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HQ 560257





November 19, 1997

CLA-2 RR:TC:SM 560257 KKV

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Mr. Robert Noell
Cain Customs Brokers
Texano Industrial Park
415 S. Industrial
P.O. Box 150
Hidalgo, Texas 78557

RE: Applicability of partial duty exemption under HTSUS subheading 9802.00.80 to automotive fuel pumps; NAFTA preferential tariff treatment; General Note 12; Article 509; tariff shift

Dear Mr. Noell:

This is in response to your letter dated December 31, 1996, on behalf of Wells Manufacturing Corporation (hereinafter "Wells"), which requests a binding ruling regarding the applicability of subheading 9802.00.80 of the Harmonized Tariff Schedule of the United States (HTSUS), and the North American Free Trade Agreement ("NAFTA") to imported automotive fuel pumps. A sample of the finished pump and several component materials was received with your request.

FACTS:

Wells plans to begin importing automotive fuel pumps, classifiable under 8413.30.9030, HTSUS, from Mexico. We are informed that the component materials and their tariff classification are as follows:

Component Material Tariff Classification

O-Ring 4016.93.00
Cylinder 8413.91.00
Inlet can assembly 8413.91.00

Lower flux Carrier 8413.91.00
Wave washer 7318.21.00
Valve 8481.90.00
Circuit board 8538.90.00
Outlet can assembly 8481.90.00
Upper flux carrier 8413.91.00
Screws 7318.15.00
Coil assembly 8504.31.00
Piston 8481.90.00
Check valve flapper 8481.90.00
Pressure spring 7320.20.00
Valve cage 8481.90.00
Upper sealing grommet 4016.93.00
Potting compound 3907.30.00
Filter label 4901.10.00
Filter assembly 8421.23.00
Plastic cap 3923.50.00
Label 4901.10.00
Plastic bag 3923.21.00
Mounting bracket 8302.50.00
Mounting package Various
Instruction sheet 4901.10.00

We are informed that, with the exception of the o-ring, all of the materials are NAFTA originating goods. Further, we are informed that with the exception of the o-ring, the coil assembly and the potting compound, all of the materials are of U.S. origin. You indicate that, due to a potential switch of vendors, the non-U.S. origin component materials listed above may change to components of U.S. origin, and indicate that a claim under subheading 9802.00.80, HTSUS, will only be made with regard to those components of U.S. origin. Further, you acknowledge that the potting compound, which is not a U.S. fabricated component, is ineligible for the partial duty exemption.

You state that the assembly process in Mexico consists of the following steps:

1) The o-ring is slid over the cylinder.
2) The cylinder is inserted into the inlet can assembly.
3) The lower flux carrier and wave washer are slid over the end of the cylinder.
4) The valve is inserted into the inlet can assembly. 5) The wires from the printed circuit board are put through the holes in the outlet can assembly. The wire is held in place by the strain relief grommet.
6) The upper flux carrier and circuit board are placed over the coil assembly and secured by two screws.
7) The subassembly created in the previous step (#6) is inserted into the inlet housing and locked into place with the locking tabs on the upper flux carrier.
8) The piston, check valve flapper, pressure spring and valve cage are inserted into the cylinder. A rubber upper sealing grommet is slid over the cylinder.
9) The outlet cover is placed over the inlet can assembly and the two parts are crimped together. 10) The assembly is tested electrically. The cavity is filled with potting compound, an epoxy-like gel consisting of a resin and a hardening agent whose chemical reaction causes the substance to harden. 11) A filter label is applied to the side of the assembly over the slot. The filter is threaded onto the outside of the inlet can assembly. 12) A plastic cap is forced over the inlet end of the filter. The filter is then tightened with an impact wrench.
13) A label is applied to the shipping box. The fuel pump is placed in a plastic bag.
14) The fuel pump, mounting bracket, instruction sheet and mounting package are packed into a carton for shipping.

For purposes of this ruling we will assume that the tariff classifications provided are correct.

ISSUES:

I. Whether the automotive fuel pump will qualify for the partial duty exemption available under subheading 9802.00.80, HTSUS, when returned to the U.S.

II. Whether the automotive fuel pumps will qualify for preferential tariff treatment under the North American Free Trade Agreement.

