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HQ 555505

December 28, 1989

CLA-2 CO:R:C:V 555505 KAC


TARIFF NO.: 9802.00.80

Mr. John W. Cain
Cain Customs Brokers, Inc.
421 Texano
P.O. Box 150
Hidalgo, Texas 78557

RE: Applicability of partial duty exemption in subheading 9802.00.80, HTSUS, to automobile condensers imported from Mexico.

Dear Mr. Cain,

This is in response to your letters of October 6, and November 16, 1989, on behalf of Wells Manufacturing Company, requesting a ruling on the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to automobile condensers imported from Mexico. Photographs showing the components and stages of the operation were submitted for examination.


Wells Manufacturing Company plans to build condensers for automobiles in Mexico. The condenser is designed to accumulate and hold an electric charge for the automobile. The origin of the majority of condenser components will be the U.S. However, your November 16, 1989, letter mentioned that some components, such as the eyelet (grommet), may be made in Mexico. The described assembly process consists of:

(1) winding foil and mylar into a cylinder; (2) compressing the cylinder in a press to ensure a uniform length;
(3) drying the cylinder;
(4) testing the cylinder for its capacity to hold a 600 volt charge;
(5) cutting to length and stripping the insulated wire, spinning the eyelet onto the wire and sliding the head seal onto the stripped end of the wire;
(6) soldering a contact washer to the wire lead; (7) connecting the wire lead, a pressure washer, a tube, a terminal, and the cylinder to each other on a Bodine machine (now known as the condenser sub-assembly);
(8) testing the condenser sub-assembly for resistance and 18-pound pull;
(9) welding a bracket to the condenser shell; and (10) testing the condenser for shorts.

The attachment operation of the terminal in step 7 can be performed in a number of ways. A majority of the terminals will be attached on the Bodine machine (as described in step 7) or by means of a machine which stamps out a terminal from brass metal and attaches the terminal to the condenser sub-assembly in one pass. Another method used to attach the terminal involves the use of pre-formed terminals on a reel which are fed into a machine. In one motion, the machine separates the terminal from the reel and affixes it to the condenser lead wire. This type of terminal attachment is not used in the majority of cases.

Upon completion of the above operations, the automobile condensers will be imported to the U.S.


Whether the foreign operation constitutes an "assembly," thereby entitling the automobile condenser to the partial duty exemption under HTSUS subheading 9802.00.80 when returned to the U.S.


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 10.24, Customs Regulations (19 CFR 10.24).

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 operation. 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 (19 CFR 10.16(c)).

The winding of the foil and mylar to form the cylinder have been found to constitute assembly steps rather than a "further fabrication" within the meaning of the tariff provision. See, General Instrument Corporation v. United States, 61 CCPA 86, C.A.D. 1128, 499 F.2d 1318 (1974), rev'g, 70 Cust.Ct. 151, C.D. 4421, 359 F.Supp. 1390 (1973), and General Instrument Corporation v. United States, 72 Cust.Ct. 86, C.D. 4507 (1974), appeal dismissed, 62 CCPA 109 (1974).

Regarding the compressing of the cylinders, we understand that this operation is performed to ensure that each is the same length to enable it to fit into the housing unit. The degree to which each cylinder is compressed depends upon the slight variations in size of the cylinders. We believe that this operation is incidental to the assembly process in view of section 10.16(b)(5), Customs Regulations (19 CFR 10.16(b)(5)), which provides that incidental assembly operations include "[a]djustments in the shape or form of a component to the extent required by the assembly being performed abroad...." Moreover, we note that in General Instrument, 61 CCPA 86, the court found that precision shaping of coil to fit the contours of a plastic liner on which it was to be mounted was considered incidental to the assembly process. The compressing operation also appears to be a minor one in comparison to the total assembly process as the information you have provided indicates that it represents only 5% of the time and 7.4% of the cost to assemble the finished condenser.

The drying of the cylinder is also considered incidental to the assembly process. General Instrument, 72 Cust.Ct. 86. All of the testing operations performed are operations incidental to assembly pursuant to section 10.16(b)(7), Customs Regulations (19 CFR 10.16(b)(7)). The operations of cutting to length and stripping the insulated wire are considered operations incidental to the assembly process pursuant to section 10.16(b)(6), Customs Regulations (19 CFR 10.16(b)(6)). See also, General Instrument, 72 Cust.Ct. 86. Acceptable assembly operations occur when the eyelet (grommet) is spun onto the wire and the head seal is slid onto the stripped end of the wire, when the contact washer and wire lead are soldered together, when the bracket and condenser shell are welded, and when the lead wire, pressure washer, tube, terminal and cylinder are connected to each other on the Bodine machine. See, 19 CFR 10.16(a). An acceptable assembly operation also occurs when another machine cuts the pre-formed U.S. terminal from a reel and attaches it to the condenser sub- assembly. See, 19 CFR 10.16(a). However, where the terminal is stamped out of brass metal immediately before its assembly to the condenser sub-assembly, it will not be entitled to the duty exemption under subheading 9802.00.80, HTSUS, as it clearly has been subjected to a further fabrication prior to its assembly.

With respect to those components, such as the eyelets and terminals, which may be manufactured both in Mexico and the U.S., ("dual-sourced" parts), only the components of U.S. origin may receive the benefits of this tariff provision. Moreover, we have consistently taken the position that under section 10.24, Customs Regulations (19 CFR 10.24), a subheading 9802.00.80, HTSUS, allowance may be granted only if the importer can demonstrate, for each and every entry for which the allowance is claimed, that those components claimed to be products of the U.S. are, in fact, products of the U.S. In addition to the documentary materials required to be presented with each entry, the importer and assembler are required to establish reliable controls, including the strict physical segregation of U.S. and foreign components and the maintenance of any other records pertaining to the U.S. components, so that the district director can identify by audit, if necessary, the specific components of U.S. origin in particular shipments for which a subheading 9802.00.80, HTSUS, allowance is claimed. See, for example, Headquarters Ruling Letter 071136 dated December 27, 1983.

Thus, in regard to the "dual-sourced" parts used in the assembly of the condensers here, the importer must establish to the satisfaction of the district director the precise quantity and identity of the U.S. components on an entry-by-entry basis. For example, if, in regard to a particular shipment, the importer is unable to establish the precise quantity and identity of the U.S. terminals incorporated in the condensers (as opposed to the terminals of Mexican manufacture), then no allowance in duty may be made under subheading 9802.00.80, HTSUS, for any of the terminals incorporated in the imported condensers.

As the U.S. components to be used in the assembly process (except for the terminals that are stamped out of brass metal abroad) will be exported in condition ready for assembly without further fabrication, will not lose their physical identities in the assembled article, and will not be advanced in value or improved in condition except by assembly operations and operations incidental thereto, the returned automobile condensers will be eligible for the partial duty exemption under HTSUS subheading 9802.00.80.


On the basis of the photographs and information provided, it is our opinion that, with the exception of the stamping out of terminals abroad, the operations performed to the condenser components are considered proper assembly steps or operations incidental to the assembly process. Therefore, the imported condensers may be entered under subheading 9802.00.80, HTSUS, with allowances in duty for the cost or value of the U.S. components incorporated therein (except for terminals that are stamped out of brass metal abroad). In regard to components sourced both in the U.S. and abroad, reliable controls must be established to ensure that the precise quantity and identity of the U.S. components can be determined on an entry-by-entry basis.


John Durant, Director

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