us-cbp-cross-rulings-hq-081999•HQ 081999: Unassembled components, for golf cars, not constituting incomplete unassembled golf carts; essential character; NY 847602 revoked; not substantially complete; entireties
HQ 081999: Unassembled components, for golf cars, not constituting incomplete unassembled golf carts; essential character; NY 847602 revoked; not substantially complete; entireties
us-cbp-cross-rulings-hq-081999HQ 081999: Unassembled components, for golf cars, not constituting incomplete unassembled golf carts; essential character; NY 847602 revoked; not substantially complete; entiretiesGuidance
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 081999
December 10, 1990
CLA-2 CO:R:CV:G: 081999 JLV
CATEGORY: Classification
TARIFF NO.:
Kenneth J. Pierce, Esq.
Willkie Farr & Gallagher
Three Lafayette Centre
1155 21st Street, NW.
Washington, D.C. 20036
RE: Unassembled components, for golf cars, not constituting
incomplete unassembled golf carts; essential character;
NY 847602 revoked; not substantially complete; entireties
Dear Mr. Pierce:
In a letter dated March 18, 1988, as supplemented by
letters of May 16 and May 26 and June 24, 1988, you request on
behalf of your client a ruling on the tariff classification of
certain golf car "kits". The transactions described in your
letter of March 18 were prospective at that time. However, as
you indicated in your letter of May 26, a transaction similar
to "Transaction No. 2" has become current. Your request
involves classification for purposes of entries made under the
former tariff schedules, the Tariff Schedules of the United
States (TSUS) and classification for purposes of entries made
under the Harmonized Tariff Schedule of the United States
(HTSUSA).
FACTS:
In each of the five proposals ("transactions") that
follow, the unassembled components will be packed in bulk
rather than put up in individual kits containing unassembled
components for one golf car. The gas engines and the
transmissions will be imported in each of the five proposals.
Unless otherwise stated, the containers of these bulk
components will be on the same vessel and entered together.
The difference between each proposal or transaction is the
number and kind of components that are proposed for each
shipment.
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First, these elements are common to the first four
transactions: the engine and the transmission assemblies will
always be imported with the other components, except as noted
in Transaction 1(a); the components will always be in bulk;
two structural pieces, which appear to be the welded frame for
the golf car, and a welded reinforcement section onto which
the rear cowling and tray will be attached, will be
manufactured in the United States, except as noted in
Transaction 1; most of the seals and the nuts, bolts, washers,
and similar fasteners will be imported from Japan, as well as
the front wheel hubs, steering gear box, tie rod components,
steering wheel, steering linkages and front suspension arms,
rear axle shafts and wheel hubs, starter and generator, fuel
pump assembly, igniter assembly, fuel tank, muffler, front
upper cowling and two backing plate components, and
miscellaneous structural brackets, plates, and pedal
components. The wheels and tires are not included in the
components that are to be imported.
In view of the fact that some components will always be
made in the United States (except as noted in Transaction 1),
no transaction will ever consist of the required parts for a
complete, unassembled golf car. Exhibit 5 of your letter of
March 18, 1988, identifies the specific components ("A," "B,"
"C," "D" or "E") that will be excluded from the components to
be imported in each proposal.
In Transaction 1 you propose to separate the free-rate
items and import them in one container, either in a separate
shipment (Transaction 1(a)) or in the same shipment with
containers of the other unassembled components (Transaction
1(b)). The free-rate items consist of the engine assembly and
various washers to be used in the assembly of the golf cars.
The other components, packaged and shipped in bulk, constitute
all of the remaining components for a specific number of golf
cars. You describe the free-rate components and these other
components as constituting complete knock down or CKD "kits."
In Transaction 2 you propose to exclude the following
items (listed as "A") from the imported bulk components:
various cables and wires for linkage of the throttle, brakes,
starter, and shift; bumper pads and body pads for protection
and for noise reduction; various body panels, which include
inside panels for wheel wells, exterior rear fender and seat
panels, front cowl and tray or dash panels, and the front
flooring; cushions and seats.
