Here’s a spooky question about 9802 HTSUS: When do improvements create a completely new imported item?
Halloween (which is just around the corner, judging by all the pumpkins at the grocery stores) may be just the right holiday to consider a ghoulish question that confounds importers in regards to section 9802 of the HTSUS. As you may know, 9802 allows an importer to avoid paying duties on merchandise that was exported, as long as the merchandise was enhanced (advanced in value or improved in condition) overseas. If the merchandise qualifies, the importer pays duties solely on the value of the enhancements.
Halloween at the gut level deals with transformation, typically from good to bad or, if not bad, at least to outcast or mischievous. People wear costumes to make the change temporary and superficial, but the fun stories touch a darker reality. People transform into zombies, werewolves, vampires, and even monsters created by evil geniuses or possessed by demons. Think Doctor Jekyll and Mister Hyde, The Fly, and The Exorcist. The stories would not work and would not stir something in us, however, if the hope for redemption was absent. Will the monster ever turn back into a human? Or has he/she turned irretrievably into something completely inhuman, something so different that it no longer deserves all the protections and benefits that we guarantee solely to our fellow humans?
Back to 9802. To qualify for duty savings under this provision, you must export an item to get it improved or enhanced in the foreign country. However, while improvements or enhancements are required, you must keep a tight leash on them. You cannot bring back a completely new item.
I call this the Six Million Dollar Man paradox. Turn the way-back machine to the 1970s. Steve Austin, aka the Six Million Dollar Man, aka the Bionic Man, is injured in a terrible accident. A secret, government-funded medical team saves his life by replacing his broken body parts with robotic or bionic parts. They improve him. They make him better.
They replace one eye and one ear drum with an infrared scanner and an electronic earpiece. He is still Steve Austin, human. They give him nuclear powered legs and arms. He is still Steve Austin. If memory serves (I have not watched the show in over three decades and barely even then), the upgrades stopped there. But what if they continued to replace body parts? What if they replaced his torso with a gigantic iPad and on and on you, removing slices of his anatomy and replacing them with shining steel and electronic circuitry. At some point, he will no longer be Steve Austin, but instead will be something else irretrievably.
What is that point?
Questions like that are normally the province for philosophers and science fiction fans, but US Customs and Border Protection daily decides similar, albeit more prosaic, questions regarding 9802 items. We attorneys often fight to convince CBP that the items have not transmogrified while in a foreign land into something more sinister.
Who knew import law could be so spooky?
Principal and a founding member of GRVR Attorneys.