CLA-2 RR:CR:GC 960554 DWS
Port Director of Customs
33 New Montgomery Street, #1501
San Francisco, CA 94105
RE: Protest 2809-96-101144; Components of Physical Vapor
Deposition Apparatus
Dear Port Director:
The following is our decision regarding Protest 2809-96-101144 concerning your action in classifying and assessing duty
on components of physical vapor deposition (PVD) apparatus under
the Harmonized Tariff Schedule of the United States (HTSUS).
In a facsimile letter dated August 7, 1998, counsel for the
protestant withdrew from the protest the issue regarding the
classification of parts for the physical vapor deposition
apparatus.
FACTS:
The merchandise consists of several entries of components
two of which containing components of an electron beam machine
(Model 1850-634, Beta V) and four of which containing components
of a sputter deposition machine (Model FBR 1400 SP-5C, Beta III).
Based upon a review of the entry documents, the bulk of the
components making up the electron beam machine and the sputter
deposition machine were contained within one entry for each
machine.
In its complete form, the sputter deposition machine is a
vacuum deposition apparatus incorporating thermal evaporation and
sputtering deposition sources capable of physical deposition of
various metals on flexible base materials, such as polyimide,
polyester, or other polymeric substrates. It possesses multiple
processing subchambers, including multiple sputtering sources for
production of monolithic or graded adhesion layers and/or a
copper adhesion flash, and an indirectly heated resistive
evaporation source which can attain the requisite temperatures
for the evaporation of copper. This source is constructed of
materials compatible with copper evaporation, and normally
operates at a crucible temperature of 1425 to 1470 degrees
Celsius (C). Additional thermal sources are also installed for
the evaporation of aluminum materials.
In its complete form, the electron beam machine is a vacuum
deposition apparatus incorporating electron beam deposition
sources capable of physical deposition of various metals on
flexible base materials, such as polyimide, polyester, or other
polymeric substrates. It also possesses multiple subchambers.
In an affidavit on behalf of the protestant, it is stated
that the two machines:
belong to a class of large scale roll-to-roll vacuum deposition
apparatus the principle use of which
include the manufacture and production of thin film flexible printed
circuits for the automotive,
electronics, computer, and communications industries, and for the
production of optically (laser)
readable disks.
The PVD apparatus consists of three main sections; the
vacuum chamber with the evaporation source, the loading and
unloading apparatus, and the pumping group. Key equipment within
the article are of U.S. origin in order to facilitate the
maintenance and repair or replacement of these items. The
equipment of U.S. origin include: 1) two vacuum pumps; 2) six
diffusion pumps; 3) two cryogenic refrigeration systems; 4) eight
source evaporators; 5) standalone control units ; 6) power
supplies; 7) two Shrader Octal feed- throughs; 8) 16 Telemark
high voltage feed-throughs; and 9) 120 feet of high voltage
electrical cable.
The vacuum and diffusion pumps were used to create the high
vacuum environment inside the chamber so that the evaporated
metals can bond to the surface of the material to be coated. The
two Kinney KT 505-LP vacuum pumps were connected to the PVD
apparatus via piping by being bolted to flanges in the piping.
They were also connected to their respective electrical systems
and painted to match the color of the vacuum chamber. After
testing, they were detached from the PVD apparatus for shipment
to the U.S., although they remained attached to their respective
rotary pump frames.
The six Varian HS20 diffusion pumps were attached to the PVD
apparatus in Great Britain. The processing included attachment
to the PVD apparatus by bolting the pumps to their respective
chamber manifolds and piping system. The pumps were also
connected to their respective electrical systems and painted to
match the color of the vacuum chamber. Four of the diffusion
pumps were later disassembled for shipment back to the U.S.
The two Polycold refrigeration units remove water vapor from
inside the chamber. They were connected to the PVD apparatus by
two copper refrigeration coils, which were mounted inside the
vacuum chamber and connected to the refrigeration units in Great
Britain by piping.
The eight sets of high voltage feed-through's and 120 feet
of high voltage cable provided the high voltage electrical
connection between the Temescal EB power supplies, and the
Temescal Electron Beam source evaporators which were mounted
inside the vacuum chamber in Great Britain. The cable was cut to
length and used to connect the evaporators to the high voltage
feed-throughs abroad. The high voltage feed-throughs's were used
"as is" and were simply inserted into their respective ports
leading to the vacuum chamber and bolted in place abroad. The
feed-through's allow the electrical connection between the
external EB power supplies and the EB source evaporators inside
the chamber while maintaining the integrity of the vacuum. The
feed-throughs remain attached to the vacuum chamber after
testing.
The EB source evaporators were bolted to individual support
plates and to a frame on the floor of the vacuum chamber in Great
Britain.
After testing, the power supplies and control units were
disconnected for shipment to the U.S. With regard to the power
supplies, control units and the two cryogenic refrigeration
units, they were only assembled abroad and then disassembled.
