OT:RR:VSP: H335581 RSD
Center Director
Electronics Center of Excellence and Expertise
U.S. Customs and Border Protection
301 E. Ocean Blvd.
Suite 1400
Long Beach, CA 90802
RE: Internal Advice; Applicability of Subheading 9802.00.80 to Wire Harnesses
Dear Center Director:
This is in response to your memorandum dated November 9, 2023, concerning a
ruling request from Quarles, the counsel for Global Engineered Products, Inc. (GEP),
concerning the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of
the United States (HTSUS) to wire harnesses imported from China. In your
memorandum, you indicate that GEP made an initial request for a binding ruling. Since
GEP has transactions pending involving the wire harnesses under consideration, our
office is issuing this Internal Advice decision pursuant to 19 CFR § 177.11.
FACTS:
GEP engineers, designs and sells wire harnesses to customers in the United
States for use in small machinery and equipment. Counsel provided examples of the
wire harnesses in an exhibit attached to its submission. The wire harnesses are
currently imported under subheading 8544.43.90, HTSUS. The wire harnesses
essentially serve to organize the wires for easy implementation into machines and
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equipment such as small tractors, snowmobiles, snow blowers, and other small
equipment. They are intended to transmit power or information in a uniform or
streamlined way. Generally, a wire harness is an assembly of multiple parts including
connectors, conductors, cables, tubes, wire, and tape. As some of the component parts
of the imported harnesses are fabricated in the United States (the “U.S. Components”),
GEP is seeking a determination on the applicability of subheading 9802.00.80, HTSUS.
After an acceptable design is created, GEP and Precision Cable Assemblies
(PCA) identify all the materials needed and all the assembly steps required to build the
wire harness.
Once the design is finalized, GEP’s purchasing department determines the
sources for the production materials and negotiates prices. Thereafter, GEP’s customer
service department engages the customer in their production needs by obtaining
schedules and loading the appropriate demand. GEP’s quality department engages in
the production part approval process to ensure that each part meets the required
specifications and requirements and after its approval.
The following materials are generally used to produce a wire harness
• Cable
• Multi-conductors
• Connectors
• Harness covering (includes convoluted fiberglass acrylic sleeve
nylon braid, electrical tape, fabric tape, heat resistance or reflective
tape
• Ferrule
• Grommet (includes strain relief, wire seal overmolded grommet)
• Tubing (includes shrink tubing, PVC sleeve)
• Clips
• Wire tie (includes double headed zip ties, and other zip ties)
• Grease
Some of the components listed above are fabricated in the U.S. and procured by
GEP in the U.S. and sent to China for assembly. For components fabricated in the
United States, GEP procures certificates of origin. PCA sends them—along with the
engineering designs—to either Precision Cable Assemblies (Qingdao) LLC or Qingdao
Global Engineered Products, Inc. in China for assembly into harnesses. The finished
assembled products are then imported back into the United States by GEP for their U.S.
customers.
The assembly includes organizing the wires, taping and/or tying them together,
and applying sleeves or tubing to the wires. Specifically, hand assembly of the wire
harness is necessary to route wires through the sleeves and to apply fabric tape where
needed, such as on branch outs from the wire strands. Terminals are crimped onto the
wires, and where more than one wire needs to be attached to one terminal, multiple
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crimping will be used. Insertion of one sleeve into another is done manually, and so is
the fastening of any strands with tape, clamps, or cable ties. Cable connectors and
grease are also used in the assembly process.
To identify which components were fabricated in the United States, GEP
procures certificates of origin from the suppliers of the U.S. components. The U.S.
components are tracked on the bill of materials sent to China. It is claimed that the
foreign assembly operations follow a process to segregate and track the U.S.
components through the assembly process. This allows the assembler to determine the
U.S. components used in the specific wire harness exported to the United States. The
value of the U.S. components then appears as a separate line item on the invoice from
the Chinese assembler to GEP in summary.
