the business records of an unaffiliated
party.
The legislative history of item 870.10, TSUS, is discussed
at some length in Headquarters letter 079847, October 28, 1987.
It is clear that the intent of item 870.10, TSUS, was to exempt
from duty business records or other data relating to the
operations of foreign offices . . .of American businesses. A
comment of Mr. Mills, in the Congressional Record of May 9, 1962,
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page 8010, states "[T]he provision would not, of course, apply to
business records processed abroad when no other phase of the
business operations to which the records pertain occurs abroad."
See, too, Headquarters letter 063240, October 24, 1979.
The enactment of General Headnote 5(e), TSUS, and repeal of
item 870.10, TSUS, was not accompanied by an explanation of the
reason for the deletion of the phrase ". . . conducted outside
the United States. . .". We conclude that deletion of the
requirement that the records relate to business conducted outside
the United States also removed the need for the business records
to be the business records of the importer. General Headnote
5(e), TSUS, of course, was transferred without change to general
note 4(c), HTSUS.
The legislative history of item 870.10, TSUS, also indicates
that the records contemplated in item 870.10, TSUS, are not
salable, S.Rep. No. 1318, 97th Cong., 1st. Sess. 1640 (1962).
Similarly, records or data classifiable under General Headnote
5(e), TSUS, were not permitted any commercial value except to the
business to which they pertain, see Headquarters letter 073099,
June 5, 1984. We interpret "salable" and "commercial value" to
mean that the primary purpose of importation into the United
States is resale to others.
The question of sale of the records is not specifically
addressed in your submission. Based upon your description of the
process, we assume that your client, who processes the records
under a contract with ARC, does not import the records into the
United States primarily for the purpose of sale to ARC or others.
Based upon the foregoing, the subject magnetic tape,
microfiche, and microfilm, bearing business records and not
imported for resale, are exempt from general note 1, HTSUS,
pursuant to general note 4(c), HTSUS. While no entry is required
for articles enumerated in general note 4, HTSUS (section
141.4(a), Customs Regulations, will be amended to reflect this),
the importer must declare the records and the Customs Service
retains the right to inspect all parcels containing them.
You next ask if your client can temporarily import magnetic
tapes into a FTZ under subheading 9813.00.05, HTSUS; copy the
data from the imported tapes onto blank tapes of United States
manufacture admitted to the FTZ in domestic status; and
thereafter transfer the copies into the Customs territory of the
United States free of quotas, duty, and taxes.
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In the circumstances described, it is not necessary for your
client to enter the magnetic tape temporarily free of duty under
bond. The tape can be sent directly to the zone from the port of
arrival by cartman or bonded carrier, as may be appropriate, and
there have the data copies from the imported tape onto blank
tapes of United States manufacture. As noted in your submission,
C.S.D. 83-73 (Headquarters letter 215445, March 14, 1983) held
that tape recordings produced in a FTZ on tape in domestic status
by the use of imported master tapes may be sent into customs
territory free of quota, duty, and taxes. Note that pursuant to
T.D. 86-16 the status of privileged domestic was abolished and
domestic status merchandise is now generally governed by section
146.43, Customs Regulations.
The third and fourth issues relate to country of origin
marking of magnetic tape, microfiche, and microfilm, and whether
any such marking on blank magnetic tape, microfiche, or microfilm
must be amended or removed when the magnetic tape, microfiche, or
microfilm bearing business data is returned to the United States.
The Customs Service has previously held that "intangibles"
under the TSUS are not articles within the meaning of 19 U.S.C.
1304 and therefore need not be marked with the country of origin.
Business records such as those described and the media by which
they are carried would have been within the intendment of
intangibles in General Headnote 5(e), TSUS. Since general note
4(c), HTSUS, carried over virtually the same language as that in
General Headnote 5(e), TSUS, the same view is adopted; that is,
the subject magnetic tape, microfiche, and microfilm bearing
business data need not be marked with country of origin pursuant
to 19 U.S.C. 1304, and blank magnetic tape, microfiche, and
microfilm marked with country of origin (we note that all of the
magnetic tape, microfiche, and microfilm herein is said to be of
United States manufacture) while still blank but which has
business data transferred to it while abroad need not have the
markings amended or removed.
HOLDING:
1. Magnetic tape, microfiche, and microfilm bearing business
data as described in detail in a submission dated October 7,
1988, bearing the reference JS No. 88-0538, imported into the
United States is exempt from general note 1, HTSUS, pursuant to
general note 4(c), HTSUS, and entry is not required for articles
enumerated in general note 4(c), HTSUS.
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2. Magnetic tape may be imported into the Customs territory
of the United States and transferred to a FTZ for reproduction of
the data from the imported tape onto a tape of United States
manufacture admitted to the FTZ in domestic status. The tape
copies may be transferred to the Customs territory of the United
States free of duty, taxes, and quota.
3. Magnetic tape, microfiche, and microfilm bearing business
data meeting the requirements of general note 4(c), HTSUS, are
not subject to the marking requirements of 19 U.S.C. 1304.
4. Magnetic tape, microfiche, and microfilm marked with
country of origin while still blank but which has business data
meeting the requirements of general note 4(c), HTSUS, transferred
to it abroad need not have the markings amended or removed upon
its return to the United States.
Sincerely,
John Durant, Director
Commercial Rulings Division
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