CLA-2 CO:R:C:S 556574 WAW
Ms. Elaine Jacoby
Miles & Joffroy
1185 Avenida Costa Este
Suite 1600
Otay Mesa, CA 92073
RE: Applicability of duty exemptions under HTSUS subheadings
9802.00.50 and 9802.00.80 to tractors from Mexico;
8716.40.00
Dear Ms. Jacoby:
This is in response to your letter dated January 10, 1992,
on behalf of SuperBus, Inc., requesting a ruling on the tariff
classification and applicability of subheadings 9802.00.50 and
9802.00.80, Harmonized Tariff Schedule of the United States
Annotated (HTSUSA), to tractors to be imported from Mexico.
FACTS:
SuperBus, Inc. proposes to import two types of articles --
passenger trailers and semi-tractors. The passenger trailer
consists of a semi-trailer manufactured in Mexico and contains
seating for approximately 48 to 60 passengers, entry and exit
doors on the curb side of the trailer, modesty panels and
stanchions or handholds for standees and ingress/egress to the
passenger module, wheelchair accessibility features such as
ramps, kneeling, tie-downs, and intercoms to the power module
(tractor), farebox, closed circuit TV system, heating and
ventilating system for passenger comfort.
The semi-tractors consist of a General Motors Corporation
Volvo white cab over diesel tractors. These tractors are
manufactured in the U.S. by GMC-Volvo and exported to Mexico
where the following operations will be performed:
(1) The custom building and installation of wiring harnesses
in the tractor and the installation of and wiring the panels
where the electrical connections will be made. The wiring
enables the tractor driver to operate all functions of the
passenger module from the tractor, ie., opening and closing
doors of the passenger module, turning lights on and off in
the passenger module, kneeling the passenger module at the
curb, operating the door interlock system, etc.;
(2) The installation of a particulate trap which is a clean
air device which serves to filter and clean the diesel
exhaust;
(3) The installation of monitors and an intercom system
which provides driver/passenger communication.
All of the components which are assembled to the tractor in
Mexico by means of soldering and screwing operations are of U.S.-
origin. The tractor and passenger trailer modules will be
connected and tested in Mexico to ensure proper functioning of
all features. Next, the tractor and passenger modules will be
disconnected to allow for separate importation into the U.S.
Duty-free treatment for the passenger trailers will be
sought under the Generalized System of Preferences (GSP), while
the tractors will be entered under the partial duty exemption
provision of subheading 9802.00.50 or 9802.00.80, HTSUS. No
ruling is requested regarding the eligibility of the trailers for
GSP treatment.
ISSUES:
(1) What is the proper classification of the passenger
trailer under the HTSUS?
(2) Whether the tractor will qualify for the partial duty
exemption available under HTSUS subheading 9802.00.50 or
9802.00.80 when returned to the U.S.
LAW AND ANALYSIS:
Tariff Classification of passenger trailer
Classification of merchandise under the HTSUS is in
accordance with the General Rules of Interpretation (GRI's),
taken in order. GRI 1 provides that classification is determined
according to the terms of the headings and any relative section
or chapter notes.
Subheading 8716.40.00, HTSUS, provides for: "[t]railers and
semi-trailers; other vehicles, not mechanically propelled:
[o]ther trailers and semi-trailers."
In understanding the language of the HTSUS, the Harmonized
Commodity Description and Coding System Explanatory Notes may be
utilized. The Explanatory Notes, although not dispositive, are
to be used to determine the proper interpretation of the HTSUS.
54 Fed. Reg. 35127, 35128 (August 23, 1989). Explanatory Note
87.16(A)(5)(a) (pp. 1439-1440) states that:
[t]his heading covers a group of non-mechanically propelled
vehicles (other than those of the preceding headings)
equipped with one or more wheels and constructed for the
transport of goods or persons. . .
The heading includes:
(A) Trailers and semi-trailers
For the purposes of this heading, the term "trailers"
and "semi-trailers" means vehicles (other than side-cars) of
a kind designed solely to be coupled to another vehicle by
means of a special coupling device (whether or not
automatic). . .
