Unassembled components, for golf cars, not constituting incomplete unassembled golf carts; essential character; NY 847602 revoked; not substantially complete; entireties

HQ 081999 December 10, 1990 CLA-2 CO:R:CV:G: 081999 JLV CATEGORY: Classification TARIFF NO.: Kenneth J. Pierce, Esq. Willkie Farr & Gallagher Three Lafayette Centre 1155 21st Street, NW. Washington, D.C. 20036 RE: Unassembled components, for golf cars, not constituting incomplete unassembled golf carts; essential character; NY 847602 revoked; not substantially complete; entireties Dear Mr. Pierce: In a letter dated March 18, 1988, as supplemented by letters of May 16 and May 26 and June 24, 1988, you request on behalf of your client a ruling on the tariff classification of certain golf car "kits". The transactions described in your letter of March 18 were prospective at that time. However, as you indicated in your letter of May 26, a transaction similar to "Transaction No. 2" has become current. Your request involves classification for purposes of entries made under the former tariff schedules, the Tariff Schedules of the United States (TSUS) and classification for purposes of entries made under the Harmonized Tariff Schedule of the United States (HTSUSA). FACTS: In each of the five proposals ("transactions") that follow, the unassembled components will be packed in bulk rather than put up in individual kits containing unassembled components for one golf car. The gas engines and the transmissions will be imported in each of the five proposals. Unless otherwise stated, the containers of these bulk components will be on the same vessel and entered together. The difference between each proposal or transaction is the number and kind of components that are proposed for each shipment. - 2 - First, these elements are common to the first four transactions: the engine and the transmission assemblies will always be imported with the other components, except as noted in Transaction 1(a); the components will always be in bulk; two structural pieces, which appear to be the welded frame for the golf car, and a welded reinforcement section onto which the rear cowling and tray will be attached, will be manufactured in the United States, except as noted in Transaction 1; most of the seals and the nuts, bolts, washers, and similar fasteners will be imported from Japan, as well as the front wheel hubs, steering gear box, tie rod components, steering wheel, steering linkages and front suspension arms, rear axle shafts and wheel hubs, starter and generator, fuel pump assembly, igniter assembly, fuel tank, muffler, front upper cowling and two backing plate components, and miscellaneous structural brackets, plates, and pedal components. The wheels and tires are not included in the components that are to be imported. In view of the fact that some components will always be made in the United States (except as noted in Transaction 1), no transaction will ever consist of the required parts for a complete, unassembled golf car. Exhibit 5 of your letter of March 18, 1988, identifies the specific components ("A," "B," "C," "D" or "E") that will be excluded from the components to be imported in each proposal. In Transaction 1 you propose to separate the free-rate items and import them in one container, either in a separate shipment (Transaction 1(a)) or in the same shipment with containers of the other unassembled components (Transaction 1(b)). The free-rate items consist of the engine assembly and various washers to be used in the assembly of the golf cars. The other components, packaged and shipped in bulk, constitute all of the remaining components for a specific number of golf cars. You describe the free-rate components and these other components as constituting complete knock down or CKD "kits." In Transaction 2 you propose to exclude the following items (listed as "A") from the imported bulk components: various cables and wires for linkage of the throttle, brakes, starter, and shift; bumper pads and body pads for protection and for noise reduction; various body panels, which include inside panels for wheel wells, exterior rear fender and seat panels, front cowl and tray or dash panels, and the front flooring; cushions and seats. In Transaction 3 you propose to exclude, in addition to the items excluded in Transaction 2, the following items (listed as "B"): welded frame on which the engine is mounted - 3 - and to which the rear suspension is attached; side and upper trim for cowl; steering column; hinges; various pads; battery support plate; buzzer; and rear brake drums. In Transaction 4 you propose to exclude the following additional items (listed as "C"): steering shaft; bumper components; filters; dampers; body panels; parts of the steering and support linkage; brackets and axle support components; structural floor and side plates; bag supports and various reinforcing plates and cover panels for the golf car sides. In Transaction 5 you propose to exclude other components (listed as "D" and "E") which would leave only the following to be imported: engine assembly; transmission assembly; and an emblem. Although the proposed transactions were prospective at the time of your request, a transaction similar to the second proposed transaction has become current. You identified this change in your letter of May 26, 1988. The Customs officers at the port of entry are aware of your request for a ruling. You request a ruling on the application of the "doctrine of entireties" under the TSUS to the proposed transactions, and a ruling on the application of General Interpretative Rule (GRI) 2(a), HTSUSA. ISSUES: 1. Do the unassembled, bulk components in any of the proposed transactions constitute incomplete golf cars, unassembled, within the meaning of GRI 2(a), HTSUSA? 