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Cargo Vans Exported for Conversion Into Motorhomes Not Eligible for 9802 Treatment

Thursday, October 20, 2016
Sandler, Travis & Rosenberg Trade Report

The Court of International Trade ruled Oct. 18 that Class B motorhomes produced in Canada from cargo vans shipped from the U.S. are properly classified as motor vehicles under HTSUS 8703.33.00 (2.5 percent duty). The plaintiff had argued for classification as articles returned to the U.S. after having been exported to be improved in condition under HTSUS 9802.00.50 (duty-free under NAFTA).

After being exported to Canada the cargo vans were subject to a variety of operations to turn them into motorhomes (e.g., installing cabinetry, appliances, plumbing systems, etc.). The CIT agreed with CBP that these operations altered the vans beyond the permissible scope of HTSUS 9802.00.50, destroyed the essential characteristics of the vans, and created a new commercial product. The court explained that to qualify for preferential treatment under this subheading the foreign alterations must be made to goods that are suitable for their ultimate intended use – i.e., the use of the article upon return to the U.S. – when exported from the U.S. In this case, the exported articles were ready for use as cargo vans, whereas upon their return the motorhomes were not suitable for such use.

U.S. Customs and Border protection determined in ruling HQ H077417 that the motorhomes were eligible for preferential treatment under HTSUS 9802.00.50 but later revoked that ruling and voided it ab initio because the plaintiff had failed to adhere to 19 CFR 177.1(a)(2)(ii), which forbids CBP from issuing a ruling where a similar or identical transaction has taken place or is pending at the time the ruling request is made. The CIT states that despite CBP not finding fault with its own logic in this voided ruling, the ruling “has neither binding nor persuasive bearing on the court’s decision here and does not merit Skidmore deference.”

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