The protestant states that "nothing was done" to these
components; there were no holes drilled or any other work done on
these components abroad other than the assembly and disassembly.
In all instances, the U.S. origin articles were attached to
the PVD system by bolts abroad, so as to allow the units to be
readily removed for maintenance or repair.
Once the construction of the PVD apparatus was completed
abroad, the vacuum system was tested by powering up the system
and checking for leaks in the vacuum chamber and for the proper
operation of the pumps.
After testing, the system was partially disassembled for
shipment. The entire system was then shipped to the U.S. and
installed at the importer's facilities in the U.S.
The importer states that in each instance, the U.S.-produced
articles were assembled in or connected to the PVD system in the
condition in which they were received in Great Britain.
The merchandise was entered on January 12, February 12, 14,
19, and 21, 1996, under subheading 8479.89.85, HTSUS, as machines
for production and assembly of diodes, transistors, and similar
semiconductor devices and electronic integrated circuits, or
machines for the manufacturing of video laser discs. The entries
were liquidated on May 31, June 7, and 21, 1996, under subheading
8479.89.95, HTSUS, as other machines having individual functions,
not specified or included elsewhere in chapter 84, HTSUS. The
protest was timely filed on August 27, 1996.
ISSUE:
Whether the bulk of components for the creation of the
electron beam machine contained in one of the two entries impart
the essential character of a complete electron beam machine.
Whether the bulk of components for the creation of the
sputter deposition machine contained in one of the four entries
impart the essential character of a complete sputter deposition
machine.
If so, whether the components imparting the essential
character of each complete machine are classifiable under
subheading 8479.89.85, HTSUS, as machines for production and
assembly of diodes, transistors, and similar semiconductor
devices and electronic integrated circuits, or machines for the
manufacturing of video laser discs, or under subheading
8479.89.95, HTSUS, as other machines having individual functions,
not specified or included elsewhere in chapter 84, HTSUS.
Whether the equipment of U.S. origin is eligible for
preferential duty treatment under subheading 9802.00.80, HTSUS,
subheading 9801.00.1025, HTSUS, or subheading 9802.00.50, HTSUS.
LAW AND ANALYSIS:
CLASSIFICATION
Classification of merchandise under the HTSUS is in
accordance with the General Rules of Interpretation (GRI's). GRI
1 provides that classification is determined according to the
terms of the headings and any relative section or chapter notes.
The 1996 HTSUS provisions under consideration are as
follows:
8479 Machines and mechanical appliances having individual
functions, not specified
or included elsewhere in this chapter; parts thereof:
Other machines and mechanical appliances:
8479.89 Other:
8479.89.85 Machines for processing of semiconductor
materials;
machines for production and assembly of
diodes,
transistors and similar semiconductor
devices and
electronic integrated circuits; machines
for the
manufacturing of video laser discs.
8479.89.95 Other.
* * * * * * * * *
We must first determine whether the components in the
entries containing the bulk of components making up the sputter
deposition and electron beam machines impart the essential
character of complete machines. GRI 2(a) states that:
GRI 2(a) states that:
[a]ny reference in a heading to an article shall be taken to include a
reference to that article incomplete or unfinished, provided that, as
entered, the incomplete or unfinished article has the essential
character of the complete or finished article. It shall also include a
reference to that article complete or finished (or falling to be
classified as complete or finished by virtue of this rule), entered
unassembled or disassembled.
Based upon an analysis of the entry documents, it is our
position that the components in the two entries mentioned above
impart the essential character of each of the subject machines.
Therefore, we must now ascertain the proper classification of
complete electron beam and sputter deposition machines under the
HTSUS.
Because the complete PVD apparatus are machines not
described elsewhere in chapter 84, HTSUS, they meet the terms of
heading 8479, HTSUS. However, based upon the information
provided, as the subject machines are used for the production of
flexible printed circuits and not diodes, transistors, or similar
semiconductor devices and integrated circuits, the machines are
precluded from that portion of subheading 8479.89.85, HTSUS.
Additional U.S. Rule of Interpretation 1(a), HTSUS, states:
1. In the absence of special language or context which otherwise
requires--
(a) a tariff classification controlled by use (other than actual
use) is to be determined in accordance with the use in the
United States at, or immediately prior to, the date of
importation, of goods of that class or kind to which the imported goods belong, and the controlling use is the principal use.
GRI 6 states that:
[f]or legal purposes, the classification of goods in the subheadings of
a heading shall be determined according to the terms of those
subheadings and any related subheading notes and,
mutatis mutandis, to the above rules, on the understanding that only
subheadings at the same level are comparable. For the purposes of this
rule, the relative section, chapter and subchapter notes also apply, unless
the context otherwise requires.
