RR:CR:SM 560518 JML
TARIFF NO: 9802.00.80
Mr. Robert Noell
Cain Customs Brokers
Texano Industrial Park
415 S. Industrial
P.O. Box 150
Hidalgo, TX 78557
RE: Eligibility of a single port device imported from Mexico for
a partial duty exemption under subheading 9802.00.80,
HTSUS; eligibility for NAFTA preferential tariff treatment;
Article 509.
Dear Mr. Noell:
This is in response to your letter of May 26,1997, on behalf
of your client, MCE Manufacturing Corporation ("MCE"), requesting
a binding ruling for a single port device imported from Mexico.
Specifically, you request a ruling with respect to whether the
imported articles will be eligible for a partial duty exemption
under subheading 9802.00.80, Harmonized Tariff Schedule of the
United States ("HTSUS"), and preferential tariff treatment under
NAFTA. We regret the delay in responding.
FACTS:
MCE intends to import single port devices assembled in
Mexico. You describe the single port devices as a product to
terminate unwanted radio frequency ("rf") energy at an output
port of a microwave device by dissipating the rf energy as heat.
The assembly process is to be performed in Mexico. The
process involves pressing a resistor rod into a male contact with
a solder ball between them. The resistor rod/contact assembly is
then pressed into a Teflon insulator. A metal housing is
inserted over the resistor rod and the housing is pressed onto
the assembly. A solder ball is placed in the housing cavity on
top of the resistor rod. The assembly is then placed on a hot
plate at 250ø C to flow the solder balls. The assembly is then
cleaned and dried at 100ø C for 5 minutes. A connector is
slipped over the housing at the side of the contact end and a
snap ring is inserted onto the contact. The assembly is then
electronically tested, visually inspected, and packed for
shipment.
With regard to the tariff classification of the single port
devices, you claim that they are classified under subheading
8529.90.99, HTSUS (parts suitable for use solely or principally
with the apparatus of headings 8525 to 8528: other: other:
other). In support of this classification you submitted New York
Ruling B86122, dated July 1, 1997, wherein the subject single
port devices were classified accordingly.
A bill of materials submitted indicates that all the
components used to make the single port devices are of U.S.
origin. The tariff classification of the various components are
as follows: resistor rod 8533.10, HTSUS, flux 3810.10, HTSUS,
snap ring 7318.29, HTSUS, solder ball 8311.30, HTSUS, contact
8536.90, HTSUS, housing 7326.90, HTSUS, Teflon insulator
8547.90, HTSUS, and connector 8536.90, HTSUS.
ISSUES:
1) Whether the single port devices assembled in Mexico are
eligible for duty allowances under subheading 9802.00.80, HTSUS.
2) Whether the single port devices are eligible for NAFTA
duty preference.
LAW AND ANALYSIS:
SUBHEADING 9802.00.80
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 this tariff provision is subject to duty
upon the full cost or 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,
lamination, 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. See 19 CFR 10.16(a). 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
subheading 9802.00.80, HTSUS, to that component. See 19 CFR
10.16(c).
You claim subheading 9802.00.80, HTSUS, duty allowances for
six of the eight components involved in producing the single port
devices: the resistor rods, the snap ring, the contact, the
housing, the Teflon insulator and the connector. Presumably, you
concede that the other materials involved in the production of
the single port devices (flux and solder) are not eligible
subheading 9802.00.80, HTSUS, components. For purposes of this
ruling only those materials you contend are eligible will be
considered.
The assembly processes you describe for the single port
devices -- pressing a resistor rod into male contact, pressing
the resistor rod/contact assembly into a Teflon insulator,
inserting a metal housing over the resistor and pressing it into
the assembly and slipping a connector over the housing at the
side of the contact end, inserting a snap ring onto the contact,
and soldering various components together -- are considered
acceptable forms of assembly for purposes of subheading
9802.00.80, HTSUS. See 19 CFR 10.16(a); HRL 560609, dated
October 30, 1997 (pressing and force fitting various components
together to make coaxial attenuators is an acceptable form of
assembly for purposes of subheading 9802.00.80, HTSUS). Moreover
cleaning and drying the assembly, as well as final testing are
considered operations incidental to the assembly of the single
port devices. See 19 CFR 10.16(b).
Accordingly, the imported single port devices from Mexico
will be eligible for allowances in duty for the cost or value of
the U.S. components incorporated therein under subheading
9802.00.80, HTSUS, upon compliance with the documentary
requirements of section 10.24, Customs Regulations (19 CFR
10.24).
NAFTA PREFERENCE
General Note 12, HTSUS, incorporates Article 401 of the
North American Free Trade Agreement ("NAFTA") into the HTSUS.
Note 12(a)(ii) provides, in pertinent part:
(ii) [g]oods that originate in the territory of a NAFTA
party under subdivision (b) of this note and that
qualify to be marked as goods of Mexico under the terms
of the marking rules set forth in regulations issued by
the Secretary of the Treasury (without regard to
whether the goods are marked), when such goods are
imported into the customs territory of the United
States and are entered under a subheading for which a
rate of duty appears in the "Special" subcolumn
followed by the symbol "MX" in parentheses, are
eligible for such duty rate...
