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HQ 555219


July 12, 1989

CLA-2 CO:R:CV:V 555219 BJO

CATEGORY: CLASSIFICATION

District Director of Customs
El Paso, Texas 79985

RE: Reconsideration of HQ 067017, dated March 25, 1981 (GSP Eligibility of Power Mast Antenna Assembly)

Dear Sir:

This is in response to your memorandum of December 13, 1988, in which you request our reconsideration of Headquarters Ruling 067017, dated March 25, 1981. In that ruling, we held that the components of an automobile AM/FM radio power mast antenna assembly were substantially transformed constituent materials of the antenna assembly for purposes of the Generalized System of Preferences (GSP)(19 U.S.C. 2461-2466).

FACTS:

The importer states that the power mast assembly is part of a motor-driven radio antenna installed in passenger cars and light duty trucks. When the car or truck radio is turned on, the antenna will automatically extend 31 inches from the front fender from a hidden position.

The power mast antenna assembly consists of three subassemblies: a rod and cable subassembly, a shield tube subassembly, and a mast subassembly. The importer's Mexican subsidiary will assemble the three subassemblies in Mexico from materials imported from the U.S., West Germany, and Japan, and will combine the subassemblies to form the final article. In HQ 067017, we found that each of the three subassemblies was a substantially transformed constituent material of the power mast assembly, and that their cost or value may therefore be counted toward the 35% value-content minimum of the GSP.

The rod and cable subassembly consists of a metal rod measuring approximately one foot with a threaded end attached to a hollow plastic cable measuring approximately one yard in
length. At the other end of the plastic cable is attached a two inch hook-shaped metal tube. You state that the rod and cable subassembly is no longer produced in the same manner as was presented to us in HQ 067017. Formerly, the assembly of the rod and cable subassembly was accomplished as follows:

1. Plastic cable imported into Mexico is wound from a 16-inch spool onto an 8-inch mandrel. The wound mandrel is then placed in an oven where the cable is annealed. The annealing process gives the cable additional recoiling ability which is essential to ensure sufficient cable tension for proper operation of the antenna.

2. The annealed cable is then cut to length (the sample submitted is approximately one yard long).

3. A "music wire" measuring approximately two inches long is inserted into one end of the annealed plastic cable.

4. A hollow metal tube measuring approximately two inches, a circular rubber drain plug, and a circular piece of felt are slid over the cable end containing the music wire.

5. The cable tube/wire end is bent into a hook shape and the cable tube is "dimpled," or compressed, to fasten it securely to the cable.

6. The other end of the cable is swaged to decrease its diameter to allow a hollow metal coupler to "slip-fit" over it.

7. The metal coupler, which is approximately one inch long, is welded to a metal rod measuring approximately one foot. A contact is assembled to the coupler and welded. The rod and coupler are then fit over the end of the plastic cable and secured by dimpling.

An audit of the Mexican facility has revealed that the importer's subsidiary no longer anneals the cable (step 1 above) nor cuts the annealed cable to length (step 2); those steps are now accomplished in the U.S. prior to shipment to Mexico. It appears that the metal tube, metal coupler, contact, and metal rod are pre-cut and do not require further fabrication prior to assembly in Mexico.

ISSUE:

Whether the rod and cable subassembly, assembled in Mexico from imported components as described above, is a substantially transformed constituent material of the power mast antenna assembly for purposes of the GSP.

LAW AND ANALYSIS:

Under the GSP, eligible articles which are imported directly from a designated developing beneficiary country (BDC) may receive duty-free treatment if the sum of 1) the cost or value of materials produced in the BDC, plus 2) the direct costs of the processing operation in the BDC, is equivalent to at least 35% of the appraised value of the article upon its entry into the U.S. See 19 U.S.C. 2463(b).

If an article is produced or assembled from materials that are imported into the BDC, the cost or value of those materials may be counted toward the 35% value-content minimum only if they undergo a double substantial transformation in the BDC. See 19 CFR 10.177. That is, the cost or value of the rod and cable subassembly may be included in the GSP 35% value-content computation only if the imported components of the rod and cable assembly -the music wire, plastic cable, metal wire, contact, coupler, tube, and drain plug- are substantially transformed into a new and different article of commerce, which is then itself substantially transformed in the assembly of the final article, the power mast antenna assembly.

A substantial transformation occurs "when an article emerges from a manufacturing process with a name, character, or use which differs from those of the original material subjected to the process." See The Torrington Co., v. United States, 764 F.2d 1563, 1568 (Fed. Cir. 1985). In determining whether the combining of parts or materials constitutes a substantial transformation, the issue is the extent of operations performed and whether the parts lose their identity and become an integral part of the new article. Belcrest Linens v. United States, 741 F.2d 1368, 1373 (Fed. Cir. 1984). Assembly operations which are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation for GSP purposes. See C.S.D. 85-25, dated September 25, 1984 (HQ 071827).

In HQ 067017, we stated that the rod and cable subassemblies were substantially transformed constituent materials of the power mast antennas because they had been "so transformed from
their imported state so as to constitute articles of commerce in and of themselves, regardless of the degree of transformation present in the final assembled product."

As stated above, the rod and cable subassemblies are substantially transformed constituent materials only if their components have undergone a double substantial transformation. Accordingly, whether their cost or value may be included toward the 35% value content requirement will in fact depend on the degree of transformation present in the final assembled product. That portion of HQ 067017 which suggests otherwise is therefore overruled.

We find that the rod and cable subassembly has not undergone the requisite double substantial transformation. Even though the imported components may be substantially transformed into the rod and cable subassembly, as we held in HQ 067017, the rod and cable subassembly is not thereafter substantially transformed in the assembly of the power mast antenna assembly. The assembly of the rod and cable subassembly into the final product appears to be simple or minimal, rather than complex or meaningful, for it appears that the rod and cable subassembly are assembled into the final product simply by insertion into a larger tube (the "shield tube"), and placing a nut on the threaded end of the wire rod. The final assembly does not appear to significantly affect the character of the rod and cable subassembly, nor does it appear to affect its use. Both before and after the final assembly, the rod and cable assembly appears to be suitable only for use in a power mast antenna assembly. Finally, assembly of the rod and cable subassembly into the final article does not appear to cause the rod and cable to change tariff classification, for both before and after the final assembly, the article appears to be classified under subheading 8529.10.60, Harmonized Tariff Schedule of the U.S. (HTSUS)("Parts suitable for use solely or principally with the apparatus of headings 8525 to 8528 [which includes 'radiobroadcast receivers not capable of operating without an external source of power, of a kind used in motor vehicles', subheading 8527.21, HTSUS]; Antennas and antenna reflectors of all kinds; parts suitable for use therewith; Other.").

CONCLUSION:

A rod and cable subassembly assembled in Mexico from imported components is not a substantially transformed constituent material of the radio power mast assembly into which
it is finally assembled. Accordingly, the cost or value of the rod and cable subassembly may not be included toward the GSP 35% value-content minimum in determining whether the radio power mast assembly may receive duty-free treatment under that program when it is imported into the U.S.

Sincerely,

John Durant, Director

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