CLA-2 CO:R:C:V 555681 KAC
Matthew J. Marks, Esq.
Marks Murase & White
Suite 750
2001 L Street, N.W.
Washington, D.C. 20036
RE: Applicability of subheading 9802.00.80, HTSUS, to relays
created by mounting and soldering.Substantial
transformation;assembly;Anheuser-Busch;Timex;19 CFR
10.12(e);19 CFR 10.14(b);19 CFR 10.16(a)
Dear Mr. Marks:
This is in response to your letter dated June 13, 1990, on
behalf of Aromat Corporation ("Aromat"), requesting a ruling on
the applicability of subheading 9802.00.80, Harmonized Tariff
Schedule of the United States (HTSUS), to relays imported into
the U.S.
FACTS:
Aromat produces "DS2" relays composed of fourteen parts
manufactured in the U.S. from U.S. and Japanese origin materials.
The components produced in the U.S. from Japanese materials are:
1. The 142 and 143 yokes made from Japanese magnetic iron
which is subjected to a flattening operation;
2. The residual plate made from Japanese stainless steel
strip which is cut to form. The residual plate is then welded to
the 142 and 143 yokes;
3. The 140 iron core made from Japanese material which
undergoes a flattening and sorting operation. This component
will later be incorporated into the coil block;
4. The fixed terminal A and B and movable spring made from
Japanese nickel-silver strip and phosphorous bronze are die
stamped, and gold contacts (four contacts for both the A and B
terminal, and eight contacts for the movable spring) are welded
into place. These components will later be merged with others to
form the body block C assembly;
5. The coil terminal made from Japanese nickel-silver is
die stamped, molded and cut into shape. This component will
later be incorporated into the bobbin block assembly;
6. The 165 card made from Japanese polybutylenetere-
phthalate ("PBT") plastic is transformed into its proper shape by
injection molding. This component will later be merged into the
coil block assembly;
7. The 313 case made from Japanese PBT plastic is
transformed into its proper shape by injection molding. This
component will later be merged with others to form the exterior
of the DS2 relay;
8. The coil wire purchased in Japan is wound into a coil
bobbin which is then molded into its proper shape; and
9. The 281 pellet material, an imidazole derivative, is
purchased through a Japanese company.
In the U.S., the components are manufactured into the DS2
relays as follows:
1. molding of PBT plastic with the fixed terminal A and B
to form the body block c assembly;
2. attaching the 142 and 143 yokes and a magnet to the
body block c assembly;
3. molding the coil terminal in plastic to form the bobbin
block assembly;
4. winding the bobbin block assembly with copper wire to
form the coil block assembly;
5. inserting the 140 core into the coil block assembly and
attaching the 165 card to both ends of the 145 core to
form the coil core block assembly;
6. assembling the body c block assembly and the coil core
block assembly together to form the coil, body
assembly;
7. soldering a coil lead to the coil, body assembly;
8. attaching the 415 metal supporter to the coil, body
assembly;
9. ultra-sonic cleaning, vacuum annealing, second
annealing, magnetizing, cleaning, and adjusting
operations to the coil, body assembly;
10. encasing the coil, body assembly with the 313 case;
11. adding the 281 pellet to the coil, body assembly;
12. curing the coil, body assembly;
13. filling the coil, body assembly with N2 gas and
sealing (now known as relay);
14. marking the exterior of the relay case;
15. presoldering the relays;
16. inspecting the relay; and
17. inserting the relays into a tube.
Upon completion of the U.S. manufacturing processes, the
DS2 relays will be exported to Mexico. In Mexico, the DS2 relays
will be mounted and soldered to a printed circuit board. After
the soldering operation is complete, the DS2 relays attached to
the printed circuit board will be returned to the U.S.
ISSUE:
Whether the DS2 relays will be entitled to the partial duty
exemption under subheading 9802.00.80, HTSUS, 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 cost or value of the imported assembled article,
less the cost or value of the U.S. components assembled therein,
upon compliance with the documentary requirements of section
10.24, Customs Regulations (19 CFR 10.24).
According to section 10.12(e), Customs Regulations (19 CFR
10.12(e)), a "product of the United States" is an article
manufactured within the customs territory of the U.S. and may
consist wholly of U.S. components or materials, of U.S. and
foreign components or materials, or wholly of foreign components
or materials. If the article consists wholly or partially of
foreign components or materials, the manufacturing process must
be such that the foreign components or materials have been
substantially transformed into a new and different article, or
have been merged into a new and different article.
A substantial transformation occurs when, as a result of
manufacturing processes, a new and different article emerges,
having a distinctive name, character, or use, which is different
from that originally possessed by the article or material before
being subjected to the manufacturing process. See, Anheuser-
Busch Association v. United States, 207 U.S. 556, (1908); Timex
Corporation v. United States, Slip Op. 88-90, 12 CIT , 691
F.Supp. 1445 (CIT 1988); and section 10.14(b), Customs
Regulations (19 CFR 10.14(b)).
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.
We are of the opinion that the Japanese materials are
substantially transformed into a product of the U.S. These raw
materials, including magnetic iron, stainless steel strip,
nickel-silver strip, phosphorous bronze and PBT plastic, are
imported into the U.S. In the U.S., the materials are processed
by flattening, cutting to form, welding, molding, and other
operations to create distinctive components which are then
assembled into DS2 relays. The relays clearly emerge as new and
different articles with a distinctive name, character and use
different from that possessed by the raw materials from which
they are made.
Soldering is an acceptable assembly operation pursuant to 19
CFR 10.16(a). Therefore, an allowance in duty for the DS2 relay
will be available under subheading 9802.00.80, HTSUS, after the
PCB with DS2 relays are imported into the U.S.
HOLDING:
Based on the information submitted, we are of the opinion
that the Japanese materials are substantially transformed in the
U.S. into U.S.-origin DS2 relays. The foreign operations
performed on the DS2 relays are acceptable assembly operations.
Therefore, the imported printed circuit boards with attached DS2
relays may be entered under subheading 9802.00.80, HTSUS, with an
allowance in duty for the cost or value of the DS2 relays, upon
compliance with the documentary requirements of 19 CFR 10.24.
Sincerely,
John Durant, Director
Commercial Rulings Division