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the circumstances in which goods are eligible for this duty treatment. Thus, articles reimported after having been exported from the United States; goods subject to personal exemptions (such as those for returning U.S. residents); government importations; goods for religious, educational, scientific, or other qualifying institutions; samples; and articles admitted under bond are some of the goods eligible for such duty treatment.

Chapter 99 contains provisions, generally temporary in nature, that modify or otherwise affect the duty treatment of specified articles in the other chapters. Additional duties and suspensions or reductions of duties enacted by Congress are included, as are temporary modifications (increases or decreases in duty rates) and import restrictions (quotas, import fees, and so forth) proclaimed by the President under trade agreements or pursuant to legislation. However, antidumping and countervailing duties imposed under the authority of the Tariff Act of 1930, as amended, to eliminate the unfair price advantage of underpriced or subsidized imports are not included. These duties are listed in the Federal Register.

Applicable duty treatment

Column 1-General.-The rates of duty appearing in the column 1-general of the HTS are imposed on products of countries that have been extended most-favored-nation (MFN) or non-discriminatory trade treatment by the United States, unless such imports are eligible for treatment under a preferential tariff scheme discussed below. The column 1-general duty rates are concessional and have been set through reductions of full statutory rates in negotiations with other countries.

Column 1-Special.-General note 3 to the HTS sets forth the special tariff treatment afforded to covered products of designated countries or under specified measures. These programs and the corresponding symbols by which they are indicated in the special subcolumn along with the appropriate rates of duty are as follows:

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The presence of one or more of these symbols indicates eligibility of the described articles under the respective program. In the case of the GSP, a symbol followed by an asterisk indicates that, although the described articles are geneally eligible for duty-free entry, such tariff treatment does not apply to products of the designated beneficiary countries specified in general note 3(c). In the case of CBERA, the asterisk indicates that some of the described articles, as provided in the Federal Register or the Code of Federal Regulations, are ineligible for duty-free entry. These programs are discussed in greater detail below.

Column 2.-The column 2 rates of duty apply to products of countries that have been denied MFN status by the United States (see general note 3(b)); these rates are the full statutory rates, gen

erally as enacted by the highly restrictive Tariff Act of 1930. The products of the following countries are currently subject to column 2 rates of duty:

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Special duty exemptions and preferences

This section will briefly discuss HTS subheadings 9801.00.10, 9802.00.40, 9802.00.60, 9802.00.80, providing duty treatment for various categories of American goods returned from abroad after processing or assembly; general note 3(a)(iv), providing preferential tariff treatment for products of U.S. insular possessions; and duty exemptions under APTA and ATCA, as mentioned above.

American goods returned (HTS subheading 9801.00.10).-American goods may be returned to the United States duty-free under HTS subheading 9801.00.10 if they are not advanced in value or improved in condition while abroad. The courts have interpreted this provision to allow duty-free entry of American goods which had been exported for sorting, separating (e.g., by grade, color, size, etc.), culling out, and discarding defective items and repackaging in certain containers, so long as the article itself has not been the object of advancement in value or improvement in condition while abroad.

American goods repaired or altered abroad (HTS subheading 9802.00.40).-HTS subheading 9802.00.40 provides that goods exported from the United States for repairs or alterations abroad are subject to duty upon their reimportation into the United States (at the duty rate applicable to the imported article) only upon the value of such repairs or alterations. The provision applies to processing such as restoration, renovation, adjustment, cleaning, correction or manufacturing defects, or similar treatment that changes the condition of the exported article but does not change its essential character. The value of the repairs or processing for purposes of assessing duties is generally determined, in accordance with U.S. note 3 to subchapter II of chapter 98, by—

(1) the cost of the repairs or alterations to the importer, or (2) if no charge is made, the value of the repairs or alterations, as set out in the entry documents.

However, if the customs officer finds that the amount shown in the entry document is not reasonable, the value of the repairs or alterations will be determined in accordance with the valuation standards set out in section 402 of the Tariff Act of 1930 (19 U.S.C. 1401a).5

American metal articles processed abroad (Subheading 9802.00.60).—HTS subheading 9802.00.60 provides that an article of metal (except precious metal) which is exported from the United

519 U.S.C. 1401a.

States for processing abroad may be subject to duty on the value of the processing only upon its return to the United States. To qualify for this duty treatment, the exported article (1) must have been manufactured or subjected to a process of manufacture in the United States; and (2) must be returned "for further processing" in the United States.

The term "processing" refers to such operations as melting, molding, casting, machining, grinding, drilling, tapping, threading, cutting, punching, rolling, forming, plating, and galvanizing.

As in the case of articles imported under subheading 9802.00.40 (repairs or alterations), discussed above, the duty on metal articles processed abroad is assessed against the value of such processing, determined in accordance with U.S. note 3 to subchapter II of chapter 98.

American components assembled abroad (HTS subheading 9802.00.80).-Articles assembled abroad from American-made components may be exempt from duty on the value of such components when the assembled article is imported into the United States under HTS subheading 9802.00.80. This provision enables American manufacturers of relatively labor-intensive products to take advantage of low-cost labor and fiscal incentives in other countries (usually less developed countries) by exporting American parts for assembly in such countries and returning the assembled products to the United States with partial exemption from U.S. duties.

Subheading 9802.00.80 applies to articles assembled abroad in whole or in part of fabricated components, the product of the United States, which

(1) were exported in condition ready for assembly without further fabrication;

(2) have not lost their physical identity in such articles by change in form, shape, or otherwise; and

(3) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process such as cleaning, lubricating, and painting.

