HQ 0555540 - Applicability of partial duty exemption under HTSUS subhead- ing 9802.00.80 to automobile high energy coils created by winding and cutting wire to length; soldering, crimping and clipping components together, and, encapsulating the finished product with epoxy.Fabricated components;19 CFR 10.14(a);General Instrument Corporation (1973);T.D. 74- 59;554962;555533;19 CFR 10.16(a);Assembly;555205; General Instrument (1974);555505;19 CFR 10.16(b);incidental operations;C.S.D. 81-52 - United States International Trade Commision Rulings

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HQ 555540

October 9, 1990

CLA-2 CO:R:C:V 555540 GRV

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Mr. John W. Cain
Cain Customs Brokers, Inc.
421 Texano
P.O. Box 150
Hidalgo, Texas 78557

RE: Applicability of partial duty exemption under HTSUS subhead- ing 9802.00.80 to automobile high energy coils created by winding and cutting wire to length; soldering, crimping and clipping components together, and, encapsulating the finished product with epoxy.Fabricated components;19 CFR 10.14(a);General Instrument Corporation (1973);T.D. 74- 59;554962;555533;19 CFR 10.16(a);Assembly;555205; General Instrument (1974);555505;19 CFR 10.16(b);incidental operations;C.S.D. 81-52

Dear Mr. Cain:

This is in response to your letter of December 7, 1989, on behalf of Wells Mfg. Co., requesting a ruling on the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to automobile high energy coils to be imported from Mexico. A photograph of the various components was submitted for our consideration. We regret the delay in responding to your request.

FACTS:

Nineteen products of the U.S. will be sent to Mexico for assembly into high energy coils for automobiles. The products consist of rolls of wire and plastic sleeving, wire pigtails, solder, terminals, laminations, housings, clips and epoxy resin materials.

The operations performed consist of twelve steps:

(1) copper wire is wound into a primary coil; (2) plastic sleeving is cut to length;
(3) a wire pigtail is welded to a plate;
(4) the primary coil is soldered to the plate/pigtail subassembly;
(5) a terminal is crimped to a lead wire; (6) poly wire, paper, a cardboard tube and insulation are wound into a secondary coil;
(7) the secondary coil is soldered to the primary coil and plate/pigtail subassembly;
(8) the coils are inserted into the plastic housing and wires are clipped to the side of the housing; (9) the coils are preheated in an oven and epoxy resin materials are injected into the housing to encapsulate the coil assembly;
(10) excess epoxy materials are trimmed off and terminals are attached;
(11) coil housing assembly is bored to expose metal contact plate inside; and,
(12) a lamination is inserted into the housing and the unit is tested, date stamped and individually packed.

Following these various operations, the high energy coils will be returned to the U.S.

ISSUE:

Whether the returned articles are entitled to the partial duty exemption under HTSUS subheading 9802.00.80.

LAW AND ANALYSIS:

HTSUS subheading 9802.00.80 provides a partial duty exemp- tion for:

[a]rticles assembled abroad in whole or in part of fab- ricated 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 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 the U.S. components assembled therein, provided there has been compliance with the documentation requirements of section 10.24, Customs Regulations (19 CFR 10.24).

Fabricated Components subject to the exemption are provided for at section 10.14(a), Customs Regulations (19 CFR 10.14(a)), which provides, in part, that:

The components must be in condition ready for assembly without further fabrication at the time of their exportation from the U.S. to qualify for the exemption....Materials undefined in final dimensions and shapes, which are cut into specific shapes or patterns abroad are not considered fabricated components.

Regarding the solder and epoxy materials--comprising three of the U.S. products exported, in General Instrument Corporation v. United States, C.D. 4470, 71 Cust.Ct. 51 (1973), the court determined that the encapsulation of assembled diodes by means of a plastic transfer molding process did not defeat entitlement to the duty allowance under this tariff provision as to the diodes. The court did not hold that the plastic materials also were entitled to the duty allowance. Moreover, in discussing the General Instrument case in T.D. 74-59, 8 Cust.Bull. 101 (1974), we stated that although the assembled diodes were entitled to the duty allowance, the plastic materials used for encapsulation were not fabricated components of the type designed to be fitted together with other components and, therefore, were ineligible for the duty allowance. See also, Headquarters Ruling Letter (HRL) 554962 (May 15, 1989) (epoxy used in range heating elements falls outside the scope of fabricated components eligible for this tariff treatment). Concerning the ineligibility of the solder material, see HRL 555533 (June 4, 1990, abstracted at C.S.D. 90-82(9)), which held that U.S.-origin solder was not entitled to the duty exemption, as it was not exported in condition ready for assembly.

Assembly operations for purposes of HTSUS subheading 9802.00.80 may consist of any method used to join or fit together solid components, and section 10.16(a), Customs Regulations (19 CFR 10.16(a)), specifically enumerates soldering and the use of fasteners as acceptable means of assembly. We have held that crimping constitutes an acceptable assembly operation within the meaning of 19 CFR 10.16(a). HRL 555205 (August 25, 1989) (crimping terminals to spark plug wires). Despooling and winding operations to form coils have also been found to constitute assembly steps rather than "further fabrication" within the meaning of the tariff provision. General Instrument Corporation v. United States, C.A.D. 1128, 61 CCPA 86, 499 F.2d 1318 (1974), rev'g, C.D. 4421, 70 Cust.Ct. 151, 359 F.Supp. 1390 (1973). See also, HRL 555505 (December 28, 1989, abstracted as C.S.D. 90-32(1) (winding foil and Mylar to form cylinders for automobile condensers).

Operations incidental to the assembly process are not considered further fabrication, as they are of a minor nature and cannot always be provided for in advance of the assembly operation. Examples of operations considered incidental to the assembly process are delineated at 19 CFR 10.16(b), which specifically enumerates (1) adjustments in the shape or form of a component to the extent required by the assembly; (2) cutting to length of wire, thread, tape, foil, and similar products exported in continuous lengths; (3) trimming off small amounts of excess materials; and, (4) the testing of assembled articles. Further, we have held that hole-drilling operations which are not substantial and are merely incidental to the overall assembly process are incidental thereto. C.S.D. 81-52, 15 Cust.Bull. 844 (1981). The hole-drilling operation in this case appears to meet these requirements and is deemed an incidental operation.

In the instant case, we are satisfied, based on the description of the foreign operations, and the photograph of the various U.S. products to be exported to Mexico, that all of the products are eligible for the duty exemption, except the three comprising the epoxy materials and solder, as these three materials are not fabricated components of the type designed to be fitted together with other components. Regarding the other sixteen components, they are all eligible components that satisfy the three requirements of HTSUS subheading 9802.00.00.

HOLDING:

On the basis of the photograph and descriptive information provided, sixteen of the nineteen U.S. products used in the assembly of high energy coils will be eligible for the partial duty exemption under HTSUS subheading 9802.00.80 when returned to the U.S., upon compliance with the documentary requirements of 19 CFR 10.24. The two epoxy materials and the solder will not be eligible for the exemption, as they are not fabricated components of the type designed to be fitted together with other components.

Sincerely,

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See also:

Tariff No.: 9802.00.80 - U.S. articles assembled abroad, which have not lost their physical identity or have not advanced in value or improved in condition abroad