Request for Partial Reconsideration of Headquarters Ruling Letter 554539 (August 25, 1987)

HQ 544159 December 16, 1988 CLA-2 CO:R:C:V 544159 GRV CATEGORY: CLASSIFICATION TARIFF NO.: 9802.00.80, HTSUS (807.00, TSUS) Stephen L. Gibson, Esq. Arent, Fox, Kintner, Plotkin & Kahn Washington Square 1050 Connecticut Avenue, N.W. Washington, D.C. 20036-5339 RE: Request for Partial Reconsideration of Headquarters Ruling Letter 554539 (August 25, 1987) Dear Mr. Gibson: This is in response to your letter of January 15, 1988, on behalf of the Edelmann Division of Parker Hannifin Corporation, requesting partial reconsideration of our Headquarters Ruling Letter 554539 (August 25, 1987). That ruling held that power steering pumps were not entitled to the partial duty exemptions available under item 806.20, Tariff Schedules of the United States (TSUS), and TSUS item 807.00, and, in addition, that duty- free treatment for the same units was precluded under the Gener- alized System of Preferences. You only request that we reconsid- er that portion of our ruling which relates to the applicability of TSUS item 807.00. FACTS: Regarding the applicability of TSUS item 807.00 to the im- ported power steering pumps, you stated in your initial letter of February 4, 1987, that the exported power steering units were disassembled, repaired and reassembled in Mexico with reusable parts of the disassembled units and certain new, replacement parts of U.S. origin, referred to as "soft parts." You further stated that these "soft parts," i.e., O-rings, gaskets and seals, were purchased by your client in the U. S. and exported for use in the reassembly of the repaired units. In our ruling of August 25, 1987, we stated that under the statute only assembly operations and operations incidental there- to were permitted and held that, as the imported units were fore- closed from TSUS item 807.00 treatment because of the disassem- bly, their constituent parts were also foreclosed from the tariff provision. We noted that disassembly operations constituted a non-assembly operation, contrary to the requirements of TSUS item 807.00. In your letter of January 15, 1988, you state that the - 2 - ruling focused on the disassembled parts and not on the new U.S.- origin "soft parts." You further state that the "soft parts" satisfy the conditions for item 807.00 treatment, and request that Customs reconsider and modify the former ruling as it re- lates to the applicability of item 807.00 to the imported power steering pumps. ISSUE: Whether the described U.S. "soft parts," exported to Mexico for assembly with other disassembled components of used power steering pumps, are entitled to the duty exemption provided for in subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS) (TSUS item 807.00), when the pumps are returned to the U.S. LAW & ANALYSIS: Effective January 1, 1989, the Harmonized Tariff Schedule of the United States (HTSUS) will supersede and replace the Tariff Schedules of the United States (TSUS). TSUS item 807.00 will be carried over into the HTSUS without change as subheading 9802.00.80. HTSUS subheading 9802.00.80 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 with- out further fabrication, (b) have not lost their physi- cal 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 assem- bled and except by operations incidental to the assembly process such as cleaning, lubricating, and painting. Under this tariff provision, there is a duty upon the full value of the imported assembled article less the cost or value of such U.S. components, provided the documentation requirements of sec- tion 10.24, Customs Regulations (19 CFR 10.24), are met. In General Instrument Corp. v. United States, 480 F.2d 1402, 1405, 60 CCPA 178, C.A.D. 1106 (1973), the U.S. Court of Customs and Patent Appeals stated that: The only reasonable interpretation of item 807.00 is that all elements that go into the imported final article which meet the conditions the item imposes on the fabricated components are subject to the exclusion it provides. - 3 - In this case, power steering pumps are exported for reman- ufacture. The remanufacture process includes disassembling the pumps, refurbishing salvageable parts, and reassembling those parts with new replacement "soft parts" of U.S. origin (O-rings, seals and gaskets) that were exported for the reassembly portion of the remanufacture operation. Thus, we believe that the ex- ported "soft parts" qualify as U.S. fabricated components, within the meaning of TSUS item 807.00, in that they (1) are exported in condition ready for assembly, (2) do not lose their physical identity, and (3) are not advanced in value or improved in con- dition except by being assembled. Accordingly, the reassembled power steering pumps will qualify for the partial duty exemption available under TSUS item 807.00. CONCLUSION: On reconsideration of the described foreign assembly oper- ation, we find that the imported power steering pumps are reassembled in part with exported U.S. fabricated components, thereby qualifying the pumps for the partial duty exemption under HTSUS subheading 9802.00.80 (TSUS item 807.00). Allowances in duty may be made for the cost or value of the U.S. "soft parts," upon compliance with the applicable Customs Regulations (19 CFR 10.11-10.24). Headquarters Ruling Letter 554539 and any other prior ruling inconsistent with this ruling are modified accordingly. Sincerely, John Durant, Director Commercial Rulings Division CO:R:C:V:VILDERS:GRV:11/10/88:11/15/88