CLA-2 CO:R:C:S BLS
Philip Freeman
Cain Customs Brokers
Progresso, Texas 78579
RE: Subheading 9802.00.80, HTSUS; automotive rotor;
substantial transformation; GSP; 19 CFR 10.16(a);
19 CFR 10.195(a); Torrington; HRL 556462; HRL 555659
Dear Mr. Freeman:
This is in reference to your letter dated February 11, 1993,
requesting a ruling regarding the applicability of subheading
9802.00.80, Harmonized Tariff Schedule of the United States
(HTSUS), to certain automobile rotors, to be imported from Mexico.
You also inquire as to whether the rotor body is transformed into
a product of Mexico for purposes of the Generalized System of
Preferences (GSP).
FACTS:
The product to be imported is a rotor, used to direct
electricity from the ignition coil to the spark plugs in certain
automobile engines. The rotor is mounted on the distributor shaft.
The spring on the rotor always makes contact with the terminal in
the center of the distributor cap, which comes from the ignition
coil. As the shaft rotates, the rotor closes the circuit with the
terminals in the cap that go to the spark plugs.
The rotor body will be injection molded in Mexico from
granulated thermoplastic of U.S. origin. Each rotor body is molded
and then passed to an adjoining machine for completion of the
assembly. The rotor body is manually placed on a turntable
fixture, and two small metal parts of U.S. origin, a spring and a
vane, are placed on the rotor body. The turntable is positioned
to allow a screw to be fed through a hole on the spring and vane
into the rotor body. The turntable turns again to position the
rotor under an Ultrasonic Bonding Assembly Machine, which presses
the screw into the rotor body and then melts plastic around the
screw by ultrasonic vibrations, holding the spring and vane to the
rotor body. The part is then examined and packed for shipment.
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ISSUES:
1) Whether the imported rotor is eligible for the partial duty
exemption under subheading 9802.00.80, HTSUS;
2) Whether the rotor is considered a product of Mexico for
purposes of the GSP.
LAW AND ANALYSIS:
1) Subheading 9802.00.80
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, (Emphasis added.)
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 10.16(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, riveting, force fitting, gluing, laminating, sewing,
or the use of fasteners.
It is clear that the U.S. granulated thermoplastic is further
fabricated in Mexico by the injection molding process, which
transforms the raw material into a rotor body. The physical
identity of the thermoplastic is completely changed by this
process. Accordingly, the rotor body will not be eligible for an
allowance in duty under subheading 9802.00.80, HTSUS. However, the
vane and spring will be eligible for a duty allowance under this
tariff provision, as these components are assembled onto the rotor
body by screwing and ultrasonic bonding, processes considered to
be acceptable assembly operations within the purview of 19 CFR
10.16(a).
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2) Generalized System of Preferences
Under the GSP, eligible articles the growth, product or
manufacture of a designated beneficiary developing country (BDC),
which are imported directly into the Customs territory of the U.S.
from a BDC may receive duty-free treatment if the sum of (1) the
cost or value of materials produced in the BDC, plus (2) the direct
costs of the processing operations in the BDC, is equivalent to at
least 35 percent of the appraised value of the article at the time
of entry. See, 19 U.S.C. 2463(b).
Mexico is a designated BDC. See, General Note 3(c)(ii)(A),
HTSUS. In addition, it appears from a description of the
merchandise that the articles in question are classified under
subheading 8511.90.60, HTSUS, which provides for electrical
ignition or starting equipment used for spark ignition or
compression-ignition internal combustion engines, other parts,
other, a GSP eligible provision. Therefore, the rotor will receive
duty-free treatment if it is considered to be a "product of"
Mexico, the 35 percent value content requirement is satisfied, and
it is imported directly to the U.S. Merchandise is considered the
"product of" a BDC if it is wholly the growth, product or
manufacture of a BDC or has been substantially transformed there
into a new or different article of commerce. 19 U.S.C. 2463(b)(2).
A substantial transformation occurs "when an article emerges from
a manufacturing process with a new name, character, or use which
differs from that of the original material subjected to the
process." The Torrington Company v. United States, 764 F.2d 1563
(Fed. Cir. 1985).
The manufacture of the rotor body in Mexico from the U.S.
thermoplastic by an injection molding process clearly results in
a substantial transformation of this material into a new and
different article of commerce. See, for example, Headquarters
Ruling Letter (HRL) 556462 dated April 24, 1992 (injection molding
of U.S. resin to form drainage pipes); and HRL 555659 dated
December 3, 1990 (injection molding of plastic material to form
plastic handles, folding hinges, brakes and folding clips).
Therefore, the rotor body is considered to be a product of Mexico
for purposes of the GSP.
The additional issue to be considered is the effect of the
assembly process upon the eligibility of the completed article for
GSP treatment.
In determining whether the processing performed in Mexico
constitutes a substantial transformation, section 10.195(a),
Customs Regulations (19 CFR 10.195(a)), also is relevant. Pursuant
to this regulation, which implements the Caribbean Basin Economic
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Recovery Act (CBERA), no article shall be considered to have been
produced in a CBERA beneficiary country by virtue of having merely
undergone simple, as opposed to complex or meaningful, combining
or packaging operations. (Note also that under 19 U.S.C.
2463(b((2)(A), GSP treatment is similarly precluded for articles
or materials of a BDC by virtue of merely undergoing simple
combining or packaging operations.) However, 19 CFR
10.195(a)(2)(ii)(D) provides that this exclusion shall not be
taken to include:
A simple combining or packaging operation or mere dilution
coupled with any other type of processing such as testing or
fabrication (e.g., a simple assembly of a small number of
components, one of which was fabricated in the beneficiary
country where the assembly took place.)
Since both the CBERA and GSP have similar statutory goals, and the
country of origin criteria are nearly identical, we may apply this
regulation to the issue at hand.
In our opinion, the manual insertion of the spring and vane
onto the rotor body, and joinder of the components by screwing and
bonding, are simple assembly operations. However, as a result of
fabrication of the rotor body, 19 CFR 10.195(a)(2)(ii)(D) is
applicable. Therefore, these assembly operations do not prevent
a finding that the processing in Mexico, viewed in its totality,
constitutes a substantial transformation. In this regard, we do
not believe that this is the minimal, "pass-through" type of
operation that should be disqualified from receiving the benefit
of duty-free treatment under the GSP. Additionally, the assembly
of the spring and vane to the rotor, while considered to constitute
simple rather than complex operations, requires a significant
portion, 38 percent, of the total time necessary to complete
processing of the article to be imported.
Under the circumstances, we find that the operations to be
performed in Mexico in the production of the automotive rotor,
including fabrication and assembly operations, substantially
transform the U.S. materials into a new and different article of
commerce. As a result, the imported articles will be considered
products of Mexico for purposes of determining the eligibility of
the articles for duty-free treatment under the GSP.
HOLDING:
1) Granulated thermoplastic of U.S. origin will be further
fabricated in Mexico as a result of an injection molding process;
Accordingly, the imported rotor body manufactured during this
process will not be eligible for a duty allowance under subheading
9802.00.80, HTSUS. However, the U.S. origin spring and vane
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assembled onto the rotor body with the use of a screw, which is
machine bonded, will qualify for the duty allowance under this
provision.
2) The processing to be performed in Mexico in the production
of the automotive rotor, including fabrication and assembly
operations, substantially transform the U.S. components into a new
and different article of commerce. As a result, the imported
article is considered to be a product of Mexico for purposes of
determining the eligibility of the rotor for duty-free treatment
under the GSP.
Sincerely,
John Durant, Director
Commercial Rulings Division