LAW AND ANALYSIS:

I. Applicability of subheading 9802.00.80, 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, lubrication, 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 such U.S. components, 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.

Section 10.16(a), Customs Regulations (19 CFR 10.16(a)), provides that assembly operations for purposes of subheading 9802.00.80 encompass any method used to join together solid components such as sewing, welding, soldering, riveting, force fitting, gluing, or the use of fasteners and may be accompanied by operations that are incidental to the assembly as provided in section 10.16(b). Operations incidental to the assembly process are not considered further fabrication operations, as they are of a minor nature and cannot always be provided for in advance of the assembly operations. However, any significant process, operation, or treatment whose primary purpose is the fabrication, completion, physical, or chemical improvement of a component precludes the application of the exemption under subheading 9802.00.80, HTSUS, to that component.

In the case before us, you have described processing in Mexico which involve only assembly operations. The components are in condition ready for assembly without further fabrication at the time of their exportation from the United States and are joined together by acceptable assembly operations (e.g., force fitting, crimping and the use of locking tabs, screws and grommets). Consequently, the automotive fuel pumps may enter the United States under subheading 9802.00.80, HTSUS, with allowances in duty for the cost or value of any components which are determined to be of U.S. origin, provided that the documentary requirements of 19 CFR 10.24 are satisfied.

II. Eligibility for preferential tariff treatment under NAFTA

The second issue concerns whether the imported flapper assembly is entitled to preferential tariff treatment under NAFTA. Article 401 of NAFTA is incorporated into General Note 12, HTSUS. General Note 12(a) provides, in pertinent part, that:

(ii) Goods that originate in the territory of a NAFTA party under subdivision (b) of this note and that qualify to be marked as goods of Mexico under the terms of the marking rules
....and are entered under a subheading for which a rate of duty appears in the
"Special" subcolumn followed by the symbol "MX" in parentheses, are eligible for such duty rate....

Thus, by operation of General Note 12, the eligibility of a particular article for NAFTA duty preference is predicated, in part, upon an origin determination under the NAFTA Marking Rules of either Canada or Mexico.

Section 102.11, Customs Regulations (19 CFR 102.11), sets forth the required hierarchy for determining whether a good is a good of a NAFTA country for the purposes of country of origin marking and determining the rate of duty and staging category applicable to an originating good as set out in Annex 302.2. Paragraph (a) of this section states that the country of origin of a good is the country in which:

(1) The good is wholly obtained or produced; (2) The good is produced exclusively from domestic materials; or
(3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.

"Foreign material" is defined in 19 CFR 102.1(e) as "a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced." Sections 102.11(a)(1) and 102.11(a)(2) do not apply to the facts presented in this case because the automotive fuel pumps are assembled in Mexico of U.S. and other materials and therefore are neither wholly obtained or produced, nor produced exclusively from domestic materials. Since an analysis of sections 102.11(a)(1) and 102.11(a)(2) will not yield a country of origin determination, we look to section 102.11(a)(3).

Section 102.11(a)(3) provides that the country of origin is the country in which "each foreign material incorporated in that good undergoes an applicable change in tariff classification as set forth in 19 CFR 102.20...."

You indicate that the finished automotive fuel pump is classified at subheading 8413.30.9030, HTSUS. The applicable tariff shift rule found in section 102.20(o) provides as follows:

8413.11-8413.82 A change to subheading 8413.11 through 8413.82 from any other subheading, including another subheading in that group.

You indicate that, with the exception of the o-ring, the coil assembly and potting compound, all other materials utilized are of U.S.-origin, thus qualifying as "foreign materials" subject to the rule set forth above. Under the facts provided, materials initially classified under subheading 3923.50, HTSUS (plastic cap), subheading 4016.93, HTSUS (upper sealing grommet), subheading 7318.15, HTSUS (screws), subheading 7318.21, HTSUS (wave washer), subheading 7320.20, HTSUS (pressure spring), subheading 8413.91, HTSUS (cylinder, inlet can assembly, lower flux carrier, upper flux carrier), subheading 8421.23, HTSUS (filter assembly), subheading 8481.90, HTSUS (valve, outlet can assembly, piston, check valve flapper, and valve cage) and subheading 8538.90, HTSUS (circuit board) are subsequently classified under subheading 8413.30.9030. HTSUS as a result of assembly processes in Mexico. No information has been provided with regard to the country of origin of the o-ring (classifiable under subheading 4016.93, HTSUS), the coil assembly (classifiable under subheading 8504.31, HTSUS) and the potting compound (classifiable under subheading 3907.30). However, assuming that these materials are not of Mexican origin and constitute "foreign" materials, we note that they also meet the applicable tariff shift rule set forth above. Consequently, inasmuch as all foreign materials undergo the applicable tariff shift as a result of assembly processes in Mexico, under the NAFTA Marking Rules, the country of origin of the finished automotive fuel pump is Mexico, pursuant to 19 CFR

