United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 1993 HQ Rulings > HQ 0556734 - HQ 0557035 > HQ 0556789

Previous Ruling Next Ruling

HQ 556789

October 26, 1992

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


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.


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.


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.


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.


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.


John Durant, Director

Previous Ruling Next Ruling

See also: