us-cbp-cross-rulings-hq-083222•HQ 083222: Classification of unassembled components at the time of application for privileged status in an Foreign Trade Zone (FTZ); incomplete or unfinished article having the essential character of the complete or finished article
HQ 083222: Classification of unassembled components at the time of application for privileged status in an Foreign Trade Zone (FTZ); incomplete or unfinished article having the essential character of the complete or finished article
us-cbp-cross-rulings-hq-083222HQ 083222: Classification of unassembled components at the time of application for privileged status in an Foreign Trade Zone (FTZ); incomplete or unfinished article having the essential character of the complete or finished articleGuidance
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 083222
April 25, 1989
CLA-2 CO:R:CV:G: 083222 JLV
CATEGORY: Classification
TARIFF NO.:
Brian S. Goldstein, Esq.
Siegel, Mandell & Davidson, P.C.
One Whitehall Street
New York, New York 10004
RE: Classification of unassembled components at the time of
application for privileged status in an Foreign Trade
Zone (FTZ); incomplete or unfinished article having the
essential character of the complete or finished article
Dear Mr. Goldstein:
In a letter of September 23, 1988, on behalf of your
client, Subaru-Isuzu Automotive Inc. ("SIA"), you requested a
ruling on the tariff classification of certain automotive
parts which will be imported by SIA for assembly with other
parts into a finished light duty pickup truck in a foreign
trade subzone (FTZ). You presented multiple situations as
proposed transactions. This ruling is our decision on the
issues presented.
FACTS:
SIA proposes several transactions which are ultimately
related to the production of a light duty pickup truck
("T.F.R.") in an FTZ in the United States. The merchandise
involved in the transactions consists of components produced
in Japan, components produced in the United States, and
components produced in the FTZ. Although SIA intends to
increase the domestic content of the components, you state
that the listed parts will remain the same, with slight
changes contemplated in the sourcing of certain parts.
You describe the parts as consisting of the following
component categories: panel parts, frame, engine assembly,
transmission assembly, trim parts, chassis parts (other than
frame) and other miscellaneous parts. However, according to
the list of parts, there are few assemblies or subassemblies
of parts in these categories. With the exception of the
- 2 -
engine assembly, transmission assembly, various small motors
(e.g., starter motor; blower; alternator), and a few other
small assemblies, the parts as imported will consist of
unassembled, discrete components for use in making various
subassemblies, such as doors, frames, axles, cargo boxes, and
bodies.
As shown in Exhibit A-1, the components imported from
Japan will be grouped according to "trim parts," "chassis
parts," "panel parts," and "other parts (engine and
transmission assemblies, and nuts, bolts, washers, bushings,
and similar miscellaneous fasteners and pins for various
sections of the vehicle)." SIA initially proposes to ship
these components, although grouped in this manner, on the same
vessel and in unequal numbers, and to import them at the same
port. No specific quantities, however, were proposed, nor did
you indicate whether the components would be individually
packaged, packaged in bulk (like items only), or packaged in
kits for individual vehicles. The imported components will be
put into inventory in the FTZ for eventual assembly with the
U.S. components and the components produced in the FTZ.
In the alternative, SIA also proposes to ship these same
groupings of parts on different vessels for importation at
different ports and at different times. No specific
information was given on this proposal. All the components,
however, would ultimately be put into inventory in the FTZ for
the same assembly operation.
Prior to the manipulation or manufacture of these
components, SIA proposes to apply for privileged status of the
components by specific groupings on separate days. Under
Scheme I, the groupings would be as follows: Group A,
consisting of panel parts, frames (sides only), and engine
assemblies; Group B, consisting of transmission assemblies,
trim parts, and chassis parts; and Group C, consisting of
other parts. Under Scheme II, the groupings would be as
follows: Group A, consisting of panel parts and sides of
frames; Group B, consisting of engine assemblies, transmission
assemblies, trim parts, and chassis parts, and Group C,
consisting of other parts.
The FTZ subzone operation at the SIA facility will
consist of four distinct stages: stamping, body assembly,
painting, and final assembly. In the stamping operation,
parts will be manufactured from plastic and steel materials.
