CLA-2 CO:R:C:V 555539 KAC
Mr. Phil Freeman
Cain Customs Brokers, Inc.
421 Texano
P.O. Box 150
Hidalgo, Texas 78557
Re: Applicability of partial duty exemption under HTSUS
subheading 9802.00.80 to imported toroids created by
winding, cutting to length, stripping, and tinning
wire.Assembly;incidental operations;Mast;General
Instrument;HRL 555205;C.S.D. 90-6
Dear Mr. Freeman:
This is in response to your letters of December 1, 1989 and
March 8, 1990, on behalf of Deltron, Inc., requesting a ruling on
the applicability of subheading 9802.00.80, Harmonized Tariff
Schedule of the United States (HTSUS), to toroids to be imported
from Mexico.
FACTS:
Deltron will ship U.S. components to Mexico for assembly
into toroids, which are used to protect computer power supplies
from surges in electrical current. The foreign operations to be
performed consist of assembling three basic toroid designs from
which 125 variations will be possible. Variations are necessary
to accommodate the output voltage and current in different
Deltron power supplies. Variations may include using different
grades of ferrite, gauges of wire, and number of turns for the
wire, although superficially the toroids will appear identical.
The work stations, tools and operations will not change. The
foreign operations, which are representative of the operations to
be performed on all toroid variations, consist of:
(1) cutting to length the magnet wire after it is unwound
from a spool;
(2) winding the wire around a donut-shaped ferrite core on
a winding machine;
(3) stripping the ends of the wire (removal of varnish from
outside of wire); and
(4) tinning the ends of the wire (dipping the ends of the
wire in flux and then into melted solder).
After the foreign operations are completed in Mexico, the
toroids will be imported into the U.S.
ISSUE:
Whether the toroids are entitled to the partial duty
exemption available under HTSUS subheading 9802.00.80 when
returned to the U.S.
LAW AND ANALYSIS:
HTSUS subheading 9802.00.80 provides a partial duty
exemption for:
[a]rticles assembled abroad in whole or in part of
fabricated components, the product of the United States,
which (a) were exported in condition ready for assembly
without further fabrication, (b) have not lost their
physical identity in such articles by change in form, shape
or otherwise, and (c) 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, lubrication, and painting....
All three requirements of HTSUS subheading 9802.00.80 must be
satisfied before a component may receive a duty allowance. An
article entered under this tariff provision is subject to duty
upon the full value of the imported assembled article, less the
cost or value of such U.S. components, upon compliance with the
documentary requirements of section 10.24, Customs Regulations
(19 CFR 10.24).
Section 10.16(a), Customs Regulations (19 CFR 10.16(a)),
provides that the assembly operation performed abroad may consist
of any method used to join or fit together solid components, such
as welding, soldering, riveting, force fitting, gluing,
laminating, sewing, or the use of fasteners.
Operations incidental to the assembly process are not
considered further fabrication operations, as they are of a minor
nature and cannot always be provided for in advance of the
assembly operations. However, any significant process, operation
or treatment whose primary purpose is the fabrication,
completion, physical or chemical improvement of a component
precludes the application of the exemption under HTSUS subheading
9802.00.80 to that component. See, 19 CFR 10.16(c).
In United States v. Mast Industries, Inc., 515 F.Supp. 43, 1
CIT 188, aff'd, 69 CCPA 47, 668 F.2d 501 (1988), the court, in
examining the legislative history of the meaning of "incidental
to the assembly process," stated that:
[t]he apparent legislative intent was to not preclude
operations that provide an "independent utility" or that are
not essential to the assembly process; rather, Congress
intended a balancing of all relevant factors to ascertain
whether an operation of a "minor nature" is incidental to
the assembly process.
The court then indicated that relevant factors included:
(1) whether the relative cost and time of the
operation are such that the operation may be considered
minor;
(2) whether the operation is necessary to the assembly
process;
(3) whether the operation is so related to the assembly
that it is logically performed during assembly; and
(4) whether economic or other practical considerations
dictate that the operations be performed concurrently
with assembly.
Winding wire around a ferrite core constitutes an acceptable
means of assembly, as the two components are securely joined
together. 19 CFR 10.16(a). See also, C.S.D. 90-6, Headquarters
Ruling Letter 555218 dated September 13, 1989, which held that
winding of wrap wire around core wire to create guitar strings is
an acceptable means of assembly. Cutting to length is an
incidental operation pursuant to 19 CFR 10.16(b)(6). Stripping
wire is also considered an acceptable incidental operation. See,
General Instrument v. United States, C.A.D. 1128, 61 CCPA 86, 499
F.2d 1318 (1974), rev'g, C.D. 4421, 70 Cust.Ct. 151, 359 F.Supp.
1390 (1973), and Headquarters Ruling Letter 555205 dated August
25, 1989, which held that wire stripping is an incidental
operation.
The tinning operation is not a proper assembly operation
under this tariff provision as there is no joinder of two solid
components. In order to determine if the tinning operation is
incidental to the assembly process, the Mast criteria must be
examined. The first of the Mast criteria involves a comparison
of the relative cost and time required to perform the operation
in question with the cost and time required to perform the entire
assembly operation. However, as you have failed to supply the
information which is necessary to enable us to determine if the
tinning operation is an incidental operation--although the
information was requested by a member of my staff by telephone on
March 15, and May 4, 1990--we will assume for purposes of this
ruling that the operation is not incidental to assembly.
Therefore, no allowance may be made for the cost or value of the
magnet wire.
HOLDING:
On the basis of the information provided, it is our opinion
that the operations performed abroad, except for the tinning
operation, are considered proper assembly operations or
operations incidental to assembly. Therefore, an allowance in
duty for the cost or value of the imported ferrite core is
permissible under subheading 9802.00.80, HTSUS, upon compliance
with the documentary requirements of 19 CFR 10.24.
Sincerely,
John Durant, Director
Commercial Rulings Division