CLA-2 CO:R:C:S 557051 WAW
Ms. Christine Johnson
Robert Bosch Corporation
P.O. Box 10347
Charleston, SC 29418
RE: Applicability of the partial duty exemption under subheading
9802.00.80, HTSUS, to imported electronic control units;
assembly; C.S.D. 85-25; substantial transformation; "product
of"; belting '
Dear Ms. Johnson:
This is in response to your letter of December 9, 1992,
requesting a ruling on the applicability of subheading
9802.00.80, Harmonized Tariff Schedule of the United States
Annotated (HTSUSA), to certain electronic control units to be
imported as part of automobiles. A sample of the merchandise was
submitted for our review.
FACTS:
The Robert Bosch Corporation manufactures electronic control
units in the U.S. which are used in Bosch Anti-lock Braking
Systems (ABS). You state that the articles are produced by a
lengthy, complex, labor-intensive process from hundreds of
components that your client either fabricates from raw materials
or sources from domestic or foreign suppliers. These components
then undergo an assembly process which is subdivided into various
stages of assembly, to create the final product. In the instant
case, you state that the integrated circuits and relay housing
are of German-origin and the capacitors are of Japanese-origin.
The remaining components are all of U.S.-origin.
The Robert Bosch Corporation produces two types of electronic
control units in the U.S. The first type is a stand-alone unit
which is mounted under the passenger seat and encompasses a
number of additional components. The second type is newer,
smaller and more technical than the first type and is
subassembled into the final article.
The U.S. manufacturing processes used in the production of
the electronic control units are as follows:
(1) Automatic Insertion: Integrated circuits are mounted on
beth sides of a printed circuit beard. On the top side,
solder paste is stenciled onto the beard in the areas where
components are needed. These components are then
automatically placed in the paste with a high speed assembly
machine. The beards then pass through an oven to melt the
solder paste and bend these components to the circuit beard.
The foregoing processes (e.g, stenciling paste, component
placement, and oven reflowing) are performed by means of
automated handling equipment.
The next step in Auto Insertion procedure involves inserting
electronic components through the holes in the circuit
beard. High speed insertion equipment automatically inserts
various components through holes in the circuit beard and
cuts the component's legs to the correct length. The two
machines in this area are also tied together by means of
automated handling equipment. The final step in Auto
Insertion is placing components on the bottom side of the
circuit beard. The circuit beard first passes through a glue
machine which puts very small dots of glue on the beard
where components are needed. Components are then
automatically placed in the glue by means of a high speed
assembly machine. The beard then passes through an oven that
cures the glue.
(2) Panel Shearing: The circuit beards in Automatic
Insertion are assembled in a large panel comprised of four
individual circuit beards. The next step involves shearing
the panel into four circuit boards. This is accomplished by
a hydraulic shear machine.
(3) Frame Assembly: An aluminum frame is assembled so that
the circuit beard can be mounted to it. The assembly is
performed by means of an automated assembly line that
includes a robot. Spacers, insulation plates, transistors,
holding springs and a diode are all mounted onto the frame
at this stage in the production line by means of an
automatic riveting machine.
(4) Circuit Board to Frame Assembler: In the next stage of
production, the assembled circuit beard is attached to the
per-assembled frame. A connector is also attached to the
circuit beard on this line. Both of these operations are
performed by semi-automatic riveting machines.
(5) Hand Insertion/Wave Solder: After the beard is mounted
onto the frame, additional components (e.g, hybrids,,
crystal, quartz and integrated circuits) which cannot be
mounted automatically are inserted by hand onto the board.
The electronic control units are then transported
automatically through a soldering machine. This machine
applies flux to the electronic control unit, heats it, and
solders all of the bottom side components to the electronic
control unit.
(6) Test: A visual inspection of the electronic control unit
is performed to verify that all components are in place and
have the correct value. The electronic control units are
tested using extreme temperature. They are transported to a
hot chamber, fully tested for function, and then transferred
to a cold chamber, fully tested for function, and lastly
transported to the final assembly line.
(7) Final Assembly Test: The final step involves mounting
the electronic control unit to an aluminum housing and
performing a final function test. The test data from this
test is stored in a computer by a serial labeling number for
fifteen years. This assembly line also uses automated
material handling, a vision system to read data, and torque-controlled screw drivers for assembling the housing.
You claim that in certain instances, the finished electronic
control units are sold to foreign automobile manufacturers, who
will bolt the units into their automobiles. Certain automobiles
containing the electronic control unit will then be returned to
the U.S. for resale.
ISSUES:
(1) Whether the electronic control units will qualify for a
duty allowance under subheading 9802.00.80, HTSUSA, when returned
to the U.S. as part of automobiles.