In Transaction 3 you propose to exclude, in addition to
the items excluded in Transaction 2, the following items
(listed as "B"): welded frame on which the engine is mounted
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and to which the rear suspension is attached; side and upper
trim for cowl; steering column; hinges; various pads; battery
support plate; buzzer; and rear brake drums.
In Transaction 4 you propose to exclude the following
additional items (listed as "C"): steering shaft; bumper
components; filters; dampers; body panels; parts of the
steering and support linkage; brackets and axle support
components; structural floor and side plates; bag supports and
various reinforcing plates and cover panels for the golf car
sides.
In Transaction 5 you propose to exclude other components
(listed as "D" and "E") which would leave only the following
to be imported: engine assembly; transmission assembly; and
an emblem.
Although the proposed transactions were prospective at
the time of your request, a transaction similar to the second
proposed transaction has become current. You identified this
change in your letter of May 26, 1988. The Customs officers
at the port of entry are aware of your request for a ruling.
You request a ruling on the application of the "doctrine
of entireties" under the TSUS to the proposed transactions,
and a ruling on the application of General Interpretative Rule
(GRI) 2(a), HTSUSA.
ISSUES:
1. Do the unassembled, bulk components in any of the
proposed transactions constitute incomplete golf cars,
unassembled, within the meaning of GRI 2(a), HTSUSA?
2. Under the doctrine of entireties, or under General
Interpretative Rule 10(h), TSUS, are the unassembled, bulk
components in any of the proposed transactions classifiable as
unassembled, incomplete golf cars under the provision for
other motor vehicles in item 692.10, TSUS?
LAW AND ANALYSIS:
In a ruling of April 25, 1989 (file 083222), we addressed
the application of GRI 2(a), HTSUSA, to motor vehicle
components which, at the time of importation, were unassembled
and did not constitute a complete article. GRI 2(a) provides
for classification of an article presented 1) incomplete or
unfinished, or 2) unassembled or disassembled. In this case,
the articles are both incomplete and unassembled. The tests
for these two conditions are distinct. First, an incomplete
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or unfinished article must have the essential character of the
complete or finished article. Second, if unassembled at the
time of importation, they must be "unassembled" as the term is
used in GRI 2(a). An incomplete or unfinished article, even
if unassembled or disassembled, falls within GRI 2(a) if, in
its assembled condition, it has the essential character of the
complete or finished article.
We conclude that the importations of bulk components,
even if consisting of all the components to assemble 100
complete golf cars, are not goods "unassembled" within the
meaning of GRI 2(a). Therefore, we need not determine whether
the importations are goods "incomplete" or "unfinished" which
have the essential character of the goods "complete" or
"finished."
The Explanatory Notes (EN) to the Harmonized Commodity
Description and Coding System (HS) are the official
interpretation for the HTS at the international level. EN
2(a)(V) and (VII) provide some guidance on the application of
GRI 2(a) to unassembled goods:
(V) The second part of Rule 2 (a)
provides that complete or finished
articles presented unassembled or
disassembled are to be classified in
the same heading as the assembled
article. When goods are so
presented, it is usually for reasons
such as requirements or convenience
of packing, handling or transport.
[Underscoring added for emphasis]
* * * * * * *
(VII) For the purposes of this Rule [2(a)],
"articles presented unassembled or
disassembled" means articles the
components of which are to be
assembled either by means of simple
fixing devices (screws, nuts, bolts,
etc.) or by riveting or welding, for
example, provided only simple
assembly operations are involved.
[Underscoring added for emphasis]
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As noted in our ruling letter of April 25, 1989 (file
083222), concerning components for a pickup truck that were to
be imported in bulk, the shipment of bulk components does not
have any apparent relation to the requirements necessary to
the packing, handling, or transport of motor vehicles. Nor
does the condition of the components in the shipment have any
apparent relation to convenience in the packing, handling, or
transport of motor vehicles. While this is not dispositive,
the additional facts surrounding the reasons for, and the
condition of the goods at importation are relevant. Unlike a
CKD golf car imported as an identifiable "kit," the components
in the proposed transactions are not CKD kits, but are
components in bulk, i.e. inventory for a golf car assembly
operation. The assembly plant is designed to process 100
units at a time. The bulk components appear to be packaged
and shipped to accommodate the needs of golf car production
facility rather than articles recognized as unassembled goods.
