CON-9-04-CO:R:C:E 224682 PH
Richard J. Little, Esq.
Assistant General Counsel
Mitsubishi Electric America, Inc.
5665 Plaza Drive
Post Office Box 6007
Cypress, California 90630
RE: Temporary Importation Bond (TIB); Exportation; Automated
Insertion Process for Printed Wire Boards; Repacking; Testing;
Shipment to Maquiladora Facility; Subheading 9813.00.05,
9813.00.30, HTSUS
Dear Mr. Little:
In your letter of April 30, 1993, you request a ruling on
the applicability of a TIB provision (subheading 9813.00.05,
HTSUS) to an operation involving your company. You requested
confidentiality for certain information in your ruling request.
The request for confidentiality was discussed and resolved in our
letters of May 10 and June 21, 1993, and your letters of May 18
and June 29, 1993. Pursuant to these letters, it was agreed that
the following specific information would be accorded CONFIDENTIAL
treatment:
(1) The prices specified on the three parts lists enclosed
as Exhibits A, B, and C to the ruling request;
(2) The cost information contained in the last paragraph on
page four of the ruling request; and
(3) Exhibit F, which you state includes price data and
discloses a proprietary system or process of manufacturing
and documenting and controlling that manufacturing.
Our ruling, in response to your request for a ruling, follows.
FACTS:
You state that your company is engaged in the production of
projection television receivers at its Santa Ana, California,
factory. Your company proposes to transfer some assembly work
for television chassis to a "maquiladora" facility operated in
Mexico. Under the operation, your company will import
unpopulated printed wire boards ("PCB's") and the electronic
components to be inserted thereon. At the Santa Ana factory,
approximately 2700 components (a majority of the total
components) will be mounted, but not soldered, onto the PCB's by
an automated insertion process. Five different PCB's are used
for each television chassis.
This automated insertion process consists of feeding the
unpopulated PCB's into insertion machines with machine heads into
which taped components are fed. The machine heads form the
components into specified configurations and insert them through
pre-drilled holes on the PCB's. The leads of the components are
then clinched and excess lead material is trimmed. After all
automatically inserted parts have been permanently secured to the
PCB's, the PCB's are subjected to electrical testing of the
circuits to verify that quality standards have been met.
The PCB's, along with the 300 remaining components which
must be manually inserted into the 5 PCB's making up a chassis
will be packaged in kit form and sent to the maquiladora
facility. The shipments of the partially populated PCB's from
the Santa Ana factory to the maquiladora will consist of 30 PCB's
per box. The 300 manual insertion parts for the 5 PCB's making
up a chassis will be boxed separately but included in the same
shipment. Depending on available space, additional manual
insertion parts kits may be added to some shipments.
At the maquiladora facility, flux will be cleaned from the
PCB's and the leads of the manually inserted parts will be cut.
After the manually inserted parts are mounted, the fully
populated PCB's will be wave soldered. The PCB's will then
undergo electrical testing to insure that they meet quality and
performance standards. One of the 5 PCB's will be mounted on a
chassis frame, to which the other 4 PCB's will be attached later
at Santa Ana, and the completed but unassembled chassis will then
be returned to the Santa Ana factory as television chassis under
subheadings 8529.90.1500 and 8529.90.2000, Harmonized Tariff
Schedule of the United States (HTSUS). Defective PCB's will be
returned to Santa Ana to be scrapped.
You state that your company proposes to import both the
automated insertion parts and the manual insertion parts under
the TIB provision in subheading 9813.00.05, HTSUS.
ISSUES:
(1) Are the automatically inserted components described in
the FACTS portion of this ruling "repaired, altered or processed"
within the meaning of subheading 9813.00.05, HTSUS, when they are
mounted onto the PCB's by the automatic insertion process, as
described in the FACTS portion of this ruling?
(2) Are the components which are mounted onto the PCB's by
the manual insertion process at the maquiladora facility
"repaired, altered, or processed" within the meaning of
subheading 9813.00.05, HTSUS, when they are sorted and repacked
in the United States, as described in the FACTS portion of this
ruling?
