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HQ 555523


November 8, 1990

CLA-2 CO:R:C:V 555523 LS

CATEGORY: CLASSIFICATION

TARIFF NO.: 9801.00.10, 9802.00.80

Mr. Gordon W. Larson
Account Manager
Rudolph Miles & Sons, Inc.
4950 Gateway East
P.O. Box 144
El Paso, Texas 79942

RE: Applicability of subheading 9801.00.10 and 9802.00.80, HTSUS, to "rechargeable battery set" to be imported from Mexico. Set; packaging; Superscope; assembly; country of origin marking requirements; 083672; 555592; 554935; 555239

Dear Mr. Larson:

This is in response to your letter of January 16, 1989, requesting a ruling on the applicability of subheading 9801.00.10, Harmonized Tariff Schedule of the United States (HTSUS), to a battery charger of U.S. origin, and the applicability of subheading 9802.00.80, HTSUS, to rechargeable nickel cadmium batteries assembled in Mexico, when these articles, along with an adapter of foreign origin, are packaged together in Mexico for retail sale as a set. We regret the delay in responding to this portion of your request.

In Headquarters Ruling Letter (HRL) 083672 dated May 16, 1989, we responded to your request for a classification ruling on this same merchandise. We found that, in accordance with General Rule of Interpretation 3(b), HTSUS, the above described articles are classifiable as a set under subheading 8504.40.00, HTSUS, dutiable at the rate of 3 percent ad valorem, provided the set was not subject to special duty treatment. This classification was based upon a finding that the battery charger imparts the essential character to the set.

FACTS:

The following facts are based upon your letter of January 16, 1989, and a recent telephone conversation with a member of my staff. The battery charger is of U.S. origin. The rechargeable nickel cadmium batteries are assembled in Mexico partly of U.S.
origin components. Although the adapter is said to be assembled in Haiti, no claim is being made for a partial duty exemption under subheading 9802.00.80, HTSUS, for this article. For purposes of this ruling, we assume that none of the components comprising the adapter are of U.S. origin. These three items are packed together in Mexico using blister packaging, which consists of a cardboard backing and a plastic front. The charger is capable, with the use of the adapter, of charging all common sizes of consumer rechargeable nickel cadmium batteries.

Assuming that the battery charger of U.S. origin imparts the essential character to the set and is entitled to the duty exemption under subheading 9801.00.10, HTSUS, you inquire whether the entire set is considered to be of U.S. origin and entitled to duty-free treatment under subheading 9801.00.10, HTSUS. You also inquire as to the country of origin of the set both for marking purposes and to determine the duty rate applicable to the entire set.

ISSUES:

(1) Whether the set, consisting of the battery charger, adapter, and batteries, will qualify for the duty exemptions available under subheadings 9801.00.10 and 9801.00.80, HTSUS, when returned to the U.S.

(2) What country of origin marking requirements are applicable to the set?

LAW AND ANALYSIS:

I. Applicability of subheadings 9802.00.80 and 9801.00.10, HTSUS

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 subheading 9802.00.80, HTSUS, is subject to duty upon the full value of the imported assembled article less the cost or value of the U.S. components, upon compliance with
the documentary requirements of section 10.24, Customs Regulations (19 CFR 10.24).

Upon compliance with the above statutory and regulatory requirements, the assembled batteries, which are packaged with the battery charger and adapter, may be entered under subheading 9802.00.80, HTSUS, with allowances in duty for the cost or value of the U.S. components comprising the batteries.

Subheading 9801.00.10, HTSUS, provides for the duty-free entry of products of the U.S. that are returned after having been exported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, provided there has been compliance with the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1).

In the recent decision of Superscope, Inc. v. United States, 13 CIT ____, 727 F. Supp. 629 (1989), the court held that certain glass panels of U.S. origin that were exported, repacked abroad with certain foreign components, and returned to the U.S. as part of unassembled audio cabinets, were entitled to duty-free entry under item 800.00, Tariff Schedules of the United States (TSUS), since the U.S. panel portion of the imported article was "not 'advanced in value or improved in condition . . . while abroad,' but [was] merely repacked." Id. at 631. Although the Superscope case concerned the TSUS, not the HTSUS, the decision is believed to be equally applicable to similar situations arising under the HTSUS, since item 800.00, TSUS, and relevant Schedule 8, TSUS, headnotes were carried over virtually unchanged into the HTSUS.

One of those notes in the HTSUS, U.S. Note 1, Chapter 98, HTSUS (the chapter encompassing special classification provisions, including subheading 9801.00.10, HTSUS), provides as follows:

The provisions of this chapter are not subject to the rule of relative specificity in general rule of interpretation 3(a). Any article which is described in any provision in this chapter is classifiable in said provision if the conditions and requirements thereof and any applicable regulations are met. (Emphasis added).

The "conditions and requirements" of subheading 9801.00.10, HTSUS, are (1) that the article be a product of the U.S.; and (2) that it not be advanced in value or improved in condition by any means while abroad. Granting duty-free treatment under this provision to items in a set (e.g., foreign-made items) which do not meet these "conditions and requirements" would clearly contravene the plain meaning and intent of the referenced U.S. Note. We believe there is no question that the application of GRI 3(b) was never intended to result in granting American goods
returned status to foreign-made materials or components in a set. See HRL 555592 dated October 18, 1990, modifying HRL 554935 dated April 10, 1989.

