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HQ 557202


October 1, 1993

CLA-2 CO:R:C:S 557202 BLS

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Selig S. Merber, Esq.
Customs Counsel
General Electric Company
1331 Pennsylvania Avenue
Washington, D.C. 20004

RE: Subheading 9802.00.80, HTSUS; metalized film; incidental to assembly; cut to length; cut to width along pre-existing paths; General Instrument; Texas Instruments; HRL 555221; HRL 555533; HRL 555539; 19 CFR 10.16(a); 19 CFR 10.16(b)

Dear Mr Merber:

This is in reference to your letter dated March 22, 1993, requesting a ruling regarding the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to metalized film used in the assembly of capacitors imported from Mexico.

FACTS:

The General Electric Company ("GE") imports finished capacitors from Mexico produced by Capacitores Componentes de Mexico SA ("CAPCOM"). a wholly-owned subsidiary. Under the current method of assembly, metalized film of U.S. origin is exported to Mexico on spools (or "bobbins") In widths appropriate for the particular model capacitor. In Mexico, two spools of the material are placed on winding machines and wound together so that metalized layers are separated by film of a specific density. The material is then wound around a core and cut to a specific length, thus forming a roll. The pre-determined relationship of the length and width of the metalized film used in this roll determines the overall capacitance of the product. The quality of the material and the precision of the winding process are the major factors that determine the quality of the finished capacitor.

Once the roll has been formed, both ends are sprayed with zinc to help prevent moisture from entering the capacitor roll and also to add rigidity to the ends of the roll, which facilitates further assembly. The zinc-treated roll is baked to remove any moisture that might have entered the roll during the winding process. The roll is then tested to ensure that it meets required
specifications.

The roll sub-assembly is then ready for final assembly of the capacitor, as follows:

1) Electrical leads (flat wire) are cut to length and soldered to the roll sub-assembly.

2) A piece of plastic (previously cut to length) is placed into the case sub-assembly to insulate the side of the can from the roll sub-assembly.

3) The roll sub-assembly, with the leads attached, is placed into the insulation cup bottom; then inverted and the insulation cup-top is placed onto the sub-assembly---the leads are adjusted to keep them separate.

4) The roll sub-assembly is inserted into the case sub- assembly.

5) The bridge is placed over the studs from the bushing and cover assembly; the leads from the roll sub-assembly are attached to the studs by resistance welding. The bridge is held in position by this procedure.

6) Before the cover and case are joined, the case is filled with insulating fluid to fill any space between the roll and the internal sides of the case. Its purpose is that of a heat transfer medium and an electrical charge suppressant. The liquid chemical does not impregnate the material, nor does it evaporate or change form or react chemically with any of the capacitor components.

7) The cover and case are manually aligned to fit, then joined together by seaming (mechanically rolling cover and case lips to form a tight bond).

8) The finished units are tested visually and electrically for quality, and are then packed for shipment.

9) If required by the customer, the unit is then painted. (In this regard, you have orally advised that painting may be requested by a customer to preserve the metal against rusting, when the capacitors are used in exterior applications.)

Under current manufacturing conditions, widths of metalized film needed for the capacitor assembly are separated from "master rolls", wound onto bobbins in the U.S., and exported to Mexico in this condition. (A submitted sample "master roll" measures 30 inches in width.) These "master rolls" of metalized film contain
narrow slots running the length of the roll where no metal has been deposited, due to masking of the rolls. The slots are placed at intervals corresponding to the widths of metalized film needed for assembly of the capacitors.

GE proposes to modify this procedure by shipping metalized film to Mexico on the "master rolls". Each roll will be shipped with the pre-established slots running both to length and width. This film will be separated from the master rolls in Mexico along the pre-established slots by machine cutting at a time close to the time of assembly and wound onto bobbins in amounts determined by production needs. The bobbins then would be used in production of capacitors in the same manner as for current production. You state that this change can be accomodated with only a small additional investment in Mexico for machinery to separate and cut the film and wind it onto bobbins for final assembly.

