Applicability of subheading 9802.00.80, HTSUS, to certain diskettes imported from Italy, Japan and Taiwan

HQ 555238 March 8, 1989 CLA-2 CO:R:C:V 555238 DBI CATEGORY: Classification TARIFF NO.: 9802.00.80, HTSUS Mr. Jack Ryan 3M Center P.O. Box 33250 St. Paul, Minnesota 55133-3250 RE: Applicability of subheading 9802.00.80, HTSUS, to certain diskettes imported from Italy, Japan and Taiwan Dear Mr. Ryan: This is in response to your letter dated January 6, 1989, in which you request a ruling concerning the applicability of subheading 9802.00.80, Harmonized Tariff Schedules of the United (HTSUS), to certain diskettes imported from Italy, Japan and Taiwan. FACTS: You advise that your company purchases computer diskettes, 3.5 inches, 5.25 inches and 8 inches, from vendors in Italy, Japan and Taiwan. The diskettes are made with magnetic media "cookies" which are manufactured in the U.S. The cookies are sent to the vendors ready to be inserted into their shells or envelopes. Before the cookies can be inserted, your company requires that the cookies undergo a burnishing process which polishes them and insures that the magnetic coating is smooth and free of any high spots. After burnishing, a hub of either metal or plastic is glued to the center perimeter of the cookie and the cookie is inserted into its shell or envelope. It is your position that the burnishing process is incidental to the assembly process. ISSUE: Whether the diskettes, when returned to the U.S., are eligible for the partial duty exemption in subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS). -2- LAW AND ANALYSIS: As you are probably aware, the HTSUS replaced the Tariff Schedules of the United States (TSUS), on January 1, 1989. Item 807.00, TSUS, was carried over into the HTSUS without change as subheading 9802.00.80. This provision applies to articles assembled abroad in whole or in part of fabricated components, the product of the U.S., with no operations performed thereon except the attachment of the components to form the imported merchandise and operations incidental thereto. An article classified under subheading 9802.00.80, HTSUS, is subject to duty upon the full appraised value of the imported article, less the cost or value of such products of the U.S. Section 10.16(b), Customs Regulations (19 CFR 10.16(b)), provides that operations incidental to the assembly process whether performed before, during, or after assembly, do not constitute further fabrication, and shall not preclude the application of the exemption. Section 10.16(c), Customs Regulations (19 CFR 10.16(c)), provides that any significant process, operation, or treatment other than assembly whose primary purpose is the fabrication, completion, physical or chemical improvement of a component, or which is not related to the assembly process, whether or not it effects a substantial transformation of the article, shall not be regarded as incