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HQ 557152


June 18, 1993

CLA-2 CO:R:C:S BLS

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Philip Freeman
Cain Customs Brokers
Progresso, Texas 78579

RE: Subheading 9802.00.80, HTSUS; automotive rotor; substantial transformation; GSP; 19 CFR 10.16(a); 19 CFR 10.195(a); Torrington; HRL 556462; HRL 555659

Dear Mr. Freeman:

This is in reference to your letter dated February 11, 1993, requesting a ruling regarding the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to certain automobile rotors, to be imported from Mexico. You also inquire as to whether the rotor body is transformed into a product of Mexico for purposes of the Generalized System of Preferences (GSP).

FACTS:

The product to be imported is a rotor, used to direct electricity from the ignition coil to the spark plugs in certain automobile engines. The rotor is mounted on the distributor shaft. The spring on the rotor always makes contact with the terminal in the center of the distributor cap, which comes from the ignition coil. As the shaft rotates, the rotor closes the circuit with the terminals in the cap that go to the spark plugs.

The rotor body will be injection molded in Mexico from granulated thermoplastic of U.S. origin. Each rotor body is molded and then passed to an adjoining machine for completion of the assembly. The rotor body is manually placed on a turntable fixture, and two small metal parts of U.S. origin, a spring and a vane, are placed on the rotor body. The turntable is positioned to allow a screw to be fed through a hole on the spring and vane into the rotor body. The turntable turns again to position the rotor under an Ultrasonic Bonding Assembly Machine, which presses the screw into the rotor body and then melts plastic around the screw by ultrasonic vibrations, holding the spring and vane to the rotor body. The part is then examined and packed for shipment.

ISSUES:

1) Whether the imported rotor is eligible for the partial duty exemption under subheading 9802.00.80, HTSUS;

2) Whether the rotor is considered a product of Mexico for purposes of the GSP.

LAW AND ANALYSIS:

1) Subheading 9802.00.80

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, (Emphasis added.)

All three requirements of subheading 9802.00.80, HTSUS, 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 cost or value of the imported assembled article, less the cost or value of the U.S. components assembled therein, 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, riveting, force fitting, gluing, laminating, sewing, or the use of fasteners.

It is clear that the U.S. granulated thermoplastic is further fabricated in Mexico by the injection molding process, which transforms the raw material into a rotor body. The physical identity of the thermoplastic is completely changed by this process. Accordingly, the rotor body will not be eligible for an allowance in duty under subheading 9802.00.80, HTSUS. However, the vane and spring will be eligible for a duty allowance under this tariff provision, as these components are assembled onto the rotor body by screwing and ultrasonic bonding, processes considered to be acceptable assembly operations within the purview of 19 CFR 10.16(a).

2) Generalized System of Preferences

Under the GSP, eligible articles the growth, product or manufacture of a designated beneficiary developing country (BDC), which are imported directly into the Customs territory of the U.S. from a 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 operations in the BDC, is equivalent to at least 35 percent of the appraised value of the article at the time of entry. See, 19 U.S.C. 2463(b).

Mexico is a designated BDC. See, General Note 3(c)(ii)(A), HTSUS. In addition, it appears from a description of the merchandise that the articles in question are classified under subheading 8511.90.60, HTSUS, which provides for electrical ignition or starting equipment used for spark ignition or compression-ignition internal combustion engines, other parts, other, a GSP eligible provision. Therefore, the rotor will receive duty-free treatment if it is considered to be a "product of" Mexico, the 35 percent value content requirement is satisfied, and it is imported directly to the U.S. Merchandise is considered the "product of" a BDC if it is wholly the growth, product or manufacture of a BDC or has been substantially transformed there into a new or different article of commerce. 19 U.S.C. 2463(b)(2). A substantial transformation occurs "when an article emerges from a manufacturing process with a new name, character, or use which differs from that of the original material subjected to the process." The Torrington Company v. United States, 764 F.2d 1563 (Fed. Cir. 1985).

The manufacture of the rotor body in Mexico from the U.S. thermoplastic by an injection molding process clearly results in a substantial transformation of this material into a new and different article of commerce. See, for example, Headquarters Ruling Letter (HRL) 556462 dated April 24, 1992 (injection molding of U.S. resin to form drainage pipes); and HRL 555659 dated December 3, 1990 (injection molding of plastic material to form plastic handles, folding hinges, brakes and folding clips). Therefore, the rotor body is considered to be a product of Mexico for purposes of the GSP.

The additional issue to be considered is the effect of the assembly process upon the eligibility of the completed article for GSP treatment.

In determining whether the processing performed in Mexico constitutes a substantial transformation, section 10.195(a), Customs Regulations (19 CFR 10.195(a)), also is relevant. Pursuant to this regulation, which implements the Caribbean Basin Economic

Recovery Act (CBERA), no article shall be considered to have been produced in a CBERA beneficiary country by virtue of having merely undergone simple, as opposed to complex or meaningful, combining or packaging operations. (Note also that under 19 U.S.C. 2463(b((2)(A), GSP treatment is similarly precluded for articles or materials of a BDC by virtue of merely undergoing simple combining or packaging operations.) However, 19 CFR 10.195(a)(2)(ii)(D) provides that this exclusion shall not be taken to include:

A simple combining or packaging operation or mere dilution coupled with any other type of processing such as testing or fabrication (e.g., a simple assembly of a small number of components, one of which was fabricated in the beneficiary country where the assembly took place.)

Since both the CBERA and GSP have similar statutory goals, and the country of origin criteria are nearly identical, we may apply this regulation to the issue at hand.

In our opinion, the manual insertion of the spring and vane onto the rotor body, and joinder of the components by screwing and bonding, are simple assembly operations. However, as a result of fabrication of the rotor body, 19 CFR 10.195(a)(2)(ii)(D) is applicable. Therefore, these assembly operations do not prevent a finding that the processing in Mexico, viewed in its totality, constitutes a substantial transformation. In this regard, we do not believe that this is the minimal, "pass-through" type of operation that should be disqualified from receiving the benefit of duty-free treatment under the GSP. Additionally, the assembly of the spring and vane to the rotor, while considered to constitute simple rather than complex operations, requires a significant portion, 38 percent, of the total time necessary to complete processing of the article to be imported.

Under the circumstances, we find that the operations to be performed in Mexico in the production of the automotive rotor, including fabrication and assembly operations, substantially transform the U.S. materials into a new and different article of commerce. As a result, the imported articles will be considered products of Mexico for purposes of determining the eligibility of the articles for duty-free treatment under the GSP.

HOLDING:

1) Granulated thermoplastic of U.S. origin will be further fabricated in Mexico as a result of an injection molding process; Accordingly, the imported rotor body manufactured during this process will not be eligible for a duty allowance under subheading 9802.00.80, HTSUS. However, the U.S. origin spring and vane
assembled onto the rotor body with the use of a screw, which is machine bonded, will qualify for the duty allowance under this provision.

2) The processing to be performed in Mexico in the production of the automotive rotor, including fabrication and assembly operations, substantially transform the U.S. components into a new and different article of commerce. As a result, the imported article is considered to be a product of Mexico for purposes of determining the eligibility of the rotor for duty-free treatment under the GSP.

Sincerely,

John Durant, Director
Commercial Rulings Division

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