In the body assembly operation, the body components will be
assembled. In the painting operation, the body parts will be
- 3 -
painted and coated in eight different steps. In the final
assembly operation the painted bodies will be assembled,
together with all the remaining components (approximately
1,500 to 1,800) on an assembly line.
With this overview of the operation and description of
the condition of the unassembled components, you seek a
determination that the unassembled components from Japan, if
shipped on the same vessel and imported at the same time, do
not constitute motor vehicles which, although incomplete, have
the essential character of complete motor vehicles for
purposes of GRI 2(a) under the Harmonized Tariff Schedule of
the United States (HTS). You also seek a determination that,
even if these unassembled components are incomplete and
unassembled motor vehicles within the meaning of GRI 2(a),
SIA may segregate or group shipments of unassembled components
into different lots for purposes of claiming privileged
status.
ISSUE:
1. Under the facts as given, do the unassembled
components, shipped on the same vessel and imported on the
same date, constitute unassembled incomplete motor vehicles
classifiable as "completed" or "finished" motor vehicles
within the meaning of GRI 2(a)?
2. For purposes of claiming privileged status under 19
U.S.C. 81c and 19 CFR 146.41 and 146.65 for components which
are physically or constructively segregated out of a single
shipment, does the application of GRI 2(a) preclude such claim
if the shipment consists of components which constitute
unassembled and incomplete foreign articles that are
classifiable as the article?
LAW AND ANALYSIS:
Tariff classification of articles imported into the
customs territory of the United States is governed under the
HTS by the General Rules of Interpretation (GRI's) and any
relevant section or chapter notes. GRI 2(a) provides as
follows:
- 4 -
2(a). Any reference in a heading to an article
shall be taken to include a reference to
that article incomplete or unfinished,
provided that, as presented, the incomplete
or unfinished article has the essential
character of the complete or finished
article. It shall also be taken to include
a reference to that article complete or
finished (or falling to be classified as
complete or finished by virtue of this
rule), presented unassembled or
disassembled.
Under the first sentence in GRI 2(a), an incomplete
article having the essential character of the complete or
finished article is classified under the heading for the
complete article. The second sentence in GRI 2(a) extends
this tariff treatment to the same article that is presented
unassembled or disassembled. In this case, the articles are
both incomplete and unassembled. The first question,
therefore, is whether they have the essential character of the
complete article, and the second question is whether they are
"unassembled" as the term is used in GRI 2(a).
The Explanatory Notes (EN) to the Harmonized Commodity
Description and Coding System are the official interpretation
for the HTS at the international level. EN 2(a)(I), (V), and
VII) provide some guidance on the intent of GRI 2(a):
(I) The first part of Rule 2 (a) extends
the scope of any heading which refers
to a particular article to cover not
only the complete article but also
that article incomplete or unfinished,
provided that, as presented, it has
the essential character of the
complete or finished article. [under-
scoring added for emphasis]
* * * * * * * *
(V) The second part of Rule 2 (a) provides
that complete or finished articles
- 5 -
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. [Under-
scoring added for emphasis]
EN (I) does not provide much instructive language on the
GRI 2(a) requirement that an incomplete article must have the
essential character of the complete article. However, it is
reasonable to say that in order to have the essential
character of a motor vehicle, the imported components must be
advanced to the point that they are recognizable as a motor
vehicle, i.e., having the essential features of a vehicle,
whether assembled or unassembled. In this case we have some
parts of the frame (side rails only), some parts of the body
panels, the engine and transmission assemblies, and some of
the suspension components. Except for the engines and
transmissions, there are no identifiable subassemblies. There
is no evidence that any of these components are intended to be
assembled into a specific motor vehicle, nor is there any
evidence that they constitute something other than discrete
components intended for inventory for a manufacturing
operation. Furthermore, each of the various possible
subassemblies (body, chassis, cargo box) are so incomplete as
to defy even partial assembly until additional significant
structural components are added. We cannot, under the facts
as presented, conclude that these components have the
essential character of a pickup truck or of any other motor
vehicle.