(3) If the answer to issue (1) or (2) is negative, may the
components qualify for any other TIB provision in Subchapter XIII
of Chapter 98, HTSUS?
(4) Are the components exported, for purposes of the
applicable TIB provision(s) in Subchapter XIII of Chapter 98,
HTSUS, when they are sent to the maquiladora facility for the
mounting onto the PCB's of the components mounted by the manual
insertion process and for the other operations described in the
FACTS portion of this ruling?
LAW AND ANALYSIS:
Subheading 9813.00.05, HTSUS, provides for the temporary
duty-free entry of:
Articles to be repaired, altered or processed
(including processes which result in articles
manufactured or produced in the United States).
Subheading 9813.00.30, HTSUS, provides for the temporary
duty-free entry of:
Articles intended solely for testing,
experimental or review purposes ....
Pursuant to U.S. Note 1(a) of Subchapter XIII of Chapter 98,
HTSUS, which contains subheadings 9813.00.05 and 9813.00.30:
The articles described in the provisions of
this subchapter, when not imported for sale or
for sale on approval, may be admitted into the
United States without the payment of duty,
under bond for their exportation within 1 year
from the date of importation, which period, in
the discretion of the Secretary of the
Treasury, may be extended, upon application,
for one or more further periods which, when
added to the initial 1 year, shall not exceed a
total of 3 years ....
As for the components which will be mounted on the PCB's in
the United States by the automatic insertion process, we have
consistently held that operations such as this meet the
requirement for repair, alteration, or processing in subheading
9813.00.05, HTSUS, and its predecessors (e.g., in a January 30,
1975, ruling (File: 202313) we held that the loading of plastic
video cassettes with magnetic tape met the requirements of the
predecessor of the subheading; see also, letters dated March 29,
1988 (File: 220251), and July 19, 1974 (File: 034552)).
Although you do not raise this issue, on the same basis, the
unpopulated PCB's onto which the automatically inserted
components are mounted would also meet the requirement for
repair, alteration, or processing in subheading 9813.00.05,
HTSUS.
In regard to the components which will be manually mounted
onto the PCB's in the maquiladora facility, basically all that is
done to them in the United States before being sent to the
maquiladora facility is that they are sorted and repacked. We
have consistently held that such operations are not considered to
be repairs, alterations, or processing within the meaning of
subheading 9813.00.05, HTSUS, and its predecessors (e.g., ruling
of November 26, 1976 (File: 207064), holding that the repacking
of foreign language tape cassettes with foreign language books in
special book boxes containing books and tapes did not meet the
requirements of the predecessor of the subheading; see also
Treasury Decision (T.D.) 78-77 and Customs Service Decision
(C.S.D.) 80-234; United States v. Border Brokerage Co., 48 CCPA
10, C.A.D. 754 (1960), and John v. Carr & Son, Inc. v. United
States, 69 Cust. Ct. 78, 347 F. Supp. 1390, C.D. 4377 (1972),
aff'd 61 CCPA 52, 496 F.2d 1225, C.A.D. 1118 (1974)).
In regard to the manually mounted components, you cite a
ruling dated August 16, 1974 (File: 201946), as precedent for
the applicability of subheading 9813.00.05, HTSUS, to these
components. The referenced ruling concerned the applicability of
the predecessor to subheading 9813.00.30, HTSUS (i.e., item
864.30, Tariff Schedules of the United States), to the
importation of electronic parts which were imported into the
United States for inspection. In the case under consideration,
the manually mounted components are not tested in the United
States before being sent to the maquiladora facility. Therefore,
the cited ruling, and the referenced subheading, are inapplicable
to the importation of the manually mounted components. There is
no other TIB provision which could possibly be applicable to the
manually mounted components in the described operation.
In regard to the exportation issue, "exportation" is defined
in the Customs Regulations (19 CFR 101.1(k)) as "a severance of
goods from the mass of things belonging to this country with the
intention of uniting them to the mass of things belonging to some
foreign country." This provision also provides that "[t]he
shipment of merchandise abroad with the intention of returning it
to the United States with a design to circumvent provisions of
restriction or limitation in the tariff laws or to secure a
benefit accruing to imported merchandise is not an exportation."