LAW AND ANALYSIS:
Subheading 9802.00.80, HTSUSA, 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 subheading 9802.00.80, HTSUSA, must be
satisfied before a component may receive a duty allowance. An
article entered under this t~riff 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).
For a component to be eligible for subheading 9802.00.80,
HTSUSA, treatment it must first be a "product of" the U.S.
According to section 10.12(e), Customs Regulations (19 CFR
10.12(e)), a "product of the United States" is an article
manufactured within the customs territory of the U.S. and may
consist wholly of U.S. components or materials, of U.S. and
foreign components or materials, or wholly of foreign components
or materials. If the article consists wholly or partially of
foreign components or materials, the manufacturing process must
be such that the foreign components or materials have been
substantially transformed into a new and different article, or
have been merged into a new and different article. A substantial
transformation occurs when, as a result of manufacturing
processes, a new and different article emerges, having a
distinctive name, character or use, which is different from that
originally possessed by the article or material before being
subjected to the manufacturing process. See Texas Instruments.
Inc. v. United States, 69 CCPA 152, 681 F.2d 778 (1982).
The first issue that we must address is whether the German
and Japanese-origin components which are used in the assembly of
the electronic control units in the U.S. are substantially
transformed into "products of" the U.S.
We have previously held in C.S.D. 85-25 dated September 25,
1984 (Headquarters Ruling Letter (HRL) 071827), that the process
of incorporating numerous component parts onto a printed circuit
beard subassembly constituted a processing sufficiently complex
to result in the subassembly being considered a substantially
transformed constituent material of the final article (matrix
printer) for purposes of the Generalized System of Preferences
(GSP). The focus of C.S.D. 85-25 was a PCBA which was produced by
assembling in excess of 50 discrete fabricated components (e.g.,
resistors, capacitors, diodes, transistors, integrated circuits,
sockets, and connectors) onto a printed circuit board. Customs
determined that the assembly of the PCBA involved a large number
of components and a significant number of different operations,
required a relatively significant period of time as well as
skill, attention to detail, and quality control, and resulted in
significant economic benefit to the country of assembly from the
standpoint of both the value added to the PCBA and the overall
employment generated thereby. In addition, Customs found in
C.S.D. 85-25 that the PCBA represented a distinct article which
was different from both the components from which it was made and
the matrix printer into which it was incorporated and, therefore,
the assembled PCBA constituted an intermediate article within ~he
meaning of 19 CFR 10,177(a).
In the present case, we are of the opinion that the foreign
components (i.e., integrated circuits, capacitors and relay
housing) used in the production of the electronic control unit
are substantially transformed into a "product of" the U.S. You
state that in excess of 70 discrete fabricated components (e.g.,
resistors, capacitors, diodes, transistors, integrated circuits,
connectors, a printed circuit board, and a housing) are used to
produce the final article. These separate components imported
into the U.S. acquire new attributes, and we find that the final
article differs in character and use from the component parts of
which it is composed. Moreover, the production of the electronic
control unit involves substantial operations (mounting,
soldering, riveting, quality control testing, bolting, gluing,
curing, machining, etc.), which increase the value of the
individual components, endow them with new qualities and result
in an article with a new and distinct commercial identity.
On the basis of the information submitted, we are of the
opinion that the assembly of the electronic control units in the
U.S. results in a substantial transformation of the German and
Japanese-origin components into "products of" the U.S. The
remaining issue is whether the electronic control unit is
eligible for the duty exemption available under subheading
9802.00.80, HTSUSA, when it is exported, incorporated into an
automobile by means of bolting, and then subsequently returned to
the U.S.
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.
The operation which results in securely joining the
electronic control unit to the automobile by means of bolting is
considered an acceptable assembly operation. See 19 CFR
10.16(a);"HRL 556764 dated October 5, 1992 (securely joining a
hydraulic unit to an automobile by means of bolting is considered
an acceptable assembly operation). Therefore, as the U.S.
components used in the assembly process will be exported in
condition ready for assembly without further fabrication, will
not lose their physical identity in the assembled article, and
will not be advanced in value or improved in condition except by
assembly operations, the returned electronic control unit will be
eligible for an allowance in duty under subheading 9802.00.80,
HTSUSA.
HOLDING:
Based on the information and sample submitted, we are of the
opinion that the materials imported into the U.S. and assembled
into the electronic control unit are substantially transformed
into a "product of" the U.S. Additionally, the foreign operations
which consist of bolting the electronic control unit into an
automobile is an acceptable assembly operation. Therefore, the
imported automobile may be entered under subheading 9802.00.80,
HTSUSA, with an allowance in duty for the cost or value of the
electronic control unit, upon compliance with the documentary
requirements of 19 CFR 10.24.
Sincerely,
John Durant, Director
Commercial Rulings Division