2. Under the doctrine of entireties, or under General Interpretative Rule 10(h), TSUS, are the unassembled, bulk components in any of the proposed transactions classifiable as unassembled, incomplete golf cars under the provision for other motor vehicles in item 692.10, TSUS? LAW AND ANALYSIS: In a ruling of April 25, 1989 (file 083222), we addressed the application of GRI 2(a), HTSUSA, to motor vehicle components which, at the time of importation, were unassembled and did not constitute a complete article. GRI 2(a) provides for classification of an article presented 1) incomplete or unfinished, or 2) unassembled or disassembled. In this case, the articles are both incomplete and unassembled. The tests for these two conditions are distinct. First, an incomplete - 4 - or unfinished article must have the essential character of the complete or finished article. Second, if unassembled at the time of importation, they must be "unassembled" as the term is used in GRI 2(a). An incomplete or unfinished article, even if unassembled or disassembled, falls within GRI 2(a) if, in its assembled condition, it has the essential character of the complete or finished article. We conclude that the importations of bulk components, even if consisting of all the components to assemble 100 complete golf cars, are not goods "unassembled" within the meaning of GRI 2(a). Therefore, we need not determine whether the importations are goods "incomplete" or "unfinished" which have the essential character of the goods "complete" or "finished." The Explanatory Notes (EN) to the Harmonized Commodity Description and Coding System (HS) are the official interpretation for the HTS at the international level. EN 2(a)(V) and (VII) provide some guidance on the application of GRI 2(a) to unassembled goods: (V) The second part of Rule 2 (a) provides that complete or finished articles presented unassembled or disassembled are to be classified in the same heading as the assembled article. When goods are so presented, it is usually for reasons such as requirements or convenience of packing, handling or transport. [Underscoring added for emphasis] * * * * * * * (VII) For the purposes of this Rule [2(a)], "articles presented unassembled or disassembled" means articles the components of which are to be assembled either by means of simple fixing devices (screws, nuts, bolts, etc.) or by riveting or welding, for example, provided only simple assembly operations are involved. [Underscoring added for emphasis] - 5 - As noted in our ruling letter of April 25, 1989 (file 083222), concerning components for a pickup truck that were to be imported in bulk, the shipment of bulk components does not have any apparent relation to the requirements necessary to the packing, handling, or transport of motor vehicles. Nor does the condition of the components in the shipment have any apparent relation to convenience in the packing, handling, or transport of motor vehicles. While this is not dispositive, the additional facts surrounding the reasons for, and the condition of the goods at importation are relevant. Unlike a CKD golf car imported as an identifiable "kit," the components in the proposed transactions are not CKD kits, but are components in bulk, i.e. inventory for a golf car assembly operation. The assembly plant is designed to process 100 units at a time. The bulk components appear to be packaged and shipped to accommodate the needs of golf car production facility rather than articles recognized as unassembled goods. Furthermore, the nature of the assembly operation, in this case, is not a "simple" assembly. With the exception of the engine, transmission, and certain electrical motors, the assembly does not involve the joining of distinct subassemblies. We do not consider an assembly line operation in which a motor vehicle is built piece by piece from the frame up as a "simple" assembly within the meaning of GRI 2(a). The dissociation of parts from individual vehicles, the parts presented in bulk, and the nature of the required assembly process after importation are evidence that the parts are not presented together so that they can be reasonably associated with individual CKD golf cars. Rather, the parts are in the nature of parts inventory for the production of golf cars and, as such, do not fall within the meaning of the term "unassembled" for purposes of GRI 2(a), HTSUSA. In a ruling of December 27, 1989 (file 847602), issued in response