CLA-2 CO:R:C:M 951937 KCC
District Director
300 South Ferry Street
Terminal Island
Room 2017
San Pedro, California 90731
RE: Protest No. 2704-92-100552; ceramic elements; capacitors;
part; GRI 2(a); unfinished; EN Rule 2(a); Sangamo Capacitor
Division; essential character; EN Rule 3(b); EN 85.32
Dear Sir:
This is in response to the Application for Further Review of
Protest No. 2704-92-100552, dated February 6, 1992, which
pertains to the tariff classification of ceramic elements for
capacitors under the Harmonized Tariff Schedule of the United
States (HTSUS). Samples of the ceramic elements as imported, in
their various stages of manufacture, and in their three completed
forms were submitted for examination.
FACTS:
Upon importation into the U.S., the entries of the ceramic
elements were liquidated under subheading 8532.29.00, HTSUS,
which provides for "Electrical capacitors, fixed, variable or
adjustable (pre-set); parts thereof...Other fixed capacitors...
Other."
The merchandise under consideration consists of two types of
ceramic elements used to manufacture capacitors. In the U.S.,
the ceramic elements are combined with other imported components
and domestic components to manufacture three types of completed
capacitors, the RL9, RH3 and RH4 capacitors. The ceramic element
to be manufactured into the RL9 capacitors is in a cylindrical
shape and consists of two pieces of copper conducting material
separated by a ceramic dielectric with attached end caps. The
ceramic element to be manufactured into the RH3 and RH4
capacitors is in a cylindrical shape and consists of two pieces
of copper conducting material separated by a ceramic dielectric.
The cost figures submitted by the protestant indicates that the
percentages for the value of the ceramic elements per 1,000
units, the percentages for the value of the other imported
components (end caps and wire), and the percentages for the value
added in the U.S. (parts and labor) are as follows:
Capacitor Ceramic Element Other U.S. Value
RL9 53.5% 0.0% 46.5%
RH3 43.5% 17.5% 39.0%
RH4 52.0% 15.0% 33.0%
The protestant contends that the ceramic elements are
properly classified under subheading 8532.90.00, HTSUS, which
provides for "Electrical capacitors, fixed, variable or
adjustable (pre-set); parts thereof...Parts."
ISSUE:
Are the ceramic elements for capacitors classified under
subheading 8532.29.00, HTSUS, as unfinished capacitors pursuant
to GRI 2(a), or are they classified under subheading 8532.90.00,
HTSUS, as parts of capacitors?
LAW AND ANALYSIS:
The classification of merchandise under the HTSUS is
governed by the General Rules of Interpretation (GRI's). GRI 1,
HTSUS, states in part that "for legal purposes, classification
shall be determined according to the terms of the headings and
any relative section or chapter notes...."
The ceramic elements are classified under heading 8532,
HTSUS, which provides for "Electrical capacitors, fixed, variable
or adjustable (pre-set); parts thereof...." Classification to
the eight digit subheading level is dependent upon whether the
ceramic elements are considered unfinished capacitors pursuant to
GRI 2(a), HTSUS, or parts of capacitors.
GRI 2(a), HTSUS, states that:
Any reference in a heading to an article shall be taken to
include a reference to that article incomplete or
unfinished, provided that, as entered, the incomplete or
unfinished article has the essential character of the
complete or finished article. It shall also include a
reference to that article complete or finished (or falling
to be classified as complete or finished by virtue of this
rule), entered unassembled or disassembled.
General Explanatory Note (EN) Rule 2(a) of the Harmonized
Commodity Description and Coding System (HCDCS) states that:
(I) The first part of Rule 2(a) extends the scope of any heading
which refers to a particular article to cover not only the
complete article but also that article incomplete or
unfinished, provided that, as presented, it has the
essential character of the complete or finished article.
HCDCS p. 2. The Explanatory Notes, although not dispositive, are
to be looked to for the proper interpretation of the HTSUS. 54
Fed. Reg. 35127, 35128 (August 23, 1989).
The issue to be determined is whether the ceramic elements
as imported have the essential character of the completed
capacitors. Whether merchandise was classifiable as capacitors
or unfinished capacitors under the TSUS was examined in Sangamo
Capacitor Division v. U.S., 9 CIT 154, 611 F. Supp. 967 (1985).
In determining that silver mica plates which consisted of mica
(the dielectric) and silver (the conducting material) were
classified as articles of silver or mica depending on their chief
value and not as capacitors or unfinished capacitors, the Court
considered the common and commercial meaning of capacitors. The
Court stated that "[t]he definitions...and the testimony
established a capacitor to be used in electronic circuits for the
purpose of introducing a capacitance. The components of a
capacitor are two electrodes separated by a dielectric." Id. at
973.
In examining whether the silver mica plates were unfinished
capacitors, the court analyzed the "substantially complete"
factors found in Daisy-Heddon, Div. Victor Comptometer Corp. v.