With respect to the rechargeable battery set, the mere packaging of the battery charger with the other items neither advances it in value nor improves it in condition. Therefore, the battery charger, which is a U.S. product, will be eligible for the duty exemption under subheading 9801.00.10, HTSUS. This assumes that the documentation requirements of 19 CFR 10.1 are met and that the district director of Customs at the port of entry is satisfied that the battery charger is, in fact, of U.S. origin.

Based upon the foregoing analysis, and our prior finding that the essential character of the set is imparted by the U.S. origin battery charger, we conclude that the entire rechargeable battery set is dutiable on its full value, under subheading 8504.40.00, HTSUS, at the "Column 1 General" duty rate of 3 percent ad valorem, less the cost or value of the U.S. components comprising the assembled batteries. Additionally, a classification allowance may be made under subheading 9801.00.10, HTSUS, for the cost or value of the U.S. battery charger.

III. Applicability of country of origin marking requirements

Neither the HTSUS nor the Customs Regulations contains any provisions regarding the marking of sets, mixtures or composite goods. The classification of a set or mixed or composite goods in one HTSUS subheading by reference to GRI 3(b) is not determinative of the country of origin marking requirements of the materials or components which comprise the set. Instead, the general country of origin marking requirements apply with respect to the items comprising a set.

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides, subject to specified exceptions, that all articles of foreign origin (or their containers) imported into the U.S. are required to be legibly, conspicuously, and permanently marked to indicate the country of origin to an ultimate purchaser in the U.S. For purposes of this statute, "country of origin" means the country of manufacture, production or growth of any article of foreign origin entering the U.S. Further work or material added to an article in another country generally must effect a substantial transformation in order to render such other country the "country of origin." See section 134.1(b), Customs Regulations (19 CFR 134.1).

In this case, we find that none of the components of the rechargeable battery set is substantially transformed in Mexico as a result of its inclusion in the same retail package.

Essentially, the consumer is purchasing three separate items. Accordingly, each component in the set must be marked to indicate its own country of origin, subject to the usual exceptions.

Batteries

There are several exceptions to the general rule that the country of origin of an article is the country where the last substantial transformation occurs. One such exception, set forth in section 10.22, Customs Regulations (19 CFR 10.22), specifies the following country of origin marking requirements for articles entitled to a duty exemption under subheading 9802.00.80, HTSUS:

Assembled articles entitled to the exemption are considered products of the country of assembly for the purposes of the country of origin marking requirements of section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304). If an imported assembled article is made entirely of American- made materials, the United States origin of the material may be disclosed by using a legend such as "Assembled in _______ from material of U.S. origin," or a similar phrase.

Assuming the batteries are eligible for the partial duty exemption under subheading 9802.00.80, HTSUS, they are considered products of Mexico for country of origin marking purposes and must be marked accordingly.

Battery charger

Products of the United States exported and returned are excepted from the general country of origin marking requirements. See section 134.32(m), Customs Regulations (19 CFR 134.32(m)). This provision applies if the U.S. products are returned without having been substantially transformed abroad. In this case, nothing is done to the battery charger except packaging, which is clearly not a substantial transformation. Therefore, the charger is excepted from marking under 19 CFR 134.32(m).

Adapter

Assuming that the adapter is a product of Haiti, and that it contains no U.S. components, it must be marked to indicate its Haitian origin.

Pursuant to 19 CFR 134.32(d), you may mark the container, i.e., the blister packaging material, instead of the individual articles, if marking the packaging will reasonably indicate to the ultimate purchaser the country of origin of each article, and provided that the individual articles do not bear any words, letters, names, or symbols described in sections 134.46 or 134.47, Customs Regulations (19 CFR 134.46-134.47), such as U.S.
addresses, which imply that they were made or produced in a country other than the actual country of origin. If the blister packaging obscures the country of origin marking on the individual items, then the packaging must be marked to specify the country of origin of each item with words such as: "Battery - Made in Mexico; Adapter - Made in Haiti."

For advice on any marking of the battery charger to indicate that it is made in the U.S., we suggest that you contact the Federal Trade Commission.

HOLDING:

Because the essential character of the set is imparted by the U.S. origin battery charger, the entire rechargeable battery set is dutiable on its full value, under subheading 8504.40.00, HTSUS, at the "Column 1 General" duty rate of 3 percent ad valorem, less the cost or value of the U.S. components comprising the assembled batteries. Additionally, a classification allowance may be made under subheading 9801.00.10, HTSUS, for the cost or value of the U.S. battery charger.

Since none of the items in the rechargeable battery set is substantially transformed as a result of its inclusion in the set, each item is required to be marked to indicate its own country of origin, unless excepted. The batteries should be marked as products of Mexico and the adapter as a product of Haiti. The battery charger of U.S. origin is excepted from marking under 19 CFR 134.32(m).

Sincerely,

John Durant, Director
Commercial Rulings Division

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