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HQ W563421




April 14, 2006

CLA-2 RR:CTF:VS 563421 KSG

CATEGORY: CLASSIFICATION

Port Director
Bureau of Customs and Border Protection
1100 Raymond Blvd.
Newark NJ 07102

RE: Request for Internal Advice; Subheading 9802.00.80 requirements

Dear Director:

This is in response to your Request for Internal Advice of November 23, 2005, initiated by General Electric Energy concerning the eligibility of certain parts assembled into two imported modules for subheading 9802.00.8068, of the Harmonized Tariff Schedule of the United States (“HTSUS”) treatment. The two modules, the Accessory Module and the Liquid Fuel Atomizing Air Module, are incorporated in a gas turbine power plant. You have also asked whether the two modules are properly classified under the HTSUS. We are forwarding the classification issue to the Tariff Classification and Marking Branch for their review.

FACTS:

General Electric states that the parts listed in its table (Attachment A) were made in the U.S. by the U.S. manufacturer listed. General Electric has submitted manufacturer’s affidavits to support its assertion that the particular parts were manufactured in the U.S., assembled by bolting (or in several cases by welding), and did not undergo any further manufacturing operations in Australia.

The Port determined that the alleged U.S. parts were not eligible for subheading 9802.00.80 HTSUS treatment in a CBP form 29 proposing a rate advance, dated August 9, 2005.

The case file reflects that there was a determination that the U.S. parts were not eligible for subheading 9802.00.8068, HTSUS, treatment because the parts entered the commerce of Australia. The authority cited was U.S. Note 2(b)(ii) of Subchapter II of Chapter 98, HTSUS. There was a conclusion that the U.S.-origin parts entered the commerce of a foreign country, by virtue of their sale to the Australian company in 2002 and 2003, and are therefore, not eligible for classification in subheading 9802.00.8068 because they are no longer U.S.-origin articles.

ISSUE:

Whether the U.S. parts are eligible for subheading 9802.00.80, HTSUS treatment.

LAW AND ANALYSIS:

Subheading 9802.00.80, HTSUS, provides a duty exemption for:
articles... 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). The documentary requirements stated in 19 CFR 10.24 include a declaration by the assembler and an endorsement by the importer in substantially the format set forth in the regulation.

U.S. Note 2(b), Subchapter II, Chapter 98, HTSUS (“CBI II”), states as follows:

No article (except a textile article, apparel article, or petroleum, or any product derived from petroleum, provided for in heading 2709 or 2710) may be treated as a foreign article, or as subject to duty, if—
the article is— assembled or processed in whole of fabricated components that that are a product of the United States, or processed in whole of ingredients (other than water) that are a product of the United States, in a beneficiary country; and neither the fabricated components, materials or ingredients, after exportation from the United States, nor the article itself, before importation into the United States, enters the commerce of any foreign country other than a beneficiary country.

As used in this paragraph, the term “beneficiary country” means a country listed in general note 7(a).

The subject-matter of General Note 7(a) is products of countries designated as beneficiary countries for purposes of the Caribbean Basin Economic Recovery Act (“CBERA”).

According to Senate Report No. 101-252, dated March 22, 1990, the purpose of Note 2 of subchapter II of chapter 98, HTSUS is “to create a limited exception to the general CBI rules of origin to encourage small-scale investments in assembly and processing facilities in areas of the Caribbean that are not able to support full-fledged manufacturing or processing operations. In turn, the amendment encourages greater sales of U.S. products and further integration of production between the United States and the Caribbean.” The Senate Report further explains that Note 2 grants duty-free treatment for articles assembled in CBI beneficiary countries from 100 percent U.S. content, and duty-free and quota-free treatment to articles processed in CBI beneficiary countries from 100 percent U.S. ingredients, except water. This section would not apply to imports of any product that is otherwise ineligible by law for CBI duty-free treatment.

In summary, U.S. Note 2(b) refers only to requirements for certain goods that are imported into the United States under the CBERA. U.S. Note 2(b) does not affect the requirements of subheading 9802.00.8068, HTSUS. There is no requirement for classification under subheading 9802.00.8068, HTSUS, that goods not enter the commerce of a foreign country.

Your office requested documentary information for one entry. If your office is satisfied that the importer has submitted the necessary documentary evidence (manufacturer’s affidavit and importer endorsement) and the information in Attachment A is correct, the requirements of subheading 9802.00.8068, HTSUS, have been met.

HOLDING:

U.S. Note 2(b), Subchapter II, Chapter 98, HTSUS, does not affect the requirements of subheading 9802.00.8068, HTSUS. If the information provided in Attachment A is correct and you are otherwise satisfied that the documentary requirements of 19 CFR 10.24 have been met, the parts would satisfy the requirements of subheading 9802.00.8068.

This decision should be mailed by your office to the party requesting Internal Advice no later than 60 days from the date of this letter. On that date, the Office of Regulations and Rulings will make the decision available to CPB personnel, and to the public on the CPB Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.

Sincerely,

Monika R. Brenner, Chief
Valuation & Special Programs Branch

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