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HQ 560518




March 10, 1998

RR:CR:SM 560518 JML

CATEGORY: CLASSIFICATION

TARIFF NO: 9802.00.80

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

RE: Eligibility of a single port device imported from Mexico for a partial duty exemption under subheading 9802.00.80, HTSUS; eligibility for NAFTA preferential tariff treatment; Article 509.

Dear Mr. Noell:

This is in response to your letter of May 26,1997, on behalf of your client, MCE Manufacturing Corporation ("MCE"), requesting a binding ruling for a single port device imported from Mexico. Specifically, you request a ruling with respect to whether the imported articles will be eligible for a partial duty exemption under subheading 9802.00.80, Harmonized Tariff Schedule of the United States ("HTSUS"), and preferential tariff treatment under NAFTA. We regret the delay in responding.

FACTS:

MCE intends to import single port devices assembled in Mexico. You describe the single port devices as a product to terminate unwanted radio frequency ("rf") energy at an output port of a microwave device by dissipating the rf energy as heat.

The assembly process is to be performed in Mexico. The process involves pressing a resistor rod into a male contact with a solder ball between them. The resistor rod/contact assembly is then pressed into a Teflon insulator. A metal housing is inserted over the resistor rod and the housing is pressed onto the assembly. A solder ball is placed in the housing cavity on top of the resistor rod. The assembly is then placed on a hot plate at 250ø C to flow the solder balls. The assembly is then cleaned and dried at 100ø C for 5 minutes. A connector is slipped over the housing at the side of the contact end and a snap ring is inserted onto the contact. The assembly is then electronically tested, visually inspected, and packed for shipment.

With regard to the tariff classification of the single port devices, you claim that they are classified under subheading 8529.90.99, HTSUS (parts suitable for use solely or principally with the apparatus of headings 8525 to 8528: other: other: other). In support of this classification you submitted New York Ruling B86122, dated July 1, 1997, wherein the subject single port devices were classified accordingly.

A bill of materials submitted indicates that all the components used to make the single port devices are of U.S. origin. The tariff classification of the various components are as follows: resistor rod 8533.10, HTSUS, flux 3810.10, HTSUS, snap ring 7318.29, HTSUS, solder ball 8311.30, HTSUS, contact 8536.90, HTSUS, housing 7326.90, HTSUS, Teflon insulator 8547.90, HTSUS, and connector 8536.90, HTSUS.

ISSUES:

1) Whether the single port devices assembled in Mexico are eligible for duty allowances under subheading 9802.00.80, HTSUS.

2) Whether the single port devices are eligible for NAFTA duty preference.

LAW AND ANALYSIS:

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.

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 10.14(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 the assembly operation performed abroad may consist of any method used to join or fit together solid components, such as welding, soldering, riveting, force fitting, gluing, lamination, sewing, or the use of fasteners.

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. See 19 CFR 10.16(a). 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. See 19 CFR 10.16(c).

You claim subheading 9802.00.80, HTSUS, duty allowances for six of the eight components involved in producing the single port devices: the resistor rods, the snap ring, the contact, the housing, the Teflon insulator and the connector. Presumably, you concede that the other materials involved in the production of the single port devices (flux and solder) are not eligible subheading 9802.00.80, HTSUS, components. For purposes of this ruling only those materials you contend are eligible will be considered.

The assembly processes you describe for the single port devices -- pressing a resistor rod into male contact, pressing the resistor rod/contact assembly into a Teflon insulator, inserting a metal housing over the resistor and pressing it into the assembly and slipping a connector over the housing at the side of the contact end, inserting a snap ring onto the contact, and soldering various components together -- are considered acceptable forms of assembly for purposes of subheading 9802.00.80, HTSUS. See 19 CFR 10.16(a); HRL 560609, dated October 30, 1997 (pressing and force fitting various components together to make coaxial attenuators is an acceptable form of assembly for purposes of subheading 9802.00.80, HTSUS). Moreover cleaning and drying the assembly, as well as final testing are considered operations incidental to the assembly of the single port devices. See 19 CFR 10.16(b).

Accordingly, the imported single port devices from Mexico will be eligible for allowances in duty for the cost or value of the U.S. components incorporated therein under subheading 9802.00.80, HTSUS, upon compliance with the documentary requirements of section 10.24, Customs Regulations (19 CFR 10.24).