GRI 6 allows us to apply additional U.S. rule of
interpretation 1(a) at the subheading level. As stated
previously, it has been stated on behalf of the protestant that
the subject machines are principally used for the production of
flexible printed circuits and laser disks. However, machines for
the production of flexible printed circuit boards and video disks
are classifiable under subheadings 8479.89.95 and 8479.89.85,
HTSUS, respectively. The protestant has not demonstrated that
the machines are principally used for the manufacture of laser
disks. Also, it is our understanding that the machines, in their
complete form, do not possess certain components necessary for
laser disk production (i.e., robotic handlers). Consequently, it
is our position that the machines are classifiable under
subheading 8479.89.95, HTSUS, and, in accordance with GRI 2(a),
the components contained in the entries imparting the essential
character of each complete machine are also classifiable under
subheading 8479.89.95, HTSUS.
Subheadings 9801.00.10, 9802.00.50, and 9802.00.80
The importer argues that the following articles qualify for
subheading 9802.00.80, HTSUS, treatment: 1) six diffusion pumps;
2) two vacuum pumps; 3) two Shrader Octal feed-throughs; 4) eight
source evaporators; 5) 16 high voltage feed-throughs; and 6) 120
feet of high voltage electrical cable.
The importer contends that the power supplies, control units
and cryogenic refrigeration units qualify for treatment under
subheading 9801.00.1025, HTSUS.
The importer further contends that if the four diffusion
pumps which were disassembled from the PVD apparatus for shipment
back to the U.S. do not qualify for treatment under subheading
9802.00.80, HTSUS, they qualify for treatment under subheading
9802.00.50, HTSUS.
U.S. Note 2(a), subchapter II, Chapter 98, HTSUS, provides
that any product of the U.S. which is returned after having been
advanced in value or improved in condition abroad by any process
of manufacture or other means shall be treated as a foreign
article for duty purposes and shall be dutiable, unless exempt
under a specific HTSUS provision.
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 U.S., 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 articles,
less the cost or value of the U.S. components assembled therein,
upon compliance with the documentary requirements of 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 U.S.
to qualify for the exemption. Components will not lose their
entitlement to the exemption by being subject 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,
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 subheading
9802.00.80, HTSUS, to that component. See 19 CFR 10.16(c).
Regarding the foreign assembly operations performed in this
case, the information provided to us indicates that the U.S.
components were attached to the system with bolts. As stated
above, 19 CFR 10.16(a) states that any method used to join or fit
together solid components is acceptable and specifically states
that the use of fasteners is acceptable. The eight evaporators
were installed inside the vacuum chamber with the electrical
cable and feed-throughs. Therefore, the assembly operations
performed with regard to the evaporators, feed-throughs and
electrical cable are acceptable pursuant to 19 CFR 10.16. We
have no information that these U.S. made components were advanced
in value or improved in condition abroad except by the assembly
operations or operations incidental to the assembly. In
addition, these components remained in their assembled condition
when imported into the U.S.
The cutting of the electrical cable to length is an
operation that is incidental to the assembly process. See 19 CFR
10.16(b)(6).
The protestant states that the six diffusion and two vacuum
pumps were painted to match the color of the vacuum chamber.
Painting primarily intended to enhance the appearance of an
article is listed as an example of an operation that is not
considered incidental to the assembly process. See 19 CFR
10.16(c)(3). Since the painting operation done abroad with
regard to the diffusion and vacuum pumps appears to be for the
purpose of enhancing the appearance of the article, these
articles are not eligible for a duty allowance under subheading
9802.00.80, HTSUS. Further, four of the diffusion pumps were
completely disassembled from the PVD apparatus after testing for
shipment back to the U.S. Therefore, we find that these articles
were not returned in an assembled condition as required by
subheading 9802.00.80, HTSUS.
Therefore, we find that only the two Shrader Octal feed-throughs, eight evaporators, 16 high voltage feed-throughs, and
the 120 feet of high voltage electrical cable are entitled to a
duty allowance under subheading 9802.00.80, HTSUS.
2. Subheading 9801.00.1025
The second issue raised is whether the two refrigeration
systems, power supplies and control units are eligible for duty
free treatment under subheading 9801.00.1025, HTSUS.
Subheading 9801.00.1025, HTSUS, provides that products of
the U.S. when returned temporarily for repair, alteration,
processing or the like, after having been reexported without
having been advanced in value or improved in condition by any
process of manufacture or other means while abroad can be entered
duty free provided the documentary requirements of 19 CFR 10.1
are satisfied.
To the extent that U.S. components are totally disassembled
and imported in the same condition as exported, the U.S.
components would be entitled to duty free treatment under
subheading 9801.00.1025, HTSUS.
The question in the instant case is whether connecting the
power supplies, control units, and cryogenic refrigeration units
to the PVD system is considered an advancement in value or
improvement in condition. After testing, the power supplies,
control units, and two cryogenic refrigeration units were
disconnected from the PVD apparatus, for shipment to the U.S.