U.S., 66 CCPA 97, C.A.D. 1228 (1979). In reaching its decision
that the silver mica plates were not unfinished capacitors, the
Court relied heavily on the number of additional steps and
materials added to the silvered mica plates which were required
before industry standards for capacitors were met.
Congress has indicated that earlier tariff decisions must
not be disregarded in applying the HTSUS. The conference report
to the Omnibus Trade Bill of 1988, states that "on a case-by-
case basis prior decisions should be considered instructive in
interpreting the HTS[US], particularly where the nomenclature
previously interpreted in those decisions remain unchanged and no
dissimilar interpretation is required by the text of the
HTS[US]." H. Rep. No. 100-576, 100th Cong., 2d Sess. 548, 550
(1988). Although the nomenclature involved in Sangamo and in
heading 8532, HTSUS, both contain the phrase "Electrical
capacitors", we do not find the analysis in Sangamo instructive
in this case.
The protestant contends that the term "essential character"
in GRI 2(a) is not defined in the HTSUS or in the HCDCS and,
therefore, its meaning must be discerned from the interpretation
of Rule 10(h) in the Tariff Schedules of the United States (TSUS)
(the precursor tariff schedule to the HTSUS) and by examining the
"substantially complete" factors found in Daisy-Heddon and
reiterated in Sangamo. We disagree.
In Sangamo, the court relied heavily on Daisy-Heddon finding
that the mechandise was not substantially complete and,
therefore, unfinished. However, under GRI 2(a), if an article,
has the essential character of the complete or finished article
it will be considered unfinished.
In interpreting the HTSUS, we have consistently construed
the term "essential character" to mean the attribute which
strongly marks or serves to distinguish what an article is; that
which is indispensable to the structure, core or condition of the
article. In addition, the Explanatory Notes provide further
factors which determine the essential character of goods.
Factors such as bulk, quantity, weight or value, or the role of a
constituent material in relation to the use of the goods are to
be utilized, though the importance of certain factors will vary
between different kinds of goods. See, EN Rule 3(b), HCDCS p. 4.
An electrical capacitor is defined in EN 85.32 as consisting
"in principle of two conducting surfaces separated by an
insulating material (dielectric), e.g., air, paper, mica, oil,
resins, rubber and plastics, ceramics or glass." HCDCS p. 1383.
The RL9 element and the RH3 and RH4 element meet this definition.
They both consist of two pieces of copper conducting material
separated by a ceramic dielectric. We are of the opinion that an
article has the essential character of capacitor if it contains
two conducting surfaces separated by an insulating material.
Even though as imported the elements cannot function as
capacitors, the components which are indispensable to the
capacitor are the two conducting surfaces separated by the
insulating material. We are not unmindful of the court's finding
in Sangamo that the above cited definitions are exceedingly broad
or that as imported the mechandise is incapable of introducing a
known capacitance into an electric circuit. However, in our
opinion, neither of these findings has a bearing on determining
the essential character of the article.
Moreover, an examination of the value of the imported
elements as compared to the value added in the U.S., and the
value of the foreign components, when applicable, is
inconclusive.
In the case of the RL9 capacitor, the imported element accounts
for 53.5.% of the finished capacitor and the value added in the
U.S. accounts for 46.5% of the finished capacitor. The RH3
element is 43.5% of the finished capacitor's value, as compared
to 17.5% value added in the U.S. with the other 17.5%
attributable to the foreign end caps and wire. The RH4 element
is 52% of the finished capacitor's value, as compared to 33%
value added in the U.S. with the other 15% attributable to the
foreign end caps and wire. Moreover, the U.S. manufacturing
processes for the RL9 element and the RH3 and RH4 element involve
applying overcoat and undercoat, marking the capacitance value
and voltage, various stages of testing and inspecting and
packaging. The RH3 and RH4 element undergo the additional
processes of attaching the end caps and wire leads. Although the
protestant breaks down the U.S. manufacturing processes into 18
steps for the RH elements and 20 steps for the RL elements, we do
not find that these processes are relevant to whether the
imported elements have the essential character of a capacitor.
Upon importation, the elements have the essential character of a
capacitor, two conducting surfaces separated by an insulating
material.
After review of the submitted samples, we conclude that the
RL9 element and the RH3 and RH4 element are single layer, ceramic
dielectric capacitors. Therefore, as the RL9 element and the RH3
and RH4 element have the essential character of a capacitor, they
are classified under subheading 8532.23.00, HTSUS.
HOLDING:
Pursuant to GRI 2(a), HTSUS, the RL9 element and the RH3 and
RH4 element are properly classified under subheading 8532.23.00,
HTSUS, which provides for "Electrical capacitors, fixed, variable
or adjustable (pre-set); parts thereof...Other fixed
capacitors...Ceramic dielectric, single layer."
The protest should be denied. A copy of this decision
should be attached to the Customs Form 19 and provided to the
protestant as part of the notice of action on the protest.
Sincerely,
John Durant, Director
Commercial Rulings Division