NAFTA PREFERENCE

General Note 12, HTSUS, incorporates Article 401 of the North American Free Trade Agreement ("NAFTA") into the HTSUS. Note 12(a)(ii) provides, in pertinent part:

(ii) [g]oods 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 set forth in regulations issued by the Secretary of the Treasury (without regard to whether the goods are marked), when such goods are imported into the customs territory of the United States 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...

Accordingly, the finished dividers at issue will be eligible for the "Special" "MX" rate of duty provided it is a NAFTA "originating" good under General Note 12(b), HTSUS, and they qualify to be marked as a product of Mexico under the marking rules. General Note 12(b) provides, in pertinent part:

[f]or the 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 materials used in the production of such goods undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note;.........

Although you submitted a bill of materials as evidence that the materials used in the production of the single port devices are of "U.S. origin" and therefore result in the single port devices being "originating" under General Note 12(b), HTSUS, we do not consider the bill of materials dispositive of that fact. That is, we do not view the evidence presented in the bill of materials sufficient to support a finding that the single port devices are "goods wholly obtained or produced entirely in the territory of Canada, Mexico, and/or the United States" pursuant to General Note 12(b)(i), HTSUS. Thus, we must examine whether the materials used in the production of the single port devices undergo the required change in tariff classification in Mexico pursuant to General Note 12(b)(ii)(A), HTSUS. The rule applicable to goods of subheading 8529.90.99, HTSUS, is provided for in General Note 12(t)/85.93--12(t)106, HTSUS, which provides:

101. A change to subheading 8529.90 from any other heading.

In this regard we note the tariff classifications of the materials used in the production of the single port devices: resistor rod 8533.10, HTSUS, flux 3810.10, HTSUS, snap ring 7318.29, HTSUS, solder ball 8311.30, HTSUS, contact 8536.90, HTSUS, housing 7326.90, HTSUS, Teflon insulator 8547.90, HTSUS, and connector 8536.90, HTSUS. Because all of the above materials are classified in tariff headings other than 8529.90, HTSUS, the requirements of the rule have been met. Consequently, the single port devices are considered "originating" under General Note 12(b), HTSUS.

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. Section 102.11(a), Customs Regulations (19 CFR 102.11(a)), states that the country of origin of a good is the country in which:

(1) [t]he good is wholly obtained or produced; (2) [t]he good is produced exclusively from domestic materials; or
(3) [e]ach 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 single port devices are assembled in Mexico from U.S. materials, and therefore they are neither wholly obtained or produced, nor produced exclusively from domestic materials as those terms are defined under section 102.1, Customs Regulations (19 CFR 102.1). Accordingly, section 102.11(a)(3), Customs Regulations (19 CFR 102.11(a)(3)), is the applicable rule that must be applied to determine the origin of the subassemblies. Pursuant to section 102.11(a)(3), the country of origin of a good is the country in which each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20, Customs Regulations (19 CFR 102.20).

As the single port devices are classified in subheading 8529.90, HTSUS (parts suitable for use solely or principally with the apparatus of headings 8525 to 8528: other: other: other), we note the applicable change in tariff classification rule set out in section 102.20(o), Customs Regulations (19 CFR 102.20(o)), [s]ection XVI: [c]hapters 84 through 85:

8529.......A change to heading 8529 from any other heading.

Thus, all of the materials incorporated into the finished dividers (i.e., because they are all "foreign materials"), must meet the above rule. Noting the tariff classification of the materials listed above, the applicable rule is satisfied as none of the above-mentioned materials are within heading 8529, HTSUS. Thus, based upon the information provided, the single port devices would be eligible to be marked as products of Mexico.

Based upon the information submitted, because the single port devices are considered "originating goods" under General Note 12(b), HTSUS, and qualify to be marked as products of Mexico as required by General Note 12(a)(ii), HTSUS, they are entitled to NAFTA tariff preference at the "MX" duty rate.

HOLDING:

On the basis of the information provided, it is Customs opinion that the operations to be performed in Mexico to create the single port devices are acceptable forms of assembly or operations incidental thereto pursuant to subheading 9802.00.80, HTSUS. Therefore, a duty allowance may be made under this tariff provision for the cost or value of the U.S. origin components assembled therein upon compliance with the documentary requirements of section 10.24, Customs Regulations.

In addition, based on your submissions concerning the origin of the materials incorporated into the single port device, as well as their applicable tariff classifications, we find that the single port device will be eligible for NAFTA tariff preference under the "MX" duty rate, as the finished dividers are considered "originating goods" and qualify to be marked as products of Mexico as required by General Note 12, HTSUS.

A copy of this ruling letter should be attached to the entry documents filed at the time the goods are 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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