In addition to the determination of origin required by General Note 12(a), in order to be eligible for tariff preferences under the NAFTA, goods must be "originating goods" pursuant to the rules of origin in General Note 12(b), HTSUS, which provides, General Note 12(b) provides, in pertinent part, the following:

For purposes of this note, goods imported into the Customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as goods originating in the territory of a NAFTA party' only if--
(i) they are goods wholly obtained or produced entirely in the territory of
Canada, Mexico and/or the United States; or

(ii) they have been transformed in the territory of Canada, Mexico, and/or the United States so that-

(A) except as provided in subdivision (f) of this note, each of the non-originating material used in the production of such goods undergoes a change in tariff classification described in subdivisions (r),
(s) and (t) of this note or the rules set forth therein or

(B) the goods otherwise satisfy the applicable requirements of subdivisions (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note; or

(iii) they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials.

Insufficient information has been submitted to ascertain whether the pumps are "goods wholly obtained or produced," as defined in General Note 12(n), thus we are unable to determine whether the goods are originating under General Note 12(b)(i). Inasmuch as the facts presented state that the o-ring utilized in the assembly of the finished pump is not a NAFTA-originating material, General Note 12(b)(iii) is inapplicable. Thus, we will consider whether the pump is considered originating under General Note 12(b)(ii)(A), which provides, in pertinent part, that the goods are "transformed in the territory of Canada, Mexico and/or the United States" in such a manner that:

Except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivisions
(r),(s)(and (t) of this note, or the rules set forth therein...

We are informed that the automotive fuel pumps are classifiable under subheading 8413.30.9030, HTSUS. With respect to General Note 12(b)(ii)(A), the applicable underscored tariff shift rule under General Note 12(t)/84.25 states:
25. (A) A change to subheadings 8413.11 through 8413.82 from any other heading; or

(B) A change to subheadings 8413.11 through 8413.82 from subheadings
8413.91 through 8413.92, whether or not there is also a change from any other heading, provided there is a regional value content of not less than:

(1) 60 percent where the transaction value method is used, or

(2) 50 percent where the net cost method is used.

Because the non-originating o-ring, initially classified under subheading 4016.93, HTSUS, is subsequently classified under subheading 8413.30, HTSUS, as a result of assembly operations in Mexico, the non-originating material satisfies the tariff shift rule in General Note 12(t)/84.25(A), HTSUS. Accordingly, assuming that all other components used in the assembly of the pumps are, in fact, "originating materials," the finished pumps qualify as "originating goods" pursuant to General Note 12(b)(ii), HTSUS, and are eligible for preferential tariff treatment under the NAFTA. The special MX rate of duty under subheading 8413.30.9030, HTSUS, is free. Additionally, we note the applicability of General Note 12(t)/84, Chapter Rule 4, which states. "[f]or the purposes of the subdivisions pertaining to this chapter, whenever the subdivision designation is underscored, the provisions of subdivision (d) of this note may apply for use in a motor vehicle of chapter 87."

HOLDING:

Based on the information presented, the automotive fuel pump may enter the U.S. under subheading 9802.00.80, HTSUS, with allowances in duty for the cost or value of the components which are determined to be of U.S. origin, provided the documentary requirements of 19 CFR 10.24 are satisfied.

Based on the information provided, the imported automotive fuel pumps area considered goods of Mexico under the NAFTA Marking Rules and the only non-originating material used in the manufacture of automotive fuel pumps satisfies the required change in tariff classification under General Note 12(t), HTSUS. Accordingly, the finished pumps are eligible for NAFTA tariff preference pursuant to General Note 12(b)(ii)(A), HTSUS.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

John Durant
Director
Commercial Rulings Division

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