HQ 556789: Eligibility of subheading 9802.00.80, HTSUS, to capless starter sub-assemblies; CBERA; Substantial Transformation

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 556789

                        October 26, 1992

CLA-2 CO:R:C:S 556789 RAH

CATEGORY:  Classification

TARIFF NO.:  9802.00.80

Mr. Charles A. Redden
Charles A. Redden, Inc.
Hemisphere Center
Route 189 South
Newark, New Jersey 07114 

RE:  Eligibility of subheading 9802.00.80, HTSUS, to capless
     starter sub-assemblies; CBERA; Substantial Transformation

Dear Mr. Redden:

     This is in response to your letter of March 30, 1992, on
behalf of Fluorescent Products, regarding the dutiability of
capless starter sub-assemblies from Haiti.

FACTS:

     You state that Fluorescent Products is sending components to
Haiti for a soldering assembly operation.  The items exported to
Haiti include a U.S disc ($50.53), Korean glow bulb ($53.00),
Korean capacitor ($14.00) and U.S. solder ($3.18).  The items are
soldered together and returned to the United States as a sub-
assembly for further processing.  The Haitian labor is $23.16.

     The importer also exports salvaged parts to Haiti to be
soldered in the same manner as the above-mentioned parts.  Those
parts include Korean glow bulb ($53.00), U.S. solder (3.18), and
U.S. and Korean combination disc and capacitor.  The Haitian
labor is $24.56.    

     You ask whether the sub-assemblies qualify for a partial
duty allowance under subheading 9802.00.80, Harmonized Tariff
Schedule of the United States (HTSUS) or duty-free treatment
under the Caribbean Basin Economic Recovery Act (CBERA).

     Samples were submitted for our review.
 

ISSUE:

     Whether the sub-assemblies are entitled to a partial duty
allowance under subheading 9802.00.80, HTSUS, or duty-free
treatment under the CBERA, upon return to the United States.

LAW AND ANALYSIS:

     On March 31, 1992, the Department of the Treasury
promulgated the Haitian Transactions Regulations in consultation
with the Department of State to implement the President's
Executive Orders of October 4, 1991, declaring a national
emergency with respect to Haiti and ordering a trade embargo
against Haiti as of October 28, 1991.  Except as otherwise
provided, no goods or services of Haitian origin, other than
publications and other informational materials may be imported
into the United States and no such articles may be exported from
the United States either directly or indirectly to Haiti.  31 CFR
580.205(a) and 580.206.  One exception to the trade embargo is
for importations from and exportations to assembly/production
operations in Haiti, under special license.  In order to
determine if you qualify for such a license, you may contact:

               R. Richard Newcomb, Director
               Office of Foreign Assets Control
               Department of the Treasury
               1500 Pennsylvania Avenue N.W.
               Washington, D.C.  20220              

For purposes of this ruling we will assume that you qualify for a
special license which will permit the importation of the sub-
assemblies in question into the United States from Haiti.

     Pursuant to General Note 3(c)(V)(A), HTSUS, Haiti has been
designated as a BC for CBERA purposes.  Under the CBERA, eligible
articles the growth, product or manufacture of BC's, may enter
the U.S. free of duty if such articles are imported directly to
the U.S. from the BC, and if the sum of (1) the cost or value of
the materials produced in a BC or BCs, plus (2) the direct cost
of processing operations performed in a BC or BCs, is not less
then 35 percent of the appraised value of the article at the time
it is entered into the United States.  See, 19 U.S.C. 2703(a). 
The cost or value of materials produced in the U.S. may be
applied toward the 35 percent value-content minimum in an amount
not to exceed 15 percent of the imported article's appraised
value.  See, section 10.195(c), Customs Regulations (19 CFR
10.195(c)).

     If an article is comprised of materials that are imported
into the BC, the article is considered to be a "product of" the
BC only if those materials are substantially transformed there
into a new or different article of commerce.  A substantial
transformation occurs "when an article emerges from a
manufacturing process with a new name, character, or use which
differs from that of the original material subjected to the
process."  The Torrington Company v. United States, 764 F.2d
1563, 1568 (Fed. Cir. 1985). 

     Customs has previously ruled on whether assembly operations
constitute a substantial transformation.  In C.S.D. 85-25 dated
September 25, 1984 (Headquarters Ruling Letter (HRL) 071827), we
considered the issue of whether the assembly of components onto a
printed circuit board (PCB) resulted in a substantial
transformation of the materials.  In that decision, Customs held
that an assembly process will not constitute a substantial
transformation unless the operation is "complex and meaningful"
depends on the nature of the operation, attention to detail and
quality control, and the benefit to the BC from the standpoint of
both the value added to each PCB and the overall employment
generated thereby.  In C.S.D. 85-25, it was stated that the
factors which determine if a substantial transformation occurs
should be applied on a case-by-case basis.

     The focus of C.S.D. 85-25 was a PCBA produced by assembling
in excess of 50 discrete fabricated components (e.g., resistors,
capacitors, diodes, transistors, integrated circuits, sockets,
connectors) onto a PCB.  Customs determined that the assembly of
the PCBA involved a large number of components and a significant
period of time as well as skill, attention to detail, and quality
control.

     Using the standards defined in C.S.D. 85-25, it is our
opinion that the assembly of the sub-assemblies in question is
not a complex and meaningful assembly operation and, therefore,
does not result in a substantial transformation.  It is a minor
operation that involves soldering together three components (the
disc, glow bulb and capacitor).  Therefore, the sub-assemblies
will not be eligible for duty-free treatment under the CBERA.
 
     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. 

     The assembly in the instant case involves soldering three
fabricated components together.  We find that these operations
clearly fall within the purview of an acceptable assembly as
outlined in the Customs Regulations (19 CFR 10.16(a)).  We
further find that the disc of U.S.-origin satisfies all three
requirements of subheading 9802.00.80, HTSUS, and that,
therefore, an allowance in duty may be made for the cost or value
of the disc, upon importation of the sub-asssembly into the
United States.  However, no allowance may be made for the value
of the U.S.-made solder as it loses its physical identity in the
sub-assembly by change in form and shape, contrary to clause (b)
of the statute.

HOLDING:

     The subassemblies will be eligible for the partial duty
exemption under subheading 9802.00.80, HTSUS, upon importation
into the United States.  The U.S.-manufactured disc is exported
to Haiti in condition ready for assembly without further
fabrication, does not lose its physical identity in such articles
by change in form, shape, or otherwise, and is not
advanced in value or improved in condition abroad except by being
assembled.  Therefore, an allowance in duty may be made under
this tariff provision for the cost or value of the U.S.-made 

disc, upon compliance with the documentation requirements of 19
CFR 10.24.  However, the sub-assemblies will not qualify for
duty-free treatment under the CBERA since the components are not
substantially transformed into a new and different article of
commerce in Haiti as a result of the assembly operation.    

                                   Sincerely,



                                   John Durant, Director