Accordingly, the finished dividers at issue will be eligible
for the "Special" "MX" rate of duty provided it is a NAFTA
"originating" good under General Note 12(b), HTSUS, and they
qualify to be marked as a product of Mexico under the marking
rules. General Note 12(b) provides, in pertinent part:
[f]or the purposes of this note, goods imported into
the customs territory of the United States are eligible
for the tariff treatment and quantitative limitations
set forth in the tariff schedule as "goods originating
in the territory of a NAFTA party" only if --
(i) they are goods wholly obtained or produced entirely
in the territory of Canada, Mexico, and/or the United
States; or
(ii) they have been transformed in the territory of
Canada, Mexico and/or the United States so that --
(A) except as provided in subdivision (f) of this note,
each of the non-originating materials used in the
production of such goods undergoes a change in tariff
classification described in subdivisions (r), (s) and
(t) of this note;.........
Although you submitted a bill of materials as evidence that
the materials used in the production of the single port devices
are of "U.S. origin" and therefore result in the single port
devices being "originating" under General Note 12(b), HTSUS, we
do not consider the bill of materials dispositive of that fact.
That is, we do not view the evidence presented in the bill of
materials sufficient to support a finding that the single port
devices are "goods wholly obtained or produced entirely in the
territory of Canada, Mexico, and/or the United States" pursuant
to General Note 12(b)(i), HTSUS. Thus, we must examine whether
the materials used in the production of the single port devices
undergo the required change in tariff classification in Mexico
pursuant to General Note 12(b)(ii)(A), HTSUS. The rule
applicable to goods of subheading 8529.90.99, HTSUS, is provided
for in General Note 12(t)/85.93--12(t)106, HTSUS, which provides:
101. A change to subheading 8529.90 from any other
heading.
In this regard we note the tariff classifications of the
materials used in the production of the single port devices:
resistor rod 8533.10, HTSUS, flux 3810.10, HTSUS, snap ring
7318.29, HTSUS, solder ball 8311.30, HTSUS, contact 8536.90,
HTSUS, housing 7326.90, HTSUS, Teflon insulator 8547.90, HTSUS,
and connector 8536.90, HTSUS. Because all of the above
materials are classified in tariff headings other than 8529.90,
HTSUS, the requirements of the rule have been met. Consequently,
the single port devices are considered "originating" under
General Note 12(b), HTSUS.
Section 102.11, Customs Regulations (19 CFR 102.11), sets
forth the required hierarchy for determining whether a good is a
good of a NAFTA country for the purposes of country of origin
marking. Section 102.11(a), Customs Regulations (19 CFR
102.11(a)), states that the country of origin of a good is the
country in which:
(1) [t]he good is wholly obtained or produced;
(2) [t]he good is produced exclusively from domestic
materials; or
(3) [e]ach foreign material incorporated in that good
undergoes an applicable change in tariff classification set
out in section 102.20 and satisfies any other
applicable requirements of that section, and all other applicable
requirements of these rules are satisfied.
"Foreign material" is defined in 19 CFR 102.1(e) as "a
material whose country of origin as determined under these rules
is not the same country as the country in which the good is
produced." Sections 102.11(a)(1) and 102.11(a)(2) do not apply
to the facts presented in this case because the single port
devices are assembled in Mexico from U.S. materials, and
therefore they are neither wholly obtained or produced, nor
produced exclusively from domestic materials as those terms are
defined under section 102.1, Customs Regulations (19 CFR 102.1).
Accordingly, section 102.11(a)(3), Customs Regulations (19 CFR
102.11(a)(3)), is the applicable rule that must be applied to
determine the origin of the subassemblies. Pursuant to section
102.11(a)(3), the country of origin of a good is the country in
which each foreign material incorporated in that good undergoes
an applicable change in tariff classification set out in section
102.20, Customs Regulations (19 CFR 102.20).
As the single port devices are classified in subheading
8529.90, HTSUS (parts suitable for use solely or principally with
the apparatus of headings 8525 to 8528: other: other: other), we
note the applicable change in tariff classification rule set out
in section 102.20(o), Customs Regulations (19 CFR 102.20(o)),
[s]ection XVI: [c]hapters 84 through 85:
8529.......A change to heading 8529 from any other
heading.
Thus, all of the materials incorporated into the finished
dividers (i.e., because they are all "foreign materials"), must
meet the above rule. Noting the tariff classification of the
materials listed above, the applicable rule is satisfied as none
of the above-mentioned materials are within heading 8529, HTSUS.
Thus, based upon the information provided, the single port
devices would be eligible to be marked as products of Mexico.
Based upon the information submitted, because the single
port devices are considered "originating goods" under General
Note 12(b), HTSUS, and qualify to be marked as products of Mexico
as required by General Note 12(a)(ii), HTSUS, they are entitled
to NAFTA tariff preference at the "MX" duty rate.
HOLDING:
On the basis of the information provided, it is Customs
opinion that the operations to be performed in Mexico to create
the single port devices are acceptable forms of assembly or
operations incidental thereto pursuant to subheading 9802.00.80,
HTSUS. Therefore, a duty allowance may be made under this tariff
provision for the cost or value of the U.S. origin components
assembled therein upon compliance with the documentary
requirements of section 10.24, Customs Regulations.
In addition, based on your submissions concerning the origin
of the materials incorporated into the single port device, as
well as their applicable tariff classifications, we find that
the single port device will be eligible for NAFTA tariff
preference under the "MX" duty rate, as the finished dividers are
considered "originating goods" and qualify to be marked as
products of Mexico as required by General Note 12, HTSUS.
A copy of this ruling letter should be attached to the entry
documents filed at the time the goods are entered. If the
documents have been filed without a copy, this ruling should be
brought to the attention of the Customs officer handling the
transaction.
Sincerely,
John Durant, Director
Commercial Rulings Division