CLA-2 CO:R:CV:V 555219 BJO
District Director of Customs
El Paso, Texas 79985
RE: Reconsideration of HQ 067017, dated March 25, 1981
(GSP Eligibility of Power Mast Antenna Assembly)
Dear Sir:
This is in response to your memorandum of December 13, 1988,
in which you request our reconsideration of Headquarters Ruling
067017, dated March 25, 1981. In that ruling, we held that the
components of an automobile AM/FM radio power mast antenna
assembly were substantially transformed constituent materials of
the antenna assembly for purposes of the Generalized System of
Preferences (GSP)(19 U.S.C. 2461-2466).
FACTS:
The importer states that the power mast assembly is part of
a motor-driven radio antenna installed in passenger cars and
light duty trucks. When the car or truck radio is turned on, the
antenna will automatically extend 31 inches from the front fender
from a hidden position.
The power mast antenna assembly consists of three
subassemblies: a rod and cable subassembly, a shield tube
subassembly, and a mast subassembly. The importer's Mexican
subsidiary will assemble the three subassemblies in Mexico from
materials imported from the U.S., West Germany, and Japan, and
will combine the subassemblies to form the final article. In
HQ 067017, we found that each of the three subassemblies was a
substantially transformed constituent material of the power mast
assembly, and that their cost or value may therefore be counted
toward the 35% value-content minimum of the GSP.
The rod and cable subassembly consists of a metal rod
measuring approximately one foot with a threaded end attached to
a hollow plastic cable measuring approximately one yard in
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length. At the other end of the plastic cable is attached a two
inch hook-shaped metal tube. You state that the rod and cable
subassembly is no longer produced in the same manner as was
presented to us in HQ 067017. Formerly, the assembly of the rod
and cable subassembly was accomplished as follows:
1. Plastic cable imported into Mexico is wound from a
16-inch spool onto an 8-inch mandrel. The wound mandrel is
then placed in an oven where the cable is annealed. The
annealing process gives the cable additional recoiling
ability which is essential to ensure sufficient cable
tension for proper operation of the antenna.
2. The annealed cable is then cut to length (the sample
submitted is approximately one yard long).
3. A "music wire" measuring approximately two inches long is
inserted into one end of the annealed plastic cable.
4. A hollow metal tube measuring approximately two inches, a
circular rubber drain plug, and a circular piece of felt are
slid over the cable end containing the music wire.
5. The cable tube/wire end is bent into a hook shape and
the cable tube is "dimpled," or compressed, to fasten it
securely to the cable.
6. The other end of the cable is swaged to decrease its
diameter to allow a hollow metal coupler to "slip-fit" over
it.
7. The metal coupler, which is approximately one inch long,
is welded to a metal rod measuring approximately one foot.
A contact is assembled to the coupler and welded. The rod
and coupler are then fit over the end of the plastic cable
and secured by dimpling.
An audit of the Mexican facility has revealed that the
importer's subsidiary no longer anneals the cable (step 1 above)
nor cuts the annealed cable to length (step 2); those steps are
now accomplished in the U.S. prior to shipment to Mexico. It
appears that the metal tube, metal coupler, contact, and metal
rod are pre-cut and do not require further fabrication prior to
assembly in Mexico.
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ISSUE:
Whether the rod and cable subassembly, assembled in Mexico
from imported components as described above, is a substantially
transformed constituent material of the power mast antenna
assembly for purposes of the GSP.
LAW AND ANALYSIS:
Under the GSP, eligible articles which are imported directly
from a designated developing beneficiary country (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 operation in the BDC, is equivalent to at least 35% of
the appraised value of the article upon its entry into the U.S.
See 19 U.S.C. 2463(b).
If an article is produced or assembled from materials that
are imported into the BDC, the cost or value of those materials
may be counted toward the 35% value-content minimum only if they
undergo a double substantial transformation in the BDC. See 19
CFR 10.177. That is, the cost or value of the rod and cable
subassembly may be included in the GSP 35% value-content
computation only if the imported components of the rod and cable
assembly -the music wire, plastic cable, metal wire, contact,
coupler, tube, and drain plug- are substantially transformed into
a new and different article of commerce, which is then itself
substantially transformed in the assembly of the final article,
the power mast antenna assembly.
A substantial transformation occurs "when an article emerges
from a manufacturing process with a name, character, or use which
differs from those of the original material subjected to the
process." See The Torrington Co., v. United States, 764 F.2d
1563, 1568 (Fed. Cir. 1985). In determining whether the
combining of parts or materials constitutes a substantial
transformation, the issue is the extent of operations performed
and whether the parts lose their identity and become an integral
part of the new article. Belcrest Linens v. United States, 741
F.2d 1368, 1373 (Fed. Cir. 1984). Assembly operations which are
minimal or simple, as opposed to complex or meaningful, will
generally not result in a substantial transformation for GSP
purposes. See C.S.D. 85-25, dated September 25, 1984 (HQ
071827).
In HQ 067017, we stated that the rod and cable subassemblies
were substantially transformed constituent materials of the
power mast antennas because they had been "so transformed from
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their imported state so as to constitute articles of commerce in
and of themselves, regardless of the degree of transformation
present in the final assembled product."
As stated above, the rod and cable subassemblies are
substantially transformed constituent materials only if their
components have undergone a double substantial transformation.
Accordingly, whether their cost or value may be included toward
the 35% value content requirement will in fact depend on the
degree of transformation present in the final assembled product.
That portion of HQ 067017 which suggests otherwise is therefore
overruled.
We find that the rod and cable subassembly has not undergone
the requisite double substantial transformation. Even though the
imported components may be substantially transformed into the
rod and cable subassembly, as we held in HQ 067017, the rod and
cable subassembly is not thereafter substantially transformed in
the assembly of the power mast antenna assembly. The assembly of
the rod and cable subassembly into the final product appears to
be simple or minimal, rather than complex or meaningful, for it
appears that the rod and cable subassembly are assembled into the
final product simply by insertion into a larger tube (the "shield
tube"), and placing a nut on the threaded end of the wire rod.
The final assembly does not appear to significantly affect the
character of the rod and cable subassembly, nor does it appear to
affect its use. Both before and after the final assembly, the
rod and cable assembly appears to be suitable only for use in a
power mast antenna assembly. Finally, assembly of the rod and
cable subassembly into the final article does not appear to cause
the rod and cable to change tariff classification, for both
before and after the final assembly, the article appears to be
classified under subheading 8529.10.60, Harmonized Tariff
Schedule of the U.S. (HTSUS)("Parts suitable for use solely or
principally with the apparatus of headings 8525 to 8528 [which
includes 'radiobroadcast receivers not capable of operating
without an external source of power, of a kind used in motor
vehicles', subheading 8527.21, HTSUS]; Antennas and antenna
reflectors of all kinds; parts suitable for use therewith;
Other.").
CONCLUSION:
A rod and cable subassembly assembled in Mexico from
imported components is not a substantially transformed
constituent material of the radio power mast assembly into which
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it is finally assembled. Accordingly, the cost or value of the
rod and cable subassembly may not be included toward the GSP 35%
value-content minimum in determining whether the radio power mast
assembly may receive duty-free treatment under that program when
it is imported into the U.S.
Sincerely,
John Durant, Director
Commercial Rulings Division