ISSUE:

Whether, upon importation, the capacitors will qualify for entry under subheading 9802.00.80, HTSUS, with an allowance in duty for the U.S.-origin film.

LAW AND ANALYSIS:

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 this tariff provision is subject to duty upon the full cost or value of the 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 10.14(a), Customs Regulations (19 CFR 10.14(a)),
states in part that:

[t]he components must be in condition ready for assembly without further fabrication at the time of their exportation from the United States to qualify for the exemption. Components will not lose their entitlement to the exemption by being subjected to operations incidental to the assembly either before, during, or after their assembly with other components.

Such incidental operations include cutting to length of wire, thread, tape, foil and similar products exported in continuous length. (See, 19 CFR 10.16(b)(6).)

In General Instrument v. United States, 480 F.2d 1402, 60 CCPA 178 (1973), foil of U.S. origin used in the assembly of a capacitor was exported to Taiwan in rolls, where it was cut to length and trimmed to width. In reversing the Customs Court, The appellate court held that the exported foil was a "fabricated component" within the meaning of Item 807.00, Tariff Schedules of the United States (TSUS) (predecessor to subheading 9802.00.80, HTSUS), and was not changed abroad in form shape, or otherwise to such an extent that it lost its physical identity in the assembled article. The court held that these cutting operations were incidental to the assembly process and did not constitute further fabrication under item 807.00, TSUS.

In Texas Instruments v. United States, 545 F.2d 739, 64 CCPA 24 (1976), the court held that scoring and breaking a silicon slice along already marked "streets" to separate individual transistor areas commonly created on the slice did not amount to further fabrication of the transistor areas within the meaning of Item 807.00, TSUS. The court emphasized that the chips were fully fabricated and functional as chips at the time of exportation. The scoring and breaking operations were considered operations incidental to assembly under Item 807.00, TSUS.

We find that these cases are in point. In connection with the sub-assembly operation, cutting the rolls of film to length is, under the General Instrument rationale, supra, an operation incidental to assembly. (See also Headquarters Ruling Letter (HRL) 555539 dated June 7, 1990, and 19 CFR 10.16(b).) Separating the film by length and width along pre-existing paths is also considered an operation incidental to assembly, as it is analagous to the scoring and breaking operation in Texas Instruments, supra. Thus, at the time of exportation, the components are similarly fully fabricated and functional, and need only to be separated by cutting to length and width along the pre-established slots. We have also held that winding wire around a spoolis considered an
acceptable assembly operation within the meaning of subheading 9802.00.80, HTSUS. See HRL 555533 of June 4, 1990, General Instrument Corporation v. United States, 61CCPA 86, C.A.D. 1128, 499 F.d 1318 (1974), rev'g, 70 Cust. Ct. 151, C.D. 4421, 359 F. Supp. 1390 (1973); and 19 CFR 10.16(a). Spraying the completed roll with zinc, baking to help prevent moisture, and preservative painting, are also processes which are incidental to the assembly operation. (See 19 CFR 10.16(b).)

The final assembly steps, which involve soldering electrical leads to the roll sub-assembly, placing insulating plastic into the case sub-assembly, inserting the roll sub-assembly into the case sub-assembly, and attaching the leads from the roll assembly to the studs from the cover assembly by welding, are acceptable assembly operations, as is joining the cover and case by "seaming", which is analagous to force fitting. (See 19 CFR 10.16(a)). Cutting the electrical leads to length and filling any space between the roll and the internal side of the case with insulating fluid are also considered operations incidental to assembly.

HOLDING:

Based on the information submitted, the imported capacitors will be entitled to entry under subheading 9802.00.80, HTSUS, with an allowance in duty for the U.S.-origin metalized film and any other U.S. fabricated components, upon compliance with the documentation requirements of 19 CFR 10.24.

Sincerely,

John Durant, Director
Commercial Rulings Division

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