CLA-2 CO:R:C:S 556920 MLR
Mr. Robert Noell
Cain Customs Brokers Inc.
6620 S. 36th - Bldg. I
McAllen, TX 78503
RE: Applicability of partial duty exemption under HTSUS
subheading 9802.00.80 to electrical harnesses; slipping;
crimping; molding; snapping; testing; Sigma; C.J. Tower
Dear Mr. Noell:
This is in reference to your letter of September 7, 1992, on
behalf of NETP, Inc. (located at 2080 Lockport Road, Niagara
Falls, New York 14304), requesting a ruling regarding the
applicability of subheading 9802.00.80, Harmonized Tariff
Schedule of the United States (HTSUS), to electrical harnesses.
Samples of all components, except the black molding compound,
were submitted with your request.
FACTS:
NETP plans to import electrical cable systems from Mexico at
Hidalgo, Texas. The electrical cable systems are used to control
automatic brake systems for automobiles. An electrical harness,
a subassembly of the electrical cable system, consists of the
following components:
Part Name Part Number
Terminated red wire 1BH-001-01
Terminated brown wire 1BH-002-01
Speed sensor with two blue wires F02-00-D14
molded together
Seals (2) D21-00-019
Terminals (2) T02-28-002
Black molding compound K01-37-M02
Connector C06-21-001
Secondary lock C00-00-024
Convoluted tubing S66-10-225
Tie wraps (3) Z12-00-003
All components are manufactured in the United States except the
speed sensor (which arrives subassembled from Hungary) and the
convoluted tubing.
The assembly process of the electrical harnesses is
conducted at six stations. First, the green seals are slipped
over the non-terminated ends of the blue wires of the speed
sensor subassembly. Second, the speed sensor with the seals from
station #1 is placed in a terminal crimping machine where the
blue wires are terminated automatically with the terminal
components. Third, the blue, red and brown wires are placed into
a fixture, and an insert molding machine molds .007 kilograms of
black molding compound into a plastic strain relief grommet
around the wires approximately one inch from the unterminated
ends of the brown and red wires and one inch from the sensor end
of the blue wires. Fourth, the terminated ends of the blue wires
are plugged into the connector, and they are twisted 25 times by
a wire winder machine. The red and brown wires are then plugged
into the connector and the secondary lock is snapped into the
back of the connector. At the fifth station, the convoluted
tubing is spread over the wires and three tie wraps are closed
over the convoluted tubing. The tie wrap is trimmed of excess
material by a plastic cutter. Lastly, the completed cable
assembly is visually and electronically tested (speed sensor
inductance test). The electrical harness is then packed for
shipment to the United States.
ISSUE:
Whether the U.S. components in the electrical harnesses will
qualify for the duty exemption under HTSUS subheading 9802.00.80,
when imported into the United States.
LAW AND ANALYSIS:
Subheading 9802.00.80, HTSUS, 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,
lubricating and painting.
All three requirements of subheading 9802.00.80, HTSUS, 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).
Section 10.14(a), Customs Regulations {19 CFR 10.14(a)},
states in part that:
[t]he components must be in condition ready for
assembly without further fabrication at the time of
their exportation from the United States to qualify for
the exemption. Components will not lose their
entitlement to the exemption by being subjected to
operations incidental to the assembly either before,
during, or after their assembly with other components.
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,
lamination, 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. See 19 CFR 10.16(a). 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
subheading 9802.00.80, HTSUS, to that component. See 19 CFR
10.16(c).
The operations of slipping the seals over the wires,
crimping terminals on the wires, plugging the terminated ends
into the connector, twisting the wires, snapping the secondary
lock into the connector, spreading the convoluted tubing over the
wires, and closing the tie wraps over the convoluted tubing are
considered acceptable assembly operations pursuant to 19 CFR
10.16(a) for purposes of subheading 9802.00.80, HTSUS. Trimming
the tie wraps of excess material after they are closed over the
convoluted tubing is considered an acceptable operation
incidental to assembly pursuant to 19 CFR 10.16(b)(4), which
states that trimming, filing, or cutting off of small amounts of
excess materials is an acceptable incidental operation.
Conducting a speed sensor inductance test is considered an
acceptable incidental operation pursuant to 19 CFR 10.16(b)(7),
which states that final calibration and testing are considered
operations incidental to assembly.
However, no allowance in duty may be made under subheading
9802.00.80, HTSUS, for the cost or value of the black molding
compound as it is not exported from the United States in
condition ready for assembly without further fabrication as
required by clause (a) of the statute. In Sigma Instruments,
Inc. v. United States, 5 CIT 90, 565 F. Supp. 1036 (1983), aff'd,
724 F.2d 930 (Fed. Cir. 1984), U.S. terminal pins were
incorporated into header assemblies by a transfer molding
operation in Mexico. A molding compound, exported to Mexico in
rope form, was heated and transformed into a viscous state before
being joined to the terminal pins. At the completion of the
transfer molding operation, the molding compound had
substantially assumed a definitive solidification, size, and
shape. Through this process the terminal pins became permanently
fixed in their designed configuration and spacing so that they
could perform their intended function as electrical relays. The
court, relying upon C.J. Tower & Sons of Buffalo, Inc. v. United
States, 62 Cust. Ct. 643, C.D. 3840, 304 F. Supp. 1187 (1969),
found that the transfer molding operation constituted a
permissible assembly within the purview of subheading 9802.00.80,
HTSUS, and that Customs should have granted an allowance in duty
for the terminal pins. (In C.J. Tower, an extrusion process
whereby foreign polyethylene was made from pellets in liquid form
of high viscosity and was joined with sheets of U.S. polyester
was held to be an acceptable assembly since the polyethylene
became a solid upon completion of the assembly process.)
We therefore conclude that the process of placing the blue,
red and brown wires into a fixture, and molding the black molding
compound into a plastic strain relief grommet constitutes an
acceptable assembly operation for purposes of subheading
9802.00.80, HTSUS, and that allowances in duty may be made for
the cost or value of all components of U.S. origin, except the
black molding compound.
HOLDING:
On the basis of the information and samples submitted, we
conclude that the U.S. components in the electrical harnesses,
except the black molding compound, do not lose their physical
identity in the assembly operation, and are not advanced in value
or improved in condition except by assembly operations and
operations incidental thereto. Therefore, allowances in duty may
be made under subheading 9802.00.80, HTSUS, for the cost or value
of the U.S. fabricated components incorporated into the
electrical harnesses, except the black molding compound, upon
return of the electrical cable systems to the United States,
provided the documentary requirements of 19 CFR 10.24 are
satisfied.
Sincerely,
John Durant, Director