To be eligible for entry under this subheading, the exported article must be a fabricated U.S. component, i.e., a manufactured article ready for assembly in its exported condition, except for operations incidental to the assembly process. Whereas, integrated circuits, compressors, zippers, and precut sections of a garment are examples of fabricated components, uncut bolts of cloth, lumber, sheet metal, leather, and other materials exported in basic shapes and forms are not considered to be fabricated components for this purpose.

To be considered U.S. components, the articles do not necessarily have to be fabricated from articles or materials originating in the United States. If a foreign article or material undergoes a process of manufacture in the United States resulting in its "substantial transformation" into a new and different article, having a distinctive name, character, or use, then the component that emerges may qualify as a product of the United States for purposes of subheading 9802.00.80.

The assembly operations performed abroad include any method used to join solid components together, such as welding, soldering,

gluing, sewing, or fastening with nuts and bolts. Mixing, blending, or otherwise combining liquids, gases, chemicals, food ingredients, and amorphous solids with each other or with solid components is not regarded as assembling for purposes of subheading 9802.00.80. The rate of duty that applies to the dutiable portion of an assembled article is the same rate that would apply to the imported article. The assembled article is also treated as being entirely of foreign origin for purposes of any import quota or similar restriction applicable to that class of merchandise, and for purposes of country or origin marking requirements. All requirements regarding labeling, radiation standards, flame retarding properties, etc., that apply to imported products apply equally to subheading 9802.00.80 merchandise.

An article imported under subheading 9802.00.80 is treated as a foreign article for appraisement purposes. That is, the full appraised value of the article must first be determined under the usual appraisement provisions. The dutiable value, however, is determined by deducting the cost or value of the American-made fabricated components from the appraised value of the assembled merchandise.

Products from U.S. insular possessions (general note 3(a)(iv).—Imports from the Virgin Islands, Guam, American Samoa, Wake Island, Kingman Reef, Johnson Island, and Midway Islands are entitled to duty-free entry under certain conditions, designed to promote the economic development of these U.S. insular possessions. This provision does not apply to Puerto Rico which is part of the "customs territory of the United States."

As provided in general note 3(a)(iv) of the Tariff Schedule, an article imported directly from a possession is exempt from duty if—

(1) it was grown or mined in the possession; or

(2) it was produced or manufactured in the possession, and the value of foreign materials contained in that article does not exceed 70 percent of its total value. Materials of U.S. origin are not considered foreign for this purpose. Likewise, materials that could be imported into the United States duty-free (except from Cuba or the Philippines) are not counted as foreign materials for purposes of the 70 percent foreign-content limitation;

or

(3) in the case of any article excluded from duty-free treatment under section 213(b) of the Caribbean Basin Economic Recovery Act, it was produced or manufactured in the possession, and the value of foreign materials does not exceed 50 percent of its total value.

In addition, an article previously imported into the United States with duty or tax paid thereon, shipped to a possession without benefit of remission, refund, or drawback of such duty or tax, may be returned to the United States duty-free. General note 3(a)(iv) also provides that articles from insular possessions are entitled to no less favorable duty treatment than that accorded to eligible articles under the Generalized System of Preferences and the Carribbean Basin Economic Recovery Act described below.

In applying the 70 percent foreign-materials test, Customs determines the value of the foreign materials by their actual purchase price, plus the transportation cost to the possession, excluding any

duties or taxes assessed by the possession and excluding any postlanding charges. The value thus determined is then compared with the appraised value of the products imported into the United States, determined in accordance with the usual appraisement methods. If the differential is 30 percent or more, the foreign materials limitation is satisfied. This procedure is set out in 19 C.F.R. 7.8(d).

As previously noted, the product imported from a possession must have been produced or manufactured there (unless grown or mined there). It is not sufficient for foreign goods to be shipped to a possession for nominal handling or manipulation, followed by a price mark-up to meet the 70 percent test.

Canadian motor vehicles and original equipment therefor (APTA) (general note 3(c)(iii)).-Throughout the HTS are a number of specific provisions which provide for duty-free treatment of imported motor vehicles and specified original equipment parts that qualify as "Canadian articles" under general note 3(c)(iii). These provisions were added to HTS pursuant to the Automotive Products Trade Act of 1965,6 which was enacted to implement the U.S.-Canadian Automotive Agreement. The purpose of the Agreement was to create a North American common market for motor vehicles and original equipment parts (replacement parts are not covered).

The term "Canadian article" refers to an article produced in Canada but does not include any article produced with non-Canadian or non-U.S. materials unless the article satisfies the criteria set forth in the United States-Canada Free-Trade Agreement (general note 3(c)(vii)).

Most of the product categories established by the Automotive Products Trade Act are applicable to "original motor-vehicle equipment," which is defined in general note 3(c) as a Canadian fabricated component intended for use as original equipment in the manufacture of a motor vehicle in the United States and which was obtained from a Canadian supplier pursuant to "a written order, contract, or letter of intent of a bona fide motor-vehicle manufacturer in the United States." In turn, the phrase "bona fide motor-vehicle manufacturer" is defined as a person determined by the Secretary of Commerce to have produced at least 15 motor vehicles in the previous 12 months and to have the capacity to produce at least 10 motor vehicles per week.

Civil aircraft products (ATCA) (general note 3(c)(iv)).—Title VI of the Trade Agreements Act of 1979 gave the President the authority to proclaim new headnote 3 to part 6C of schedule 6 and to make specific headnotes to designated TSUS items in order to implement the Tokyo Round Agreement on Trade in Civil Aircraft and to provide duty-free treatment, in accordance with the annex to the Agreement for the civil aircraft articles described therein. These changes were implemented by Presidential Proclamation 4707 of December 11, 1979. This duty treatment is continued in the special notes subcolumn of the HTS.

The provisions work much like those implementing the U.S.-Canadian automotive pact in that a number of specific product break

6 Public Law 89-283, 19 U.S.C. 2001, et seq.

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