Cargo Vans Converted Into Motorhomes in Canada Not Duty-Free Goods Returned, CIT Says
Cargo vans exported to Canada and retrofitted as motorhomes before being imported into the U.S. do not qualify for duty-free treatment as goods returned after alteration or repair, the Court of International Trade said in a decision issued Oct. 18 (here). The transformation from a cargo van into a motorhome changed the character of the finished product so much that the importer, Pleasure-Way Industries, can no longer claim that it is the same article that it exported for tariff classification purposes, CIT said.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
The case concerned the classification of Daimler Chrysler “Sprinter” cargo vans that Pleasure-Way had exported to Canada, where it engaged in “upfitting” operations such as installing subflooring, custom cabinetry, a kitchenette with cooking facilities, a “wet bath” of toilet and shower facilities, an electric sofabed and electronics such as a television and digital media players. When Pleasure-Way reimported the vans it classified them as goods returned after repairs or alterations under subheading 9802.00.50, which is duty free under NAFTA. CBP disagreed, liquidating them as motor vehicles for the transport of persons under subheading 8703.33.00, dutiable at 2.5%.
The requirements for classification under subheading 9802.00.50, found in 19 CFR 181.64, say that the goods cannot be “incomplete for their intended use.” Any alteration cannot “destroy the essential characteristics of, or create a new or commercially different good from, the good exported from the United States,” the regulation says.
Pleasure-Way had argued the vans were complete because they were suitable at the time of exportation for Daimler Chrysler’s intended use of either using them “as-is” or “upfitting.” It said its operations simply advanced the vans in value or improved their condition, as provided for under subheading 9802.00.50. CBP said the Sprinter vans were unfinished goods that were “altered beyond the permissible scope of subheading 9802.00.50” and that the alterations “destroyed the essential characteristics of the exported vans and created a new commercial product.”
CIT ruled the “intended use” for which a good must be complete under 19 CFR 181.64 is the “ultimate” intended use when the good is returned to the U.S. The Sprinter cargo fans exported by Pleasure-Way were not suitable as motorhomes when they were exported to Canada, so they cannot be classified under subheading 9802.00.50. Also, the alterations performed by Pleasure-Way destroyed essential characteristics of the exported cargo van – to carry cargo – and created a new product with a different name that is sold at much higher prices, the trade court said. The cargo vans wouldn’t even be classifiable in the same tariff schedule provision as the motorhomes, which are processed into vehicles for carrying passengers, it said. On importation, the vehicles “do not satisfy the requirements of 19 CFR 181.64 and therefore cannot be classifiable under subheading 9802.00.50,” CIT said.
(Pleasure-Way Indus., Inc. v. U.S., Slip Op. 16-100, CIT # 10-00173, dated 10/18/16, Judge Musgrave)
(Attorneys: John Peterson of Neville Peterson for plaintiff Pleasure-Way Industries, Inc.; Marcella Powell for defendant U.S. government)