Trailers falling here include:
(5) Other trailers such as:
(a) Motor vehicle trailers specially designed for the
conveyance of persons.
Based upon the description in Explanatory Note
87.16(A)(5)(a), the subject passenger trailer is classifiable
under subheading 8716.40.00, HTSUS.
Applicability of duty exemptions under subheadings 9802.00.50 and
9802.00.80, HTSUS
Subheading 9802.00.50, HTSUS, provides for the assessment of
duty on the value of repairs or alterations performed on articles
returned to the U.S. after having been exported for that purpose.
However, the application of this tariff provision is precluded in
circumstances where the operations performed abroad destroy the
identity of the articles or create new or commercially different
articles. See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D.
631 (1956), aff'g, C.D. 1752, 36 Cust. Ct. 46 (1956); Guardian
Industries Corporation v. United States, 3 CIT 9 (1982), Slip Op.
82-4 (1982). Subheading 9802.00.50, HTSUS, treatment is also
precluded where the exported articles are incomplete for their
intended use and the foreign processing operation is a necessary
step in the preparation or manufacture of finished articles.
Dolliff & Company, Inc. v. United States, 81 Cust. Ct. 1, C.D.
4755, 455 F. Supp. 618 (1978), aff'd, 66 CCPA 77, C.A.D. 1225,
599 F.2d 1015 (1979). Articles entitled to this partial duty
exemption are dutiable only upon the cost or value of the foreign
repairs or alterations, provided the documentary requirements of
section 10.8, Customs Regulations (19 CFR 10.8), are satisfied.
We are of the opinion that the operations performed abroad
exceed an alteration and, therefore, the tractor will not be
entitled to the partial duty exemption available under subheading
9802.00.50, HTSUS. The installation of monitors, an intercom
system, a particulate trap and wiring harnesses into the tractor
are operations which are necessary to adapt the tractor for use
with the passenger trailer. Until these operations are
performed, the tractor is incomplete for its intended specialized
use. Therefore, as the foreign processing in this case
constitutes more than an alteration, the tractor is ineligible
for the partial duty exemption under subheading 9802.00.50,
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, 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 the U.S. components assembled therein, upon
compliance with the documentary requirements of section 10.24,
Customs Regulations (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 United States to qualify for the exemption.
Components will not lose their entitlement to the exemption
by being subjected 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 HTSUS subheading
9802.00.80 to that component. See 19 CFR 10.16(c).
We are persuaded by the description provided that all of the
U.S. components exported for assembly to create the specially
adapted tractors meet the three requirement of HTSUS subheading
9802.00.80 and, therefore, are entitled to duty allowances under
this tariff provision. The installation of a wiring harness,
particulate trap, monitors and an intercom system in the tractor
by means of soldering and screwing operations constitute
acceptable means of assembly pursuant to 19 CFR 10.16(a).
Therefore, as the U.S. components used in the assembly process,
including the tractors, will be exported in condition ready for
assembly without further fabrication, will not lose their
physical identities in the assembled article, and will not be
advanced in value or improved in condition except by assembly
operations, the returned tractor assembled with the wiring
harness, particulate trap, monitors and intercom system will be
eligible for the partial duty exemption under subheading
9802.00.80, HTSUS.
HOLDING:
The passenger trailer is classifiable under subheading
8716.40.00, HTSUS, which provides for: "[t]railers and semi-
trailers; other vehicles, not mechanically propelled: [o]ther
trailers and semi-trailers." The general, column one rate of duty
is 3.1 percent ad valorem.
On the basis of the information provided, it is our opinion
that the processes performed abroad exceed an alteration, and,
therefore preclude tariff treatment under HTSUS subheading
9802.00.50. However, the foreign operations performed on the
U.S. components are proper assembly operations or operations
incidental to assembly pursuant to HTSUS subheading 9802.00.80.
Therefore, an allowance in duty may be made under this tariff
provision for the cost or value of all U.S. components upon
compliance with the documentary requirements of 19 CFR 10.24.
Sincerely,
John Durant, Director
Commercial Rulings Division