Furthermore, the nature of the assembly operation, in
this case, is not a "simple" assembly. With the exception of
the engine, transmission, and certain electrical motors, the
assembly does not involve the joining of distinct
subassemblies. We do not consider an assembly line operation
in which a motor vehicle is built piece by piece from the
frame up as a "simple" assembly within the meaning of GRI
2(a). The dissociation of parts from individual vehicles, the
parts presented in bulk, and the nature of the required
assembly process after importation are evidence that the parts
are not presented together so that they can be reasonably
associated with individual CKD golf cars. Rather, the parts
are in the nature of parts inventory for the production of
golf cars and, as such, do not fall within the meaning of the
term "unassembled" for purposes of GRI 2(a), HTSUSA.
In a ruling of December 27, 1989 (file 847602), issued in
response to a request by your firm on behalf of your client,
Yamaha Motor Manufacturing Corporation of America, Customs
held that importations of bulk components (complete knock down
condition) for 100 or 200 recreational water vehicles,
although lacking the hull, deck, and flotation material, were
classified as other vessels for pleasure or sports in
subheading 8903.99.00, HTSUSA, because the incomplete water
vehicles had the "essential character" of the complete
article. We have reviewed the facts on which that ruling was
based, and we are revoking ruling 847602 of December 27, 1989.
The hull and the deck, i.e., that part of the water craft that
forms the hull and gives it the "boat-like" character, are
missing. Therefore, the articles as imported, even if
assembled, do not have the essential character of the
completed articles as required by GRI 2(a), HTSUSA.
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Under the TSUS, classification of unassembled or
incomplete articles was subject to different rules. In this
case (golf cars), the relevant rules are the doctrine of
entireties and General Interpretative Rule 10(h), TSUS. The
doctrine of entireties is a judicially developed rule of
interpretation. This doctrine and General Interpretative Rule
10(h), although related, should not be considered as the same
rule. The doctrine of entireties applies to unassembled
articles 1) if, when joined together, they form a complete
article of commerce into which the identities of the
individual components are merged, and 2) if the unassembled
components are intended to be joined together. Altman & Co.
v. United States, 13 Ct. Cust. Appls. 315, T.D. 41232 (1925);
Donalds Ltd., Inc. v. United States, 32 Cust. Ct. 310, C.D.
1619 (1954); Stella D'Oro Biscuit Co., Inc. v. United States,
570 F.2d 945 (CCPA 1978). The purpose of the rule is to give
effect to a basic principle of classification that an article
is dutiable in its condition as imported, and that the actual
nature of the commercial entity, whether assembled or
unassembled, must control. Classification, of course,
depended on the tariff provision, and at the time of the
development of this rule, some tariff descriptions provided
for an article "whether finished or unfinished."
If a tariff provision did not provide for an article,
whether finished or unfinished, it was arguable, and so held
in numerous judicial opinions, that the doctrine of entireties
did not apply to unassembled articles that were incomplete.
See, for example, the decision in United States v. Baldt
Anchor, 58 CCPA 122, C.A.D. 1051 (1972), in which five of six
machines for a welding apparatus did not constitute an
entirety, either with the sixth machine which was imported
separately or as an incomplete welding apparatus, because it
lacked one machine. Therefore, when the TSUS was enacted,
Rule 10(h) was an attempt to resolve this issue. Rule 10(h)
incorporated the "assembled or not assembled" concept of the
doctrine of entireties, and, to provide uniform treatment to
articles that were unfinished or incomplete, included articles
that were "finished or not finished" at the time of
importation. If an article is not finished, it must be
substantially complete, as discussed by the court in Daisy-
Heddon, Div. Victor Comptometer Corp. v. United States, 600
F.2d 799 (CCPA 1979), to be classified under the provision for
the article. As stated in the facts of this case, the
unassembled imported components do not constitute (except in
Transaction 1(b)), in any one shipment, sufficient components
to assemble one or more complete golf cars.