to a request by your firm on behalf of your client, Yamaha Motor Manufacturing Corporation of America, Customs held that importations of bulk components (complete knock down condition) for 100 or 200 recreational water vehicles, although lacking the hull, deck, and flotation material, were classified as other vessels for pleasure or sports in subheading 8903.99.00, HTSUSA, because the incomplete water vehicles had the "essential character" of the complete article. We have reviewed the facts on which that ruling was based, and we are revoking ruling 847602 of December 27, 1989. The hull and the deck, i.e., that part of the water craft that forms the hull and gives it the "boat-like" character, are missing. Therefore, the articles as imported, even if assembled, do not have the essential character of the completed articles as required by GRI 2(a), HTSUSA. - 6 - Under the TSUS, classification of unassembled or incomplete articles was subject to different rules. In this case (golf cars), the relevant rules are the doctrine of entireties and General Interpretative Rule 10(h), TSUS. The doctrine of entireties is a judicially developed rule of interpretation. This doctrine and General Interpretative Rule 10(h), although related, should not be considered as the same rule. The doctrine of entireties applies to unassembled articles 1) if, when joined together, they form a complete article of commerce into which the identities of the individual components are merged, and 2) if the unassembled components are intended to be joined together. Altman & Co. v. United States, 13 Ct. Cust. Appls. 315, T.D. 41232 (1925); Donalds Ltd., Inc. v. United States, 32 Cust. Ct. 310, C.D. 1619 (1954); Stella D'Oro Biscuit Co., Inc. v. United States, 570 F.2d 945 (CCPA 1978). The purpose of the rule is to give effect to a basic principle of classification that an article is dutiable in its condition as imported, and that the actual nature of the commercial entity, whether assembled or unassembled, must control. Classification, of course, depended on the tariff provision, and at the time of the development of this rule, some tariff descriptions provided for an article "whether finished or unfinished." If a tariff provision did not provide for an article, whether finished or unfinished, it was arguable, and so held in numerous judicial opinions, that the doctrine of entireties did not apply to unassembled articles that were incomplete. See, for example, the decision in United States v. Baldt Anchor, 58 CCPA 122, C.A.D. 1051 (1972), in which five of six machines for a welding apparatus did not constitute an entirety, either with the sixth machine which was imported separately or as an incomplete welding apparatus, because it lacked one machine. Therefore, when the TSUS was enacted, Rule 10(h) was an attempt to resolve this issue. Rule 10(h) incorporated the "assembled or not assembled" concept of the doctrine of entireties, and, to provide uniform treatment to articles that were unfinished or incomplete, included articles that were "finished or not finished" at the time of importation. If an article is not finished, it must be substantially complete, as discussed by the court in Daisy- Heddon, Div. Victor Comptometer Corp. v. United States, 600 F.2d 799 (CCPA 1979), to be classified under the provision for the article. As stated in the facts of this case, the unassembled imported components do not constitute (except in Transaction 1(b)), in any one shipment, sufficient components to assemble one or more complete golf cars. In Transaction 1(a), if the engine assemblies and other components are shipped separately, then they cannot be classified together with the components shipped on a separate - 7 - vessel. The doctrine of entireties prohibits the combining of separate shipments for tariff classification purposes. In Transaction 1(b), if the engine assemblies and other components are shipped together, then the importation of these components, even if packaged in bulk, would fall within the doctrine of entireties if (1) the components consist of all the parts necessary to complete a specific number of golf cars, (2) the components are intended to be used in the assembly of those specific cars, and (3) the actual segregation of the components after importation is sufficient to demonstrate that the imported components are not, in fact, merely placed into inventory with like components from other shipments. Demuth Steel Products Company v. United States, 12 CIT___ (Slip Opinion 88-70, decided June 2, 1988). Based on the statements of fact (all the components will remain together and be used together; there will be no mixing of components from different lots of 100; all of the components for 100 complete vehicles are in each shipment) submitted in your letters of March 18, 1988, May 16, 1988, and June 24, 1988, we conclude that these components are classifiable under the doctrine of entireties as golf cars in item 692.10, TSUS. Concerning Transactions 2 through 5, the question is whether the engine assemblies and the other components constitute an identifiable number of substantial