HQ 555544: Applicability of partial duty exemption under HTSUS subheading 9802.00.80 to fiber optic cable

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 555544

                           May 1, 1990

CLA-2 CO:R:C:V  555544 KAC

CATEGORY:  CLASSIFICATION

TARIFF NO.:  9802.00.80

Joseph S. Kaplan, Esq.
Ross & Hardies
529 Fifth Avenue
New York, New York  10017-4608

RE:  Applicability of partial duty exemption under HTSUS
     subheading 9802.00.80 to fiber optic cable

Dear Mr. Kaplan:

     This is in response to your letter of December 1, 1989, on
behalf of Canada Wire and Cable, Ltd., requesting a ruling on the
applicability of subheading 9802.00.80, Harmonized Tariff
Schedule of the United States (HTSUS), to fiber optic cable to be
imported from Canada.  Photographs and samples were submitted.

FACTS:

     Canada Wire will export U.S.-origin acrylate coated optical
fiber and coated corrugated steel tape to Canada for assembly
operations with certain Canadian-origin components and a few
materials sourced from third countries.  The Canadian assembly
operations consist of:

     (1)  cutting the acrylate coated optical fiber to length;
     (2)  inspecting the individual optical fibers to ensure
          compliance with optical transmission standards;
     (3)  covering the individual optical fibers with a silicon
          and nylon sheath;
     (4)  encasing the stainless steel strength rod with a
          polyethylene jacket for use as the core of the cable;
     (5)  twisting twelve of the individual optical fibers
          and two polyvinyl chloride coated copper wires around
          the central strength rod in a "stranding" operation;
     (6)  wrapping a plastic binder tape and propylene yarn
          around the optical fibers and core stranding for
          cushioning;
     (7)  wrapping marking tape with the manufacturer's name
          around the optic fiber and core stranding;
     (8)  wrapping mylar tape around the optic fiber and core
          stranding;
     (9)  wrapping rip cord strings around the optic fiber
          and core stranding;

     (10) encasing the optic fiber and core stranding with a
          thermoplastic jacket;
     (11) wrapping rip cord strings around the optic fiber and
          core stranding;
     (12) wrapping water blocking tape around the optic fiber
          and core stranding;
     (13) wrapping corrugated steel tape around the optic
          fiber and core stranding;
     (14) encasing the optic fiber and core stranding
          with an outside thermoplastic jacket; and
     (15) testing to ensure that the optical transmission
          quality of the original fiber has been maintained.

     Upon completion of the assembly operations, the fiber optic
cable will be imported into the U.S.

ISSUE:

     Whether the U.S. components in the fiber optic cable will
qualify for the duty exemption under HTSUS subheading 9802.00.80
when imported into the U.S.

LAW AND ANALYSIS:

     HTSUS subheading 9802.00.80 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 10.16(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 HTSUS subheading
9802.00.80 to that component.  See, section 10.16(c), Customs
Regulations (19 CFR 16(c)).

     The operations of wrapping plastic binder tape, propylene
yarn, marking tape, mylar tape, rip cord strings, water blocking
tape, corrugated steel tape, and twisting the individual optical
fibers and copper wires around the steel rod are considered
acceptable assembly operations pursuant to 19 CFR 10.16(a).  See
also, Headquarters Ruling Letter 085310 dated October 12, 1989,
which found that twisting wire together and then wrapping jute
filler, binder tape and jute bedding around the wire constitutes
an acceptable assembly operation.  Sheathing and encasing the
optical fibers, and the fiber optic cable are considered
acceptable operations incidental to the assembly process pursuant
to 19 CFR 10.16(b)(3), which allows the application of a
preservative coating, including protective encapsulation, in the
assembly process as an incidental operation.  The thermoplastic
and silicon and nylon casings are applied to the optical fibers
and cable solely for protective purposes and, therefore, will not
preclude an allowance in duty for the cost or value of the U.S.
components under this tariff provision.  Cutting the optical
fiber to length is considered an acceptable operation incidental
to assembly pursuant to 19 CFR 10.16(b)(6), which states that
cutting to length wire, thread, tape, foil, or similar products
exported in continuous lengths is an acceptable incidental
operation.  Inspecting and testing the optical fibers and the
completed fiber optic cable are considered acceptable incidental
operations pursuant to 19 CFR 10.16(b)(7), which states that
final calibration and testing are considered operations
incidental to assembly.

     With respect to the duty rate applicable to the imported
optical cable, we agree with you that the cable is properly
classifiable in subheading 8544.70.00, HTSUS, which provides for
optical fiber cables, dutiable at the rate of 8.4% ad valorem, or
6.7% ad valorem for "goods originating in the territory of
Canada" under the U.S.-Canada Free Trade Agreement Implementation
Act of 1988 (FTA).  General Note 3(c)(vii)(B), HTSUS, provides
that where goods are not wholly obtained or produced in the
territory of Canada and/or the U.S., as in this case, they,
nevertheless, will be considered "goods originating in the
territory of Canada" if they have been transformed in Canada so
as to result "in a change in tariff classification in Canada as
described in the rules of subdivision (c)(vii)(R) of this note."
General Note 3(c)(vii)(R)(16)(hh), HTSUS, provides that a change
in classification to heading 8544 from any other heading will
qualify the goods for FTA treatment, provided the value of
materials originating in Canada and/or the U.S. plus the direct
cost of processing performed in Canada or the U.S. constitute not
less than 50% of the value of the goods when exported to the U.S.

     We are satisfied that the materials not of U.S. or Canadian
origin (i.e., Megalon and nylon resin) would change tariff
headings as a result of the assembly operation in Canada.
Moreover, if, as you state, the remaining components and
materials are "materials originating" in Canada or the U.S., then
the cost information you have provided indicates that the above-
described 50% value-content requirement would be satisfied in
regard to the fiber optic cable to be imported from Canada.
Under these circumstances, the cable would qualify as "goods
originating in the territory of Canada" for purposes of the FTA,
and, assuming compliance with the documentation and other
requirements set forth in sections 10.301 through 10.309, Customs
Regulations (19 CFR 10.301-1.309), would be dutiable at the rate
of 6.7% ad valorem.

HOLDING:

     On the basis of the information and samples submitted, we
conclude that the U.S. components--optical fibers and corrugated
steel tape--do not lose their physical 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
9802.00.80, HTSUS, for the cost or value of the U.S. optical
fibers and corrugated steel tape upon importation of the fiber
optic cable, provided the documentary requirements of 19 CFR
10.24 are satisfied.  The cable is classifiable in subheading
8544.70.00, HTSUS, and, based on the information provided, would
be dutiable at the rate of 6.7% ad valorem as "goods originating
in the territory of Canada" under the FTA, provided the
requirements of 19 CFR 10.301 through 10.309 are met.

                            Sincerely,



                            Jerry Laderberg
                            Acting Director
                            Commercial Rulings Division