This definition is consistent with the decision of the Supreme
Court in the leading case of Swan v. Finch v. United States, 190
U.S. 143 (1903) (see also, 17 Op. Att'y Gen. 579 (1883)).
Customs has issued a number of rulings interpreting this
definition. In C.S.D. 82-154, we ruled that an exportation
occurred, for drawback purposes (i.e., under 19 U.S.C. 1313, also
requiring exportation and using the definition of "exportation"
referred to above), when finished watches were shipped to a
distribution center (described as "essentially a bonded
warehouse") in Canada for sale and shipment, even though some of
watches may have been returned to the United States. In C.S.D.
82-155, we ruled that an exportation did not occur when the owner
of an imported truck sent the trucks to Canada for disassembly
and re-entry into the United States because the sole purpose of
shipping the truck abroad was to obtain drawback and to take
advantage of the difference in duty. In a ruling dated February
13, 1981 (File: 212451), we held that sugar refined in the
United States was exported, for drawback purposes, when it was
sent to Canada for packaging and thereafter returned to the
United States for consumption.
On the basis of the foregoing interpretations, and noting
that in the instant case there is a legitimate purpose for
sending the PCB's and components abroad independent of cancelling
the TIB, we conclude that the PCB's and the components already
mounted thereon, as well as the components to be manually mounted
onto the PCB's in the maquiladora facility, are exported.
Therefore, we conclude that the components imported to be
mounted (by the automatic insertion process) onto the unpopulated
PCB's at the Santa Ana factory may be imported under subheading
9813.00.05, HTSUS, provided that the conditions in the
subheading, in the applicable U.S. Notes to Subchapter XIII of
Chapter 98 (see in particular U.S. Note 2(b)), and in the
applicable Customs Regulations (19 CFR 10.31 et seq.) are met (as
noted above, this is also true of the unpopulated PCB's). We
conclude that the components which are not mounted at the Santa
Ana factory and are sorted and repacked and sent to the
Maquiladora facility for mounting onto the PCB's there may not be
imported under subheading 9813.00.05 or 9813.00.30, HTSUS.
In regard to the components not qualifying for TIB treatment
(i.e., those sent to the maquiladora facility to be manually
mounted onto the PCB's), you may wish to consider the use of the
drawback law (see 19 U.S.C. 1313(j) and 19 CFR 191.141) or the
bonded warehouse law (see 19 U.S.C. 1557, 1562 and 19 CFR Parts
19 and 144). Also, in general regard to the described operation,
you should be aware of the possible future impact on such
operations of the North American Free Trade Agreement (see
Article 303 and Annex 303.7).
HOLDINGS:
(1) The automatically inserted components described in the
FACTS portion of this ruling are "repaired, altered or processed"
within the meaning of subheading 9813.00.05, HTSUS, when they are
mounted onto the PCB's by the automatic insertion process, as
described in the FACTS portion of this ruling.
(2) The components which are mounted onto the PCB's by the
manual insertion process at the maquiladora facility are not
"repaired, altered, or processed" within the meaning of
subheading 9813.00.05, HTSUS, when they are sorted and repacked
in the United States, as described in the FACTS portion of this
ruling.
(3) The components which are mounted onto the PCB's by the
manual insertion process at the maquiladora facility may not
qualify for any other TIB provision in Subchapter XIII of Chapter
98, HTSUS (specifically, the components may not be imported under
subheading 9813.00.30, HTSUS, because they are not tested in the
United States).
(4) The components [as well as the PCB's] are exported, for
purposes of the applicable TIB provision(s) in Subchapter XIII of
Chapter 98, HTSUS, when they are sent to the maquiladora facility
for the mounting onto the PCB's of the components mounted by the
manual insertion process and for the other operations described
in the FACTS portion of this ruling.
Sincerely,
John Durant, Director
Commercial Rulings Division