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HQ 555564


May 1, 1990

CLA-2 CO:R:C:V 555564 KAC

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80 - 9801.00.10

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

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