CLA-2 CO:R:C:V 555239 KAC
Mr. Gordon W. Larson
Rudolph Miles & Sons, Inc.
4950 Gateway East
P.O. Box 144
El Paso, Texas 79942
RE: Tariff treatment and country of origin marking requirements
applicable to batteries and an adapter module to be imported
Dear Mr. Larson:
This is in response to your letter dated December 5, 1988,
on behalf of Gates Energy Products Company, requesting a ruling
on the applicability of subheading 9801.00.10, Harmonized Tariff
Schedule of the United States (HTSUS), to batteries and an
adapter module packaged together in Mexico and imported into the
U.S. You also inquire as to the tariff classification and
country of origin marking requirements applicable to the imported
products. Samples were submitted for examination. We regret
the delay in responding to your request.
The completed package being imported for retail sale
contains two rechargeable nickel cadmium size AA batteries and an
adapter module. The adapter module enables the batteries to be
recharged when used with a battery charger (sold separately).
Gates ships U.S.-origin nickel cadmium battery cells and clear
plastic heat shrinkable tubing to its subsidiary in Mexico. The
subsidiary cuts the clear plastic heat shrinkable tubing to
length in order to fit the battery cells. The battery cells are
then inserted into the tubing and the tubing is heat shrunk
around each battery cell. This process is designed to protect
the batteries from electrical shorts. A pressure sensitive label
is then applied. The batteries are then blister packed together
with an adapter module of Haitian origin. The blister packaged
article is then imported into the U.S.
1. Whether the described batteries and adapter module will
be eligible for the exemption from duty in HTSUS subheading
9801.00.10 or subheading 9802.00.80 when imported into the U.S.
2. What is the proper tariff classification of the subject
3. Whether country of origin marking requirements are
applicable to the imported merchandise.
LAW AND ANALYSIS:
I. Applicability of subheadings 9801.00.10 and 9802.00.80, HTSUS
Subheading 9801.00.10, HTSUS, provides for duty-free entry
of U.S. products that are exported and returned without having
been advanced in value or improved in condition by any means
while abroad. Articles satisfying the above conditions of the
statute will be afforded duty-free treatment, provided the
documentary requirements of section 10.1, Customs Regulations
(19 CFR 10.1), are met.
In the instant case, the exported battery cells will be
subjected to an operation which results in the merchandise being
advanced in value or improved in condition. Clear plastic
shrinkable tubing is first cut to length, the battery cells are
placed into the tubing, and the tubing is then heat shrunk around
each of the batteries. We have previously stated that cutting
exported merchandise to length generally results in advancing it
in value and improving it in condition. See, Headquarters Ruling
Letters 555174 dated April 25, 1989, and 554736 dated February
16, 1988. Heat shrinking the tubing around the battery cells
also advances in value and improves in condition the batteries.
The clear plastic shrinkable tubing surrounding each battery
becomes a necessary part of the battery for use by the consumer.
The heat shrinking procedure protects the battery from electric
shorts, thereby rendering it suitable for sale upon return to the
U.S. Since the shrinkable tubing has become a necessary part of
the battery, it is distinguishable from packaging for
transportation or retail sale. See, Headquarters Ruling Letter
079133 dated June 23, 1987, where plastic bags specifically made
to hold barium were found to be used in the administration of the
barium and, therefore, distinguishable from packaging for
transportation or retail sale.
Although the batteries are not entitled to the HTSUS
subheading 9801.00.10 duty exemption, we believe that they are
entitled to an allowance in duty under HTSUS subheading
9802.00.80. HTSUS subheading 9802.00.80 provides a partial duty
[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 U.S. 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).
As your documentation and samples attest, the U.S.
components (battery cells, plastic tubing and labels) meet the
requirements of HTSUS subheading 9802.00.80. The components are
of U.S. origin and are exported in condition ready for assembly.
The cutting to length of the clear plastic shrinkable tubing is
considered an operation incidental to the assembly process
pursuant to section 10.16(b)(6), Customs Regulations (19 CFR
10.16(b)(6)). See also, General Instrument Corporation v.
United States, 60 CCPA 178, C.A.D. 1106, 480 F.2d 1402 (1973),
rev'g, 67 Cust.Ct. 127, C.D. 4263 (1971). Heat shrinking the
plastic tubing around the battery cells is considered an
acceptable assembly operation in view of General Instrument
Corporation v. United States, 70 Cust.Ct. 64, C.D. 4408 (1973).
In that case, precut lengths of tubular sleeving, called "shrink
sleeving," assembled abroad with other components to form
selenium rectifiers, were determined to be entitled to allowances
in duty under the precursor tariff provision to HTSUS subheading
9802.00.80. See also, Headquarters Ruling Letter 555503 dated
March 15, 1990 (heat shrinking heat reactive tubing around a coax
cable is considered an acceptable assembly operation). Moreover,
affixing the label to the battery is an acceptable assembly step
under 19 CFR 10.16(a).
II. Classification of the batteries and adapter module
Classification under the HTSUS is governed by the General
Rules of Interpretation (GRI's). GRI 1 provides, in part, that
"classification shall be determined according to the terms of the
headings and any relative section or chapter notes."
In accordance with GRI 1, the adapter module is prima facie
classifiable in subheading 8504.40.00, HTSUS, which provides for
"electrical transformers, static converters . . . [s]tatic
converters." The nickel-cadmium batteries are prima facie
classifiable in subheading 8507.30.00, HTSUS, which provides for
"[e]lectric storage batteries . . . [n]ickel-cadmium storage
GRI 2 is not applicable since the subject articles are
neither "incomplete or unfinished" nor "mixtures or combinations
. . . of a given material or substance." Accordingly, reference
must be made to GRI 3.