In Transaction 1(a), if the engine assemblies and other
components are shipped separately, then they cannot be
classified together with the components shipped on a separate
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vessel. The doctrine of entireties prohibits the combining of
separate shipments for tariff classification purposes. In
Transaction 1(b), if the engine assemblies and other
components are shipped together, then the importation of these
components, even if packaged in bulk, would fall within the
doctrine of entireties if (1) the components consist of all
the parts necessary to complete a specific number of golf
cars, (2) the components are intended to be used in the
assembly of those specific cars, and (3) the actual
segregation of the components after importation is sufficient
to demonstrate that the imported components are not, in fact,
merely placed into inventory with like components from other
shipments. Demuth Steel Products Company v. United States, 12
CIT___ (Slip Opinion 88-70, decided June 2, 1988). Based on
the statements of fact (all the components will remain
together and be used together; there will be no mixing of
components from different lots of 100; all of the components
for 100 complete vehicles are in each shipment) submitted in
your letters of March 18, 1988, May 16, 1988, and June 24,
1988, we conclude that these components are classifiable under
the doctrine of entireties as golf cars in item 692.10, TSUS.
Concerning Transactions 2 through 5, the question is
whether the engine assemblies and the other components
constitute an identifiable number of substantially complete
golf cars within Rule 10(h), TSUS. Because these components
are shipped in bulk (i.e., not assembled and not even in kits
packaged with an exact number of parts for assembly into
individual, identifiable golf cars), we are faced with a
situation somewhat different from that faced by the court in
Daisy-Heddon, Div. Victor Comptometer Corp. v. United States,
supra, concerning an assembled but incomplete fishing reel.
Although the court identified five criteria which could be
used, the court cautioned that the list was not exhaustive and
that all, some, or additional criteria may come into play
depending on the nature of the article in issue. Finally, the
issue presented in these proposed transactions asks us to
establish that point at which, by taking components away from
a list of complete components, the unassembled components no
longer reach the threshold of "substantially complete."
Of the factors identified in Daisy-Heddon, the
significance of the omitted parts to the overall functioning
of the completed article and the trade customs are important
factors in this case. For example, in Authentic Furniture
Products, Inc. v. United States, 68 Cust. Ct. 204, 343 F.Supp.
1372 (1972), affirmed 61 CCPA 5, 486 F.2d 1062 (1973), the
court held that merchandise consisting of unassembled
components for bunk beds did not, when assembled, constitute
substantially complete bunk beds because the importations
lacked the side rails necessary to join the ends and complete
- 8 -
the bunk beds. The merchandise in this case consists of
unassembled parts for incomplete self-propelled motor
vehicles. The missing components are (1) a frame component
which is significant in relation to the overall structural
integrity of a golf car, and (2) wheel assemblies, various
floor plates, exterior body parts (seat cushions and support
assembly; cowl and dash cover and tray; and exterior rear deck
panel), wheel assemblies, and miscellaneous cables, all of
which appear to be components that are assembled last, i.e.,
after a structural shell or chassis has been assembled.
Although the omission of a component essential to the use
of an article does not preclude classification of an
incomplete article as the article under Rule 10(h), TSUS, the
relationship of such a component or components to the overall
function of imported unassembled components, i.e., the
assembly of an article, may preclude classification of the
incomplete, unassembled components as the article under Rule
10(h). In this case the shipment of bulk components, although
described as incomplete "knock down kits," has the appearance
of a shipment of parts which, without the omitted structural
framework, cannot be assembled. The so-called "kits" include
the drive train components, the suspension and steering
components, the electrical system components, and various
brackets and structural parts that are necessary to mount or
secure these assemblies to a frame. But the welded frame, the
four wheel assemblies, and the exterior body panels and
seating are absent. A kit is defined in Webster's Third New
International Dictionary, unabridged, (1965), page 1246, as "2
* * * d: a commercially packaged set of parts * * * usu. ready
to assemble and often accompanied by finishing materials and
tools[.]" In this case, no assembly of these parts (other
than, perhaps, as various subassemblies which are noted above)
takes place without the frame component. In their condition
as imported, these unassembled parts are not packaged together
in a condition ready for assembly into individual golf cars.
