Merchandise imported and duty paid, thereafter exported and returned is subject to duties unless it qualifies for a limited number of exemptions. One of the exemptions is subheading 9801.00.20, which provides duty-free treatment for merchandise previously imported duty paid when reimported without having been advanced in value or improved in condition while abroad exported under a lease or similar use agreement and reimported by, or for the account of, the original importer.
The subject merchandise, which consist of swimwear and swim gear, was imported into United States, duty paid and immediately exported to Canada for warehousing and inventory management pursuant to an agreement with a related entity. The merchandise was thereafter reimported.
The decision first holds that the importer failed to establish a sufficient connection between the original importations and the reimportations. The decision goes on to find a failure to establish that the subject merchandise was not advanced in value or improved on condition while in Canada. The court did not really decide the question of whether the warehouse agreement was a use agreement. The importer conceded it not a lease. The court found similar problems with respect to whether the goods were imported and reimported by the same party.
In short, the court found that the importer failed to establish any of the elements for classification in subheading 9801.00.20.
This decision illustrates the inherent difficulty in qualifying consumer goods with multiple styles, sizes, colors, etc. for duty-free treatment under 9801.00.20.
The importer could have avoided having to pay duty twice by bringing the goods in initially under an Immediate Export or a Transportation and Export entry.