The court held in Border Brokerage Company, Inc. v. United
States, 314 F. Supp. 788 (1970), that tomatoes of American origin
were entitled to duty free entry under item 800.00, TSUS (the
predecessor to subheading 9801.00.10, HTSUS). The tomatoes were
shipped to Canada where they were unloaded, unpacked, sorted,
graded by color and size, and repacked. The court stated that
the test to be applied in item 800.00 cases is whether the
merchandise of American origin has itself (apart from its
container) been the object of advancement in value or improvement
in condition while abroad.
The power supplies, control units, and two cryogenic
refrigeration units which were merely connected to the PVD
apparatus in Great Britain and then disconnected after testing,
were not the object of advancement in value or improvement in
condition. These articles returned to the U.S. in exactly the
same condition as when they were exported; there were no holes
drilled or any other work performed abroad other than the
assembly and disassembly. Therefore, these articles are entitled
to duty- free treatment under subheading 9801.00.1025, HTSUS.
3. Subheading 9802.00.50
Subheading 9802.00.50, HTSUS, provides a partial duty
exemption for articles that are returned after having been
exported to be advanced in value or improved in condition by
means of repairs or alterations, provided that the documentary
requirements of 19 CFR 10.8 are met. For qualifying articles,
duty is assessed only on the cost or value of the foreign
processing.
However, in circumstances where the operations abroad
destroy the identity of the exported article or create a new or
commercially different article, entitlement to subheading
9802.00.50, HTSUS, is precluded. See A.F. Burstrom v. United
States, 44 CCPA 27, C.A.D. 631 (1956), aff'd C.D. 1752, 36 Cust.
Ct. 46 (1956); Guardian Enterprises Corporation v. United States;
3 CIT 9 (1982). Additionally, entitlement to this tariff
treatment is not available where the exported articles are
incomplete for their intended purposes prior to their foreign
processing and the foreign processing is a necessary step in the
preparation or manufacture of the finished articles. Dolliff &
Company, Inc. v. United States, 455 F. Supp. 618 (CIT 1978),
aff'd, 599 F.2d 1015 (Fed. Cir. 1979).
The court denied a partial duty exemption in Burstrom, which
involved steel ingots converted into steel slabs in Canada, in
Guardian Industries, which involved annealed glass tempered in
Canada, thus acquiring different characteristics, and in Dolliff
& Co., which involved greige goods dyed and made into a finished
fabric in Canada.
The four diffusion pumps under consideration were painted
abroad, which was a finishing step in the preparation of these
pumps. Since the pumps underwent a finishing operation abroad,
they were not finished articles when exported from the U.S.
Accordingly, we find that the diffusion pumps are not
eligible for a partial duty exemption under subheading
9802.00.50, HTSUS.
HOLDING:
In accordance with GRI 2(a), the components in the entries
containing the bulk of components making up the sputter
deposition and electron beam machines impart the essential
character of complete electron beam and sputter deposition
machines.
Those components are classifiable under subheading 8479.89.95,
HTSUS, as other machines having individual functions, not
specified or included elsewhere in chapter 84, HTSUS. With
regard to this classification issue, the protest should be
DENIED.
The protest should be GRANTED with regard to the claims for
a duty allowance under subheading 9802.00.80, HTSUS, with regard
to 1) the two Shrader Octal feed-throughs; 2) the eight
evaporators; 3) the 16 high voltage feed-throughs; and 4) the 120
feet of high voltage electrical cable. Further, the power
supplies, control units, and two cryogenic refrigeration units
are eligible for duty free entry under subheading 9801.00.1025,
HTSUS. The protestant has furnished a declaration of the foreign
shipper/ assembler and an importer's declaration which we believe
satisfy the documentation requirements of 19 CFR 10.1 and 10.24.
The protest should be DENIED with respect to the six
diffusion pumps and the two vacuum pumps, which are not eligible
for a partial duty exemption under subheading 9802.00.80, HTSUS.
The four unassembled diffusion pumps are also not eligible for a
partial duty exemption under subheading 9802.00.50, HTSUS.
In accordance with Section 3A(11)(b) of Customs Directive
099 3550-065, dated August 4, 1993, Subject: Revised Protest
Directive, this decision, together with the Customs Form 19,
should be mailed by your office to the protestant no later than
60 days from the date of this letter. Any reliquidation of the
entry in accordance with the decision must be accomplished prior
to mailing of this decision. Sixty days from the date of the
decision the Office of Regulations and Rulings will take steps to
make the decision available to Customs personnel via the Customs
Rulings Module in ACS and the public via the Diskette
Subscription Service, Freedom of Information Act, and other
public access channels.
Sincerely,
John Durant, Director
Commercial Rulings Division