CLA-2 CO:R:C:V 555523 LS
Mr. Gordon W. Larson
Account Manager
Rudolph Miles & Sons, Inc.
4950 Gateway East
P.O. Box 144
El Paso, Texas 79942
RE: Applicability of subheading 9801.00.10 and 9802.00.80,
HTSUS, to "rechargeable battery set" to be imported from
Mexico. Set; packaging; Superscope; assembly; country of
origin marking requirements; 083672; 555592; 554935; 555239
Dear Mr. Larson:
This is in response to your letter of January 16, 1989,
requesting a ruling on the applicability of subheading
9801.00.10, Harmonized Tariff Schedule of the United States
(HTSUS), to a battery charger of U.S. origin, and the
applicability of subheading 9802.00.80, HTSUS, to rechargeable
nickel cadmium batteries assembled in Mexico, when these
articles, along with an adapter of foreign origin, are packaged
together in Mexico for retail sale as a set. We regret the delay
in responding to this portion of your request.
In Headquarters Ruling Letter (HRL) 083672 dated May 16,
1989, we responded to your request for a classification ruling on
this same merchandise. We found that, in accordance with General
Rule of Interpretation 3(b), HTSUS, the above described articles
are classifiable as a set under subheading 8504.40.00, HTSUS,
dutiable at the rate of 3 percent ad valorem, provided the set
was not subject to special duty treatment. This classification
was based upon a finding that the battery charger imparts the
essential character to the set.
FACTS:
The following facts are based upon your letter of January
16, 1989, and a recent telephone conversation with a member of my
staff. The battery charger is of U.S. origin. The rechargeable
nickel cadmium batteries are assembled in Mexico partly of U.S.
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origin components. Although the adapter is said to be assembled
in Haiti, no claim is being made for a partial duty exemption
under subheading 9802.00.80, HTSUS, for this article. For
purposes of this ruling, we assume that none of the components
comprising the adapter are of U.S. origin. These three items are
packed together in Mexico using blister packaging, which consists
of a cardboard backing and a plastic front. The charger is
capable, with the use of the adapter, of charging all common
sizes of consumer rechargeable nickel cadmium batteries.
Assuming that the battery charger of U.S. origin imparts
the essential character to the set and is entitled to the duty
exemption under subheading 9801.00.10, HTSUS, you inquire whether
the entire set is considered to be of U.S. origin and entitled to
duty-free treatment under subheading 9801.00.10, HTSUS. You also
inquire as to the country of origin of the set both for marking
purposes and to determine the duty rate applicable to the entire
set.
ISSUES:
(1) Whether the set, consisting of the battery charger,
adapter, and batteries, will qualify for the duty exemptions
available under subheadings 9801.00.10 and 9801.00.80, HTSUS,
when returned to the U.S.
(2) What country of origin marking requirements are
applicable to the set?
LAW AND ANALYSIS:
I. Applicability of subheadings 9802.00.80 and 9801.00.10, HTSUS
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 subheading 9802.00.80, HTSUS, is subject to
duty upon the full value of the imported assembled article less
the cost or value of the U.S. components, upon compliance with
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the documentary requirements of section 10.24, Customs
Regulations (19 CFR 10.24).
Upon compliance with the above statutory and regulatory
requirements, the assembled batteries, which are packaged with
the battery charger and adapter, may be entered under subheading
9802.00.80, HTSUS, with allowances in duty for the cost or value
of the U.S. components comprising the batteries.
Subheading 9801.00.10, HTSUS, provides for the duty-free
entry of products of the U.S. that are returned after having been
exported, without having been advanced in value or improved in
condition by any process of manufacture or other means while
abroad, provided there has been compliance with the documentary
requirements of section 10.1, Customs Regulations (19 CFR 10.1).
In the recent decision of Superscope, Inc. v. United
States, 13 CIT ____, 727 F. Supp. 629 (1989), the court held that
certain glass panels of U.S. origin that were exported, repacked
abroad with certain foreign components, and returned to the U.S.
as part of unassembled audio cabinets, were entitled to duty-free
entry under item 800.00, Tariff Schedules of the United States
(TSUS), since the U.S. panel portion of the imported article was
"not 'advanced in value or improved in condition . . . while
abroad,' but [was] merely repacked." Id. at 631. Although the
Superscope case concerned the TSUS, not the HTSUS, the decision
is believed to be equally applicable to similar situations
arising under the HTSUS, since item 800.00, TSUS, and relevant
Schedule 8, TSUS, headnotes were carried over virtually unchanged
into the HTSUS.
One of those notes in the HTSUS, U.S. Note 1, Chapter
98, HTSUS (the chapter encompassing special classification
provisions, including subheading 9801.00.10, HTSUS), provides as
follows:
The provisions of this chapter are not subject to the rule
of relative specificity in general rule of interpretation
3(a). Any article which is described in any provision in
this chapter is classifiable in said provision if the
conditions and requirements thereof and any applicable
regulations are met. (Emphasis added).
The "conditions and requirements" of subheading 9801.00.10,
HTSUS, are (1) that the article be a product of the U.S.; and (2)
that it not be advanced in value or improved in condition by any
means while abroad. Granting duty-free treatment under this
provision to items in a set (e.g., foreign-made items) which do
not meet these "conditions and requirements" would clearly
contravene the plain meaning and intent of the referenced U.S.
Note. We believe there is no question that the application of
GRI 3(b) was never intended to result in granting American goods
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returned status to foreign-made materials or components in a set.