GEP’s counsel claims that the procurement and the assembly process prohibit
the precise tracking of each of the U.S. components, and a methodology is proposed to
determine the costs of the U.S. components assembled into the imported harness for
purposes of deducting that value under subheading 9802.00.80, from the declared
customs value. The cost methodology that GEP is proposing to use would be a cost
estimation methodology. Under GEP’s proposal, each calendar year GEP would
generate a price list for the U.S. components sold to the assembler in China. The price
list would be based on the prices of the U.S. components sold to the assembler in
China, from the prices paid for the U.S. components in the prior calendar quarter.
Counsel maintains that this approach would be conservative because the actual costs
would of the components would be far higher due to inflation. Counsel further contends
that the costs on the price list used by GEP to apply subheading 9802.00.80 would
generally be lower than the prices that GEP actually paid for the U.S. components.
The Electronics Center of Excellence and Expertise (CEE) received
documentation from GEP in support of their subheading 9802.00.80, HTSUS, claim;
however, the CEE indicates that is not clear who prepared the certifications, whether it
is the “manufacturer” or the “supplier”. Furthermore, some suppliers who certified the
country of origin of a component may not be the same as the manufacturer of that
component. It was noted that GEP’s suppliers appear to have purchased components
from other suppliers and this information was not relayed to GEP. In many instances,
the suppliers did not divulge sourcing information. In addition, many of GEP’s
certifications contained incomplete or vague certifications because they stated that the
“producer is available upon request.”
The Center further notes in its claim for the partial duty exemption under
subheading 9802.00.80, HTSUS, GEP is seeking to use a “proposed” cost estimation
methodology to determine the costs of United States components; but it did not take the
further step of stating how the “estimated” costs to “actual” costs will be reconciled.
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ISSUE:
Whether the imported wire harnesses assembled in China with some U.S.-origin
central core components, qualify for a partial duty exemption under subheading
9802.00.80, HTSUS.
LAW AND ANALYSIS:
Subheading 9802.00.80, HTSUS, provides a partial duty exemption for:
Articles . . . 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[.]
In other words, under subheading 9802.00.80, HTSUS, duty is assessed
on the full value of the article, less the cost or value of the U.S. components.
All three requirements of subheading 9802.00.80, HTSUS, must be satisfied
before an article may receive a duty allowance. An article entered under this tariff
provision is subject to duty upon the full appraised value of the imported assembled
article, less the cost or value of the U.S. components assembled therein, upon
compliance with the documentation requirements of 19 C.F.R. § 10.24.
Section 10.14(a), Customs and Border Protection (CBP) Regulations (19 C.F.R.
§ 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 subject to operations incidental to the assembly either
before, during, or after their assembly with other components. Materials
undefined in final dimensions and shapes, which are cut into specific
shapes or patterns abroad are not considered fabricated components.
Section 10.16(a), CBP Regulations (19 C.F.R. § 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. See 19
C.F.R. § 10.16(a). However, any significant process, operation or treatment whose
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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 C.F.R. § 10.16(c).
Regarding the determination of the cost or value of the U.S. components, 19
C.F.R. 10.17 provides the following:
The value of fabricated components to be subtracted from the full value of the
assembled article is the cost of the components when last purchased, f.o.b.
United States port of exportation or point of border crossing as set out in the
invoice and entry papers, or, if no purchase was made, the value of the
components at the time of their shipment for exportation, f.o.b. United States port
of exportation or point of border crossing, as set out in the invoice and entry
papers. However, if the appraising officer concludes that the cost or value of the
fabricated components so ascertained does not represent a reasonable cost or
value, then the value of the components shall be determined in accordance with
section 402 or section 402a, Tariff Act of 1930, as amended (19 U.S.C. 1401a
1402).
