CLA-2 CO:R:C:S 556069 DSN

Mr. Thomas H. Givens
Manager of Distribution
Pirelli Cable Corporation
P. 0. Box 1097
Greenwood, South Carolina 29648

RE: Applicability of partial duty exemption to insulated electrical wire from Canada; C.J. Tower; 553244; 555564; 731806

Dear Mr. Givens:

This is in response to your letter of May 29, 1991, requesting a ruling on the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to certain insulated electrical wire to be assembled in Ontario, Canada, before returning to the U.S. Samples were submitted with your request.

FACTS:

According to your submission, copper wire strand and compounds in pellet form of U.S. origin are exported to Canada where the pellets are heated and extruded (volcanized) to form insulation for the copper wire conductor. The resulting insulated electrical wire is then wound on spools which are placed in boxes for shipment to the U.S. The spools and boxes may be of U.S. or Canadian origin.

ISSUE:

Whether the insulated electrical wire will qualify for the partial duty exemption available under subheading 9802.00.80, HTSUS, when returned to the U.S.

LAW AND ANALYSIS:

Subheading 9802.00.80, HTSUS, provides a partial duty exemption for: 2

[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, laminating, sewing, or the use of fasteners.

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 operations. 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 subheading 9802.00.80, HTSUS, to that component. See 19 cfr 10.16(c).

The process of encasing the copper wire by heating the compounds in pellet form and extruding the molten rubber around the wire is considered an acceptable assembly operation under subheading 9802.00.80, HTSUS. See C.J. Tower & Sons of Buffalo, Inc. v. United States, 62 Cust. Ct. 643, C.D. 3840, 304 F. Supp.

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1187 (1969) (extrusion process whereby foreign polyethylene is made from pellets in liquid form of high viscosity and is formed with sheets of U.S. polyester is acceptable assembly since polyethylene becomes a solid upon completion of the assembly process). See also Headquarters Ruling Letter (HRL) 553244 of October 3, 1984 (encasing fiber optics by extrusion of polyethylene material constitutes an acceptable assembly).

Therefore, allowances in duty may be made under subheading 9802.00.80, HTSUS, for the cost or value of the copper wire of U.S. origin. However, no allowance in duty may be made under this tariff provision for the cost or value of the compounds in pellet form as they are not exported from the U.S. in condition ready for assembly without further fabrication as required by clause (a) of the statute. The heating extrusion/volcanization process performed abroad clearly demonstrates that the pellets require further fabrication before they can be joined to the copper wire. Moreover, the heating and extrusion process causes the pellets to lose their physical identity by change in form and shape, contrary to clause (b) of the statute. See HRL 555564 of May 1, 1990 (no allowance in duty may be made under subheading 9802.00.80, HTSUS, for the polyvinyl chloride into which the antenna structure of a tuck pack assembly was dipped. )

With respect to the packaging materials (i.e., the spools and boxes), if they are of U.S. origin, they will be entitled to duty-free treatment under subheading 9801.00.10, HTSUS. Subheading 9801.00.10, HTSUS, provides for the free entry of products of the U.S. that have been exported and returned without having been advanced in value or improved in condition by any process of manufacture of other means while abroad, provided the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1), are met. We held in HRL 731806 of November 18, 1988, that containers of U.S. origin are entitled to duty-free treatment under subheading 9801.00.10, HTSUS, when returned with their contents. However, if the spools and boxes are of Canadian origin, their cost or value would be included as part of the dutiable value of the insulated electrical wire.

HOLDING:

On the basis of the information and samples submitted, we conclude that the assembled insulated electrical wire from Canada

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is eligible for partial duty exemption under subheading 9802.00.80, HTSUS, with allowances in duty only for cost or value of the copper wire strand, provided the documentation requirements of 19 CFR 10.24 are met.


Sincerely,

John Durant, Director
Commercial Rulings Division