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HQ 562796




August 28, 2003

CLA-2 RR:CR:SM 562796 SS

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Port Director
Port of El Paso
Customs and Border Protection
797 S. Zaragosa Road, Building B
El Paso, Texas 79907

RE: Application for Further Review of Protest No. 2402-02-2100085; Applicability of Partial Duty Exemption under Subheading 9802.00.80, HTSUS, to Wiring Harnesses; Late Filing of Reduced Duty Documents under 19 CFR §10.112

Dear Sir:

This is in reference to a Protest and Application for Further Review timely filed by Delphi Corporation (“Delphi”) contesting the liquidation of entries of wiring harnesses under subheading 8544.30 of the Harmonized Tariff Schedule of the United States (“HTSUS”).

FACTS:

Delphi imports wiring harnesses built in China. The wiring harnesses are composed primarily of various gauge cables cut to exact lengths and are designed to safely carry the various electrical current levels throughout a vehicle. The electrical harnesses also contain grommets, plastic clips, seals, electrical relays, terminals, convoluted conduit, plastic connector assemblies, bussed electrical centers, lamp sockets, solder and tape. Delphi has identified 27 components, which are products of the United States, used in the assembly of the wiring harnesses.

The assembly of the wiring harness begins with cutting the cable (or wire) to specific lengths with automatic cutting machines. The cut wire ends are stripped of the insulating cover exposing the bare copper core. The machine crimps the metal terminals onto the bare copper core at the ends of the cut wire. Subsequent steps include: soldering, splicing and connector insertion.

The complete electrical harness assembly is done manually using a stationary jig and fixture frames which hold the various components in place during the assembly process. The assembly is organized upon a moving assembly line holding an array of jig and fixtures whereby personnel are assigned to assemble a portion of the harness by crimping terminals or pressing connectors onto the wire as it passes their individual workstations. The wires are then taped together to form the shape (or layout) of the harness. The last operation checks for complete electrical integrity and the harness is then removed from the moving fixture and is placed in the appropriate packaging.

Delphi Corporation imported wiring harnesses assembled in China with components, some of which were products of the United States, between November 5, 2001, and January 6, 2002. Delphi did not make a claim or indicate the imported products qualified for partial duty exemption under subheading 9802.00.80, HTSUS. Delphi did not furnish the declaration by the assembler and endorsement by the importer at the time of entry as required by Section 10.24 of the Customs Regulations (19 CFR §10.24). Delphi did not post a bond on Customs Form 301 for the production of these documents as described in Section 10.24. Delphi explains that at the time the entries were filed it did not have sufficient information or the necessary documentation to fully support a claim for partial duty free treatment under subheading 9802.00.80, HTSUS. Delphi entered the merchandise and paid the full duty owed. The entries were liquidated between September 20, 2002, and November 22, 2002.

Delphi now claims that the entries are eligible for a partial duty exemption under subheading 9802.00.80, HTSUS. At the time the timely protest was filed, Delphi submitted an endorsement of the importer and foreign assembler declaration along with manufacturer affidavits from the parties who produced the U.S. components.

ISSUE:

I. Whether Delphi may make a claim for a partial duty exemption under subheading 9802.00.80, HTSUS, by the late filing of reduced duty documents under 19 CFR §10.112.

II. Whether the wiring harnesses at issue are eligible for a partial duty exemption under subheading 9802.00.80, HTSUS.

LAW AND ANALYSIS:

I. Delphi May Make A Claim Under Subheading 9802.00.80, HTSUS, Because 19 C.F.R. §10.112 Allows For the Late Filing of Reduced Duty Documents.

Subheading 9802.00.80, HTSUS, provides a partial duty exemption to certain articles assembled abroad using U.S. fabricated components. The regulations set forth at 19 CFR §10.11 through 10.26, explain the requirements relating to the partial duty exemption. Most notably, Section 10.24 requires that a declaration by the assembler and endorsement by the importer be filed in connection with the entry of assembled articles claimed to be subject to the exemption. Furthermore, Section 10.24 advises that if either or both of the documents are not available at the time of entry, a bond for the production of the documents may be given. Accordingly, a valid claim for a partial duty exemption under subheading 9802.00.80, HTSUS, will be granted provided the documentary requirements of Section 10.24 are satisfied.

In this case, the importer did not submit the required documents or file the bond required by 19 CFR §10.24. However, 19 CFR §10.112 specifically allows for the filing of free entry documents or reduced duty documents after entry and provides as follows:

Whenever a free entry or a reduced duty document, form, or statement required to be filed in connection with the entry is not filed at the time of the entry or within the period for which a bond was filed for its production, but failure to file it was not due to willful negligence or fraudulent intent, such document, form, or statement may be filed at any time prior to liquidation of the entry or, if the entry was liquidated, before the liquidation becomes final.