Under GRI 3, when goods are prima facie classifiable under
two or more headings, classification is effected as follows:
(a) The heading which provides the most specific
description shall be preferred to the heading providing a
more general description. However, when two or more
headings each refer . . . to part only of the items in a set
put up for retail sale, those headings are to be regarded as
equally specific in relation to those goods, even if one of
them gives a more complete or precise description of the
(b) . . . [G]oods put up in sets for retail sale, which
cannot be classified by reference to 3(a), shall be
classified as if they consisted of the material or component
which gives them their essential character.
Accordingly, if the subject articles constitute a "set," GRI 3
requires that the respective headings in which the components are
described be regarded a equally specific, thereby requiring
classification based on GRI 3(b).
In accordance with Explanatory Note (X) to GRI 3, the term
"goods put up in sets for retail sale" means goods which:
(a) consist of two different articles which are, prima
facie, classifiable in different headings;
(b) consist of products or articles put up together to meet
a particular need or carry out a specific activity; and
(c) are put up in a manner suitable for sale directly to
users without repackaging.
Inasmuch as the adapter module is prima facie classifiable
in heading 8504, and the nickel-cadmium batteries are prima facie
classifiable in heading 8507, the subject merchandise satisfies
criterion (a). The articles also satisfy criterion (b), because
they "meet a particular need or carry out a specific activity"
by providing the user with rechargeable batteries and an adapter
module for the recharging process. Finally, the subject articles
satisfy criterion (c), because they are imported "suitable for
sale directly to users without repackaging." Therefore, these
articles are classifiable in accordance with GRI 3(b), which
requires classification based on the component which imparts the
set's essential character.
We agree with you that the nickel-cadmium rechargeable
batteries impart the set's essential character. The set
functions as batteries. The main reason for purchasing the set
is to have batteries that can be reused once inserted in the
adapter module and plugged into a separately purchased battery
recharger. Accordingly, the subject merchandise is classifiable
in subheading 8507.30.00, HTSUS, which provides for "electric
storage batteries," dutiable at the rate of 5.1 percent ad
III. Applicability of country of origin marking requirements
Regarding country of origin marking requirements, section
304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304),
generally provides that all articles of foreign origin (or their
containers) imported into the U.S. are required to be legibly,
conspicuously, and permanently marked to indicate the country of
origin to an ultimate purchaser in the U.S. For purposes of
this statute, "country of origin" means the country of
manufacture, product or growth of any article of foreign origin
entering the U.S. Further work or material added to an article
in another country must effect a substantial transformation in
order to render such other country the "country of origin" (See
section 134.1(b), Customs Regulations (19 CFR 134.1)).
Section 10.22, Customs Regulations (19 CFR 10.22),
constitutes an exception to the general rule that the country of
origin of an article is the country where the last substantial
transformation occurs. This provision, which specifies the
country of origin marking requirements for articles entitled to a
duty exemption under HTSUS subheading 9802.00.80, provides as
Assembled articles entitled to the exemption are considered
products of the country of assembly for the purposes of the
country of origin marking requirements of section 304,
Tariff Act of 1930, as amended (19 U.S.C. 1304). If an
imported assembled article is made entirely of American-made
materials, the United States origin of the material may be
disclosed by using a legend such as "Assembled in
from material of U.S. origin," or a similar phrase.
Thus, since the shrink-wrapped battery cells are entitled to
HTSUS subheading 9802.00.80 treatment, they are considered
products of Mexico for country of origin marking purposes and
must be marked accordingly. As this article is assembled abroad
entirely of U.S. components, the battery cells may be marked with
a legend such as, "Assembled in Mexico from material of U.S.
origin," or a similar phrase.
Regarding the adapter module of Haitian origin, merely
packaging this item with the battery cells in Mexico to create a
set will not, under the circumstances of this case, effect a
substantial transformation so as to render Mexico the country of
origin of the module for country of origin marking purposes.
Therefore, the adapter module must be separately marked to
indicate its Haitian origin. Pursuant to 19 CFR 134.32(d), the
container may be marked instead of the individual articles if
marking the container (the blister packaging material in this
case) will reasonably indicate to the ultimate purchaser the
country of origin of the articles. The blister packaging must be
marked to indicate the origin of the individual articles, if the
country of origin on the articles is obscured by the packaging.
Any marking on the container must separately indicate that the
battery is a product of Mexico and that the adapter module is a
product of Haiti.
On the basis of the information and samples submitted, as
the U.S. battery cells and heat shrinkable tubing will be
advanced in value and improved in condition abroad as a result of
the cutting to length and shrinking operations, the completed
battery will not qualify for the duty exemption under HTSUS
subheading 9801.00.10. The imported set, consisting of the
batteries and adapter module, is classifiable under HTSUS
subheading 8507.30.00, dutiable at the rate of 5.1 percent ad
valorem. However, an allowance in duty may be made for the cost
or value of the U.S. components (the battery cells, heat
shrinkable tubing and labels) under subheading 9802.00.80, HTSUS,
upon compliance with the documentary requirements of 19 CFR
10.24. The batteries are considered products of Mexico and the
adapter module is considered a product of Haiti for country of
origin marking purposes and, therefore, they (or the blister
packaging) must be marked accordingly.
Commercial Rulings Division