Used Promotional Models Not Eligible for Drawback, CBP Finds

The use of a promotional model for demonstration purposes does not constitute a "permissible use" under drawback regulations, CBP said in a ruling decision (here). CBP said in the May 28 ruling, HQ H258306, that the demonstrations of Anritsu network testing devices prior to sale go beyond incidental usage and therefore does not qualify as unused merchandise. Anritsu is a Japanese manufacturer of network test and measurement equipment for the telecommunications industry.

The company's U.S. sales personnel generate interest in Anritsu products through the use of promotional models imported into the U.S. The company allows potential customers to test the models, either through letting the prospect take a device home or within a lab setting, said CBP. The demonstration models aren't usually sold to customers, Anritsu told CBP. Anritsu asked CBP whether it could claim drawback on the promotional devices.

The "models are used because they are employed for the purpose for which they were built," said CBP. "The use of promotional models does not constitute a permissible use in connection with demonstrating a product offered for sale because Anritsu’s promotional models are not the devices offered for sale." This situation is similar to a recent CBP ruling on imported promotional garments worn by celebrities at high-profile events (see 1502020018), said CBP. Like that ruling, "Anritsu’s promotional models are demonstrated to customers, not for the purpose of selling the actual equipment, but to generate sales of Anritsu’s products and are demonstrated in the manner the promotional demonstration equipment was designed to be used," the agency said.

The company pointed to past ruling in which CBP found a yacht demonstration as an incidental use as support for Anritu's argument. That situation differs, though, because the yacht demonstration was connected to the sale of that yacht, said CBP. "Although Anritsu provides that it is technically possible to purchase the pieces of demonstration equipment, such a purchase would remove the article from its drawback claims because there would be no exportation," the agency said. Therefore, "demonstrating network test and measurement models to potential customers as described in standalone, lab, and live network settings is a 'use' prior to exportation," said CBP.