Customs had previously stated that willful negligence implies that there was a deliberate determination not to perform a known duty, or a reckless disregard of the safety or the rights of others, as manifested by the conscious and intentional omission of the care proper under the circumstances. Headquarters Ruling Letter (“HQ”) 221603, dated April 30, 1991. In that case the importer failed to supply documentation supporting a partial duty exemption at the time of entry. The importer explained that the documents were not filed at entry because the importations occurred early in the model year before the documents had been sent to the broker. Customs found this weighed against a finding that the importer’s failure to file the documents was willful. Customs stated that it would be erroneous to conclude that the importer’s failure to file the documents was due to willful negligence absent specific proof showing that the failure was deliberate.

In HQ 228786, dated March 30, 2000, an importer failed to provide Customs with a certification for emergency war materials purchased abroad at the time of entry. The certificates were not available because the authorizing official at the Department of Defense needed more information from an administrative contracting officer on whether the underlying contracts included terms on duty-free entry. Customs found that there was no specific showing of willful negligence or fraudulent intent concerning the late submission of the certificates.

Additionally, the Court of International Trade has stated that Customs promulgated 19 CFR §10.112 to alleviate onerous filing requirements arising out of the narrow construction of duty entitlements and that 19 CFR § 10.112 should be liberally construed. Aviall of Texas, Inc. v. United States, 18 Ct. Int’l Trade 727, 732, 861 F.Supp. 100, 105 (1994); Gulfstream Aerospace Corp., v. United States, 21 Ct. Int’l Trade 1083, 1097, 981 F. Supp. 654, 667 (1997).

Applying these principles to the instant matter, there is no evidence to show that the delay in filing was caused by willful negligence or fraudulent intent. We note that the manufacturer affidavits were signed in June and July 2002 just prior to the first liquidations. The foreign assembler declaration was signed in September 2002 and the endorsement by the importer was signed in October 2002. This supports the Protestant’s claim that the documents were not available at the time of entry and explains why it was not sure whether the goods qualified for the partial duty exemption.

The protest was filed within 90 days of the liquidation of the earliest entries included in this protest and, therefore, the protest was timely filed and the liquidations did not become final. 19 U.S.C. 1514(a). Thus, the Protestant had the option under 19 CFR §10.112 of submitting the documents to substantiate the claim for partial duty exemption after entry and prior to the liquidations becoming final.

II. The Wiring Harnesses Are Eligible for a Partial Duty Exemption Under 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)), provides 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, laminating, 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. 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).

The components identified by Delphi, such as connectors, terminals, grommets, seals and clips, were in a condition ready for assembly without further fabrication at the time of their export from the United States. The assembly of the wire harnesses primarily consisted of the joining or fitting together of solid components. The operation of crimping the terminals on the wires, pressing the connectors onto the wires, taping the wires together to fit the harness, soldering and splicing are considered acceptable assembly operations pursuant to 19 CFR §10.16(a) for purposes of subheading 9802.00.80, HTSUS. Cutting the wire to specific length is considered an acceptable incidental operation pursuant to 19 CFR §10.16(b)(6), which states that cutting to length of wire, tape and similar products imported in continuous lengths is considered an operation incidental to the assembly process. Conducting checks for complete electrical integrity is considered an acceptable incidental operation pursuant to 19 CFR §10.16(b)(7), which states that final calibration and testing are considered operations incidental to assembly.

In HQ 556920, dated January 7, 1993, Customs found the assembly of a similar automotive electrical harness from fabricated components, such as terminals, connectors, wire and seals, to qualify as an acceptable assembly operation under subheading 9802.00.80, HTSUS. The assembly described, among other operations, the crimping of wires and terminals, layout of wires, and joining of connectors similar to the operations occurring in the present case. Applying the reasoning set forth in HQ 556920 we find that the instant processes constitute an acceptable assembly operation for purposes of subheading 9802.00.80, HTSUS, and that allowances in duty may be made for the cost or value of the components of U.S. origin.

HOLDING:

On the basis of the information submitted, we conclude that the U.S. components in the wiring harness do not lose their identity in the assembly operation, and are not advanced in value or improved in condition except by assembly operations and operations incidental thereto. Therefore, allowances in duty may be made under subheading 9820.00.80, HTSUS, for the cost or value of the U.S. fabricated components incorporated into the imported wiring harnesses.

The protest should be granted in full. The entries should be appraised taking into account the information filed with the protest.

In accordance with Section 3A(11)(b) of Customs Directive 099 3550- 065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be mailed by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make this decision available to Customs personnel, and to the public via the Customs Home Page on the World Wide Web, the Freedom of Information Act, and other public distribution channels.

Sincerely,

Myles B. Harmon, Director
Commercial Rulings Division

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