See HRL 555592 dated October 18, 1990, modifying HRL 554935 dated
April 10, 1989.
With respect to the rechargeable battery set, the mere
packaging of the battery charger with the other items neither
advances it in value nor improves it in condition. Therefore,
the battery charger, which is a U.S. product, will be eligible
for the duty exemption under subheading 9801.00.10, HTSUS. This
assumes that the documentation requirements of 19 CFR 10.1 are
met and that the district director of Customs at the port of
entry is satisfied that the battery charger is, in fact, of U.S.
origin.
Based upon the foregoing analysis, and our prior finding
that the essential character of the set is imparted by the U.S.
origin battery charger, we conclude that the entire rechargeable
battery set is dutiable on its full value, under subheading
8504.40.00, HTSUS, at the "Column 1 General" duty rate of 3
percent ad valorem, less the cost or value of the U.S. components
comprising the assembled batteries. Additionally, a
classification allowance may be made under subheading 9801.00.10,
HTSUS, for the cost or value of the U.S. battery charger.
III. Applicability of country of origin marking requirements
Neither the HTSUS nor the Customs Regulations contains any
provisions regarding the marking of sets, mixtures or composite
goods. The classification of a set or mixed or composite goods
in one HTSUS subheading by reference to GRI 3(b) is not
determinative of the country of origin marking requirements of
the materials or components which comprise the set. Instead, the
general country of origin marking requirements apply with respect
to the items comprising a set.
Section 304 of the Tariff Act of 1930, as amended (19
U.S.C. 1304), provides, subject to specified exceptions, that all
articles of foreign origin (or their containers) imported into
the U.S. are required to be legibly, conspicuously, and
permanently marked to indicate the country of origin to an
ultimate purchaser in the U.S. For purposes of this statute,
"country of origin" means the country of manufacture, production
or growth of any article of foreign origin entering the U.S.
Further work or material added to an article in another country
generally must effect a substantial transformation in order to
render such other country the "country of origin." See section
134.1(b), Customs Regulations (19 CFR 134.1).
In this case, we find that none of the components of the
rechargeable battery set is substantially transformed in Mexico
as a result of its inclusion in the same retail package.
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Essentially, the consumer is purchasing three separate items.
Accordingly, each component in the set must be marked to indicate
its own country of origin, subject to the usual exceptions.
Batteries
There are several exceptions to the general rule that the
country of origin of an article is the country where the last
substantial transformation occurs. One such exception, set forth
in section 10.22, Customs Regulations (19 CFR 10.22), specifies
the following country of origin marking requirements for articles
entitled to a duty exemption under subheading 9802.00.80, HTSUS:
Assembled articles entitled to the exemption are considered
products of the country of assembly for the purposes of the
country of origin marking requirements of section 304,
Tariff Act of 1930, as amended (19 U.S.C. 1304). If an
imported assembled article is made entirely of American-
made materials, the United States origin of the material
may be disclosed by using a legend such as "Assembled in
_______ from material of U.S. origin," or a similar phrase.
Assuming the batteries are eligible for the partial duty
exemption under subheading 9802.00.80, HTSUS, they are considered
products of Mexico for country of origin marking purposes and
must be marked accordingly.
Battery charger
Products of the United States exported and returned are
excepted from the general country of origin marking requirements.
See section 134.32(m), Customs Regulations (19 CFR 134.32(m)).
This provision applies if the U.S. products are returned without
having been substantially transformed abroad. In this case,
nothing is done to the battery charger except packaging, which is
clearly not a substantial transformation. Therefore, the charger
is excepted from marking under 19 CFR 134.32(m).
Adapter
Assuming that the adapter is a product of Haiti, and that
it contains no U.S. components, it must be marked to indicate its
Haitian origin.
Pursuant to 19 CFR 134.32(d), you may mark the container,
i.e., the blister packaging material, instead of the individual
articles, if marking the packaging will reasonably indicate to
the ultimate purchaser the country of origin of each article, and
provided that the individual articles do not bear any words,
letters, names, or symbols described in sections 134.46 or
134.47, Customs Regulations (19 CFR 134.46-134.47), such as U.S.
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addresses, which imply that they were made or produced in a
country other than the actual country of origin. If the blister
packaging obscures the country of origin marking on the
individual items, then the packaging must be marked to specify
the country of origin of each item with words such as:
"Battery - Made in Mexico; Adapter - Made in Haiti."
For advice on any marking of the battery charger to
indicate that it is made in the U.S., we suggest that you contact
the Federal Trade Commission.
HOLDING:
Because the essential character of the set is imparted by
the U.S. origin battery charger, the entire rechargeable battery
set is dutiable on its full value, under subheading 8504.40.00,
HTSUS, at the "Column 1 General" duty rate of 3 percent ad
valorem, less the cost or value of the U.S. components comprising
the assembled batteries. Additionally, a classification
allowance may be made under subheading 9801.00.10, HTSUS, for the
cost or value of the U.S. battery charger.
Since none of the items in the rechargeable battery set is
substantially transformed as a result of its inclusion in the
set, each item is required to be marked to indicate its own
country of origin, unless excepted. The batteries should be
marked as products of Mexico and the adapter as a product of
Haiti. The battery charger of U.S. origin is excepted from
marking under 19 CFR 134.32(m).
Sincerely,
John Durant, Director
Commercial Rulings Division