- 6 -
However, even if the components in the shipment were to
constitute incomplete motor vehicles which had the essential
character of vehicles under GRI 2(a), the shipment of
components could not be classified under the heading for the
vehicles because they are not "unassembled" within the limited
scope of GRI 2(a).
If an incomplete (or complete) article is also
unassembled, EN (V) and (VII) describe the usual circumstances
surrounding the "unassembled" state at the time of
presentation: (1) the article is usually presented
unassembled for convenience or for requirements necessitated
by considerations arising from packaging, transport, or
handling, and (2) it is put together by simple assembly
operations involving simple fixing devices.
Shipment of these components in an "unassembled"
condition 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. The
condition of the components is more readily identifiable as a
shipment of inventory items for a manufacturing operation or
as replacement parts.
Finally, the description of the assembly in the FTZ
subzone precludes any consideration of the process as a
"simple" assembly within the meaning of EN 2(a)(VI), even
though the primary means of joining these components may be by
"nuts and bolts and welding operations." With the exception
of the motor and transmission assemblies, there are no
significant body or chassis subassemblies that can be easily
assembled into a finished or complete motor vehicle. These
motor vehicles will be assembled in a special-purpose subzone
that allows automobile and truck manufacturing.
Concerning the second issue, we need only address whether
GRI 2(a) applies to articles shipped unassembled into an FTZ
and for which privileged status is claimed on all or part of
the unassembled articles. In prior decisions on the
application of classification principles to foreign articles
which are placed directly into an FTZ without entry or
withdrawal from a warehouse for consumption, Customs has
determined that these principles do not apply until a claim
for privileged status is made or the articles are entered into
the customs territory of the United States. C.S.D. 83-97.
- 7 -
Classification of articles in the tariff schedule are
governed by the GRI's. Classification and rate of duty, as
provided in the tariff schedule, apply to articles imported
into the customs territory of the United States. General Note
1, HTS. The FTZ act establishes a distinction between the
geographical territory of the United States and the customs
territory of the United States, and the customs laws do not
apply, unless a specific provision allows or requires
otherwise, to articles placed in an FTZ. Hawaiian Independent
Refinery v. United States, 460 F.Supp. 1249; 19 U.S.C. 81c(a).
Therefore, GRI 2(a) would not apply to articles placed in an
FTZ until such time as a claim for privileged status is made
or the articles are transferred from the FTZ to the customs
territory of the United States. Furthermore, GRI 2(a) would
apply only to the condition (i.e., the specific grouping of
components) of the articles at the time the claim for
privileged status is made, or at the time the articles are
transferred from the FTZ.
HOLDING:
The shipment of unassembled Japanese components for
pickup trucks, as described in this letter, cannot be
classified under GRI 2(a) as finished or complete pickup
trucks because, as presented, (1) these components do not have
the essential character of the complete vehicles, (2) their
unassembled condition is not related to any identified special
requirements or to any reasonable convenience in the packing,
transport, or handling of pickup trucks, and (3) the required
assembly process is a substantial manufacturing process.
Within the limitations of 19 U.S.C. 81c(a), unassembled
components of a shipment may be segregated into distinct
groups in order to claim privileged status for the components
as individual parts. Classification principles, such as GRI
2(a), which apply at the time articles are entered, or
withdrawn from warehouse for consumption, do not apply to
articles placed in an FTZ, except when these principles must
be applied to articles in an FTZ, such as in a claim for
privileged status.
Sincerely,
John Durant, Director
Commercial Rulings Division
2cc: AD NY Seaport
1cc: Chief, CIE
1cc: Director, Commercial Rulings
1cc: Chief, Entry Branch
1cc: Director, Trade Ops.
1cc: Matt Rohde
1cc: Director, International Nomenclature Staff
1cc: AC, Commercial Ops
Continue sua pesquisa no ChatGPT ou Claude
Conecte o Omnilex para pesquisar o corpus jurídico pelo seu assistente de IA.