CLA-2 CO:R:C:V 555564 KAC
Mr. Thomas A. Baker
The Antenna Specialists Co.
30500 Bruce Industrial Parkway
Solon, Ohio 44139
RE: Applicability of the duty exemption under HTSUS subheadings
9802.00.80 and 9801.00.10 to Cell-U-Phones to be imported
from Mexico
Dear Mr. Baker:
This is in response to your letter of December 7, 1989,
requesting a ruling on the applicability of subheading
9802.00.80, Harmonized Tariff Schedule of the United States
(HTSUS), to Cell-U-Phones to be imported from Mexico. A sample
of the Cell-U-Phone (model number CELU1010 A2WB) was submitted
for examination.
FACTS:
The Antenna Specialists Company will be shipping various
components of U.S. origin to Mexico for assembly into
Cell-U-Phones, which are fixed-station, cellular telephones
designed to interface with existing cellular phone systems. You
state that the use of some foreign material "is minimally
possible." Except where specifically noted, all machining
(threading, forming, and drilling) is performed in the U.S. The
Mexican assembly operations result in the creation of eight
subassemblies which are then assembled into the final article.
Foreign operations common to each subassembly include the
following:
1. force fitting, pushing, inserting, snapping, bolting,
and riveting components together;
2. cutting cable or wire to length;
3. sliding a component over another component;
4. soldering two components together;
5. screwing or threading components together;
6. heat shrinking sleeving over a component; and
7. trimming excess material.
The operations which are subassembly-specific include the
following:
1. gluing a component to another component; and
2. dipping an entire subassembly in polyvinyl chloride.
In addition to the above operations, two forms of packaging
operations will be performed in Mexico. The first operation,
described as the "Literature Bag Ass'y," entails placing various
U.S. items, such as installation instructions, operating
instructions, and users report card, into a plastic bag, which is
then packaged together with the completed Cell-U-Phone assembly.
The second packaging operation entails packaging the Cell-U-Phone
for retail sale. The packaged Cell-U-Phone is then imported into
the U.S.
ISSUE:
Whether the U.S. components and items to be exported to
Mexico for assembly and packaging operations are entitled to the
duty exemptions under HTSUS subheadings 9802.00.80 and 9801.00.10
when the Cell-U-Phones are imported into the U.S.
LAW AND ANALYSIS:
HTSUS subheading 9802.00.80 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, lubrication, and painting....
All three requirements of HTSUS subheading 9802.00.80 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 value of the imported assembled article, less the
cost or value of such U.S. components, 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, 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 HTSUS
subheading 9802.00.80 to that component. See, section 10.16(c),
Customs Regulations (19 CFR 10.16(c)).
Those operations to be performed in Mexico which result in
securely joining components together by screwing, threading,
inserting, bolting, riveting, force fitting, snapping,
soldering, gluing, and sliding a component over another component
are considered acceptable assembly operations pursuant to 19 CFR
10.16(a). Cutting wire or cable to length is considered an
operation incidental to the assembly process pursuant to 19 CFR
10.16(b)(6). Trimming excess material is also considered an
acceptable incidental operation pursuant to 19 CFR 10.16(b)(4),
which states that trimming, filing or cutting off of small
amounts of excess material is considered incidental to the
assembly process. Moreover, heating the heat reactive tubing to
shrink the material around a component or a group of components
is considered an acceptable assembly operation or operation
incidental thereto in view of General Instrument Corporation v.
United States, 70 Cust.Ct. 64, C.D. 4408 (1973) (precut lengths
of tubular sleeving called "shrink sleeving," assembled abroad
with other components to form selenium rectifiers, are entitled
to allowances in duty under the precursor provision of HTSUS
subheading 9802.00.80). See also, Headquarters Ruling Letters
555503 dated March 15, 1990, and 052760 dated March 3, 1978.
However, no allowance in duty may be made under HTSUS
subheading 9802.00.80 for the cost or value of the polyvinyl
chloride into which the antenna structure of the tuck pack
subassembly is dipped. The polyvinyl chloride coating completely
encloses the antenna structure (except for the TNC connector) of
the Cell-U-Phone in a thermoplastic black casing, which becomes
the housing component for the antenna. The polyvinyl chloride
compound clearly is not exported from the U.S. in condition ready
for assembly as required by clause (a) of the statute. However,
the thermoplastic casing is a form of protective encapsulation
which is considered incidental to assembly pursuant to 19 CFR
10.16(b)(3). Therefore, the polyvinyl chloride coating process
will not preclude an allowance in duty under this tariff
provision for the cost or value of the antenna or other U.S.
components incorporated in the tuck pack subassembly.
HTSUS subheading 9801.00.10 provides for the free entry of
U.S. products that are exported and returned without having been
advanced in value or improved in condition by any means while
abroad, provided the documentary requirements of section 10.1,
Customs Regulations (19 CFR 10.1), are met. The packaging abroad
of U.S.-made products will not preclude classification under this
tariff provision when there is no improvement in condition or
advancement in value of the products themselves, apart from their
containers. See United States v. John V. Carr & Sons, Inc.,
69 Cust. Ct. 78, C.D. 4377 (1972), aff'd 61 CCPA 52, C.A.D. 1118
(1974).
Therefore, those U.S. items, such as the installation and
operating instructions, which are exported to Mexico and merely
packaged in plastic bags are not considered to have been advanced
in value or improved in condition for purposes of HTSUS
subheading 9801.00.10. As a result, these items will be exempt
from duty under this tariff provision when they are returned to
the U.S. packaged with the completed Cell-U-Phones, provided the
documentation requirements of 19 CFR 10.1 are satisfied. The
packaging materials themselves (e.g., cartons, plastic bags, foam
inserts) will also receive duty-free treatment under HTSUS
subheading 9801.00.10, if of U.S. origin.
The Cell-U-Phone (Model number CELU1010 A2WB) is
classifiable under the provision for other radio telephones
designed for the Public Cellular Radiotelecommunicaton Service:
units weighing over 1 kg in subheading 8525.20.6060, HTSUS, which
provides for a duty rate of 6 percent ad valorem.
HOLDING:
On the basis of the information and samples submitted, we
conclude that, with the the exception of the polyvinyl chloride
compound, those U.S. components to be exported to Mexico for
assembly into Cell-U-Phones will be entitled to duty allowances
under HTSUS subheading 9802.00.80 when returned to the U.S.,
provided the documentation requirements of 19 CFR 10.24 are met.
Those U.S. items that are exported to Mexico and merely packaged
with the Cell-U-Phones will receive duty-free treatment under
HTSUS subheading 9801.00.10 upon their return to the U.S.,
assuming compliance with the documentation requirements of 19 CFR
10.1. The Cell-U-Phone is classifiable in HTSUS subheading
8525.20.6060 and dutiable at 6 percent ad valorem.
Sincerely,
Jerry Laderberg
Acting Director
Commercial Rulings Division