Even if we were to conclude that the imported components
constitute 100 kits of substantially complete articles, the
would have to be considered "kits for golf car chassis"
because item 692.20 more accurately describes the article
(i.e., chassis).
Engines, transmissions, electrical motors, and axle
assemblies are recognizable motor vehicle components used in
the assembly of motor vehicles and are often bought and sold
as such. The mere fact that these components are imported in
sets of 100 each does not conclusively demonstrate that the
importations are unassembled, substantially complete motor
vehicles. It is our understanding that the golf car plant is
designed to process golf cars in units of 100. Therefore, the
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importation of various components in bulk and in sets of 100
would be a commercially feasible method for importing
inventory which can be used in the assembly of any vehicle in
lots of 100, as long as they were all of the same model.
Therefore, we conclude that Transaction 2 does not
consist of substantially complete golf cars under General
Interpretative Rule 10(h), TSUS. Except for the engines,
transmissions, electrical motors, and perhaps certain other
distinct assemblies, the importation consists of bulk
components that are completely unassembled. The importation
lacks a significant component, the frame assembly, and almost
all of the exterior body panels and the seat assembly. The
absence of these components, as they relate to the use of the
imported unassembled components, is such that any assembly
operation to produce a golf car will require, at first, the
frame component, and then, when a chassis is complete, the
body components. Furthermore, the characterization of the
importation as discrete sets of 100 units does not, in
Transaction 2 (unlike Transaction 1(b) in which all the
components for 100 complete golf cars were imported and the
doctrine of entireties controls), create a presumption that
the components are more than inventory parts for an assembly
operation designed to produce vehicles in lots of 100.
It follows, therefore, that Transaction 1(a) and
Transactions 2 through 5 do not consist of substantially
complete golf cars for purposes of classification under
General Interpretative Rule 10(h), TSUS.
HOLDING:
The components for 100 golf cars, imported in bulk
(complete knocked down condition), whether or not they
constitute all of the components for 100 golf cars, are not
"unassembled" within the meaning of GRI 2(a), HTSUSA.
Therefore, the components are classified separately under the
applicable HTSUSA provisions.
For purposes of classification under the TSUS, the
components for 100 golf cars, described in Transaction 1(b),
constitute an entirety and the articles would be classified
under the provision for other motor vehicles in item 692.10,
TSUS. However, in all the other proposed transactions, the
unassembled bulk components, imported in lots of 100, do not
constitute 100 substantially complete golf cars. Therefore,
the various components are separately classified under the
specific provisions of the TSUS.
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Ruling letter of December 27, 1989 (file 847602), which
involved the shipment of bulk components (completely knocked
down condition) for 100 or 200 recreational water vehicles, is
revoked. The bulk components for 100 or 200 water vehicles do
not constitute "incomplete" or "unfinished" water vehicles
because they do not have the essential character of the
complete or finished articles. The absence of the hull and
the deck is controlling in this case.
The revocation of ruling letter 847602 is effective on
the date of this letter, except to the extent that there is a
sufficient demonstration of detrimental reliance as provided
for in section 177.9(d)(3) of the Customs Regulations (19 CFR
177.9(d)(3)).
The decision on the classification of the components for
the golf cars will be effective as of the date of this ruling
and will not be applied retroactively to entries made before
this date. The issues in this ruling have not been fully
treated in a previous ruling and, because of the significance
and complexity of the issues under the HTSUSA, an unusually
long period has elapsed since the original request for a
ruling. 19 CFR 177.9(e).
Sincerely,
John Durant, Director
Commercial Rulings Division
6cc: AD NY Seaport
2cc: Chief, CIE
1cc: NIS DeSoucey (101)
1cc: AC, CO
1cc: Reading File
1cc: DD, Atlanta, Georgia
1cc: DD, Los Angeles
1cc: Durant
LIBRARY: valentin
FILE NAME: 081999
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