19 C.F.R. § 10.18 further provides that:
As in the case of the appraisement of any other import merchandise (see
sub-part C of part 152 of this chapter), the full value of assembled articles
imported under subheading 9802.00.80 Harmonized Tariff Schedule of the
United States (HTSUS) (19 U.S.C. 1202 is determined in accordance with
19 C.F.R. 152.100 et seq.
Regarding updating cost data, 19 C.F.R. 10.21 provides:
When a claim for the exemption is predicated on estimated cost data
furnished either in advance of or at the time of entry, this fact should be
clearly stated in writing at the time of entry, and suspension of liquidation
may be requested by the importer or his agent pending the furnishing of
actual cost data. Actual cost data must be submitted as soon as
accounting procedures permit. To insure that information used for
customs purposes is reasonably current, the importer shall ordinarily be
required to furnish updated cost and assembly data at least every six
months, regardless of whether he considers that significant changes have
occurred. The 6-month period for the submission of updated cost or other
data may be extended by the port director if such extension is appropriate
for the type of merchandise involved, or because of the accounting period
normally used in the trade, or because of other relevant circumstances.
(Emphasis added)
Section 10.24(a), Customs Regulations (19 C.F.R. 10.24(a)), requires the
submission of a foreign assembler’s declaration with the entry of articles claimed to be
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entitled to the exemption under subheading 9802.00.80, HTS. The declaration must
state that, to the best of the assembler’s “knowledge and belief”, the articles being
imported were assembled, in whole or in part, from components that are products of the
U.S., and must contain certain information concerning the U.S. components, including
their description, their marks of identification, quantity, unit value at time and place of
export from the U.S., the port and date of export from the U.S. and the name and
address of the manufacturer. 19 C.F.R. 10.24(a)(1). The declaration must also include
a description of the assembly operations performed abroad, as well as an endorsement
by the importer certifying the accuracy of the declaration and other documents
submitted
In this case, to determine the value of fabricated components, GEP is proposing
to use a cost estimation methodology. Under GEP’s proposal, each calendar year GEP
would generate a price list for the U.S. components sold to the assembler in China. The
price list would be based on the prices of the U.S. components sold to the assembler in
China from the prices paid for the U.S. components in the prior calendar quarter.
Counsel maintains that this approach would be conservative because the actual costs
of the components would be far higher due to inflation. Counsel further contends the
costs on the price list used by GEP to apply subheading 9802.00.80 would generally be
lower than the prices that GEP actually paid for the U.S. components. However, there
is no indication that the actual costs of the fabricated components that GEP paid will
ever be presented to CBP. As noted above, 19 C.F.R. 10.21 requires that the actual
cost data must be submitted as soon as the accounting procedures permit. Using the
cost information based upon the costs of the materials used in the wire harnesses from
the prior year is not permitted to establish the actual costs of those materials.
Furthermore, as the CEE has determined, we agree that the documents GEP
submitted in support of their claim for the partial duty exemption under subheading
9802.00.80, HTSUS, were unreliable because the certifications presented were often
from the suppliers who are not the actual manufacturers of the components. In many
instances, GEP’s suppliers did not have direct knowledge of the country of origin of the
materials used in making the wire harnesses. These suppliers often appear to have
purchased components from other providers and the information to accurately trace the
components back to their actual manufacturers and the country where they were
originally manufactured is lacking. In addition, the certifications provided by GEP often
contained incomplete/vague certifications because they only stated that the producer is
available upon request, with no follow up provided to CBP.
Therefore, for these reasons, we find that the claim for a partial duty exemption
under subheading 9802.00.80, HTSUS should be denied.
HOLDING:
Based on the information previously described, the documentary requirements of
19 C.F.R. § 10.24 regarding the certifications of the origin of the United States materials
and the requirements for updating cost data provided for in 19 C.F.R. 10.21 have not
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been met. Consequently, the imported wire harnesses under consideration are not
entitled to the partial duty exemption under subheading 9802.00.80, HTSUS.
You are to mail this decision to the Requestor no later than 60 days from the
date of the decision. At that time, the Office of Trade, Regulations and Rulings will
make the decision available to CBP personnel, and to the public on the Customs
Rulings Online Search System (CROSS) at https://rulings.cbp.gov/ which can be found
on the U.S. Customs and Border Protection website at http://www.cbp.gov and other
methods of public distribution.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch