HQ 0554936 - Substantial transformation of circuit board components - United States International Trade Commision Rulings

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HQ 554936

June 30, 1989

CLA-2-CO:R:C 544936 RA

CATEGORY: CLASSIFICATION

TARIFF NO: 807.00, TSUS

District Director of Customs
3600 Paisano
Room 134 Bldg. B
El Paso, Texas 79905

RE: Substantial transformation of circuit board components

Dear Sir:

This ruling is in response to the applications for further review of protest numbers 2402-5-000019-21-24, dated May 29, June 3, and July 15, 1985. The protests were filed against the liquidation of entries Nos. 84-819178, March 16, 1984, 85- 809844-2, December 17, 1984, and 85-812572-6, January 14, 1985.

ISSUE:

The question raised in the protest concerns the applicability of item 807.00, Tariff Schedules of the United States (TSUS), to circuit boards used as components in a Mexican assembly operation. When exported from the United States, the boards consisted of printed circuit boards containing foreign- made electronic parts which were automatically inserted by machine and crimped but not soldered in place. The specific issue is whether the inserted components and the boards were substantially transformed into new and different articles of United States origin and, therefore, qualified as domestic-made fabricated components for item 807.00, TSUS, purposes.

FACTS:

The various electronic parts were inserted into the printed circuit boards in the United States by computer programmed automatic insertion machines and the short leads were crimped to hold them in place. The parts were not permanently soldered but would have to be uncrimped before they could be separated from the board. If separated, they could not be reused in the automatic insertion process.

LAW AND ANALYSIS:

The protestant claims that the foreign-made components have been substantially transformed by their insertion into the circuit boards and, therefore, the exported complete boards qualify as United States products eligible for item 807.00, TSUS, treatment when the articles in which they are assembled abroad are imported. In our ruling of March 5, 1986 (553945), we held that similar circuit boards composed of foreign-made electronic components inserted and crimped by an automatic machine had been substantially transformed into products of the United States.

The facts in this case were distinguishable from those present in our ruling of October 16, 1980 (063647), published as Legal Determination 81-0041 of April 2, 1981. The electronic components in that ruling were placed on the circuit board in a tentative fashion and could be removed and reused. It was pointed out that the result would be different if the components were affixed in some permanent manner prior to exportation.

In the instant case, the electronic components are inserted into the printed circuit boards by computer-programmed automatic machines and the leads are securely crimped and slightly beveled. If after insertion, any component has to be removed, it would not be useable and would be scrapped. There is an irreversible commitment to utilize the inserted components in the manufacture of the printed circuit boards and their attachment is permanent even though there is a subsequent soldering to insure good connections. An examination of the submitted sample clearly demonstrates that the individual components have lost their separate identity and became integral parts of the exported circuit board.

Accordingly, it is believed that the operations have resulted in a substantial degree of permanence and the identity of the foreign components was lost and became subordinated and merged into a new identity with a new name, character and use. While the components inserted into the boards can be removed with some difficulty, this would not be economically feasable as the crimping of the short leads results in deformed components when they are removed which could not be reused in an automatic process.

CONCLUSION:

We are accordingly of the opinion that the automatic insertion and crimping operations performed prior to exportation of the circuit boards are sufficient to render them domestic products which are entitled to tariff treatment under item 807.00, TSUS, upon compliance with the Customs Regulations. On this basis, the protest should be allowed and a copy of this decision should be attached to your Form 19 Notice of Action to be sent to the protestant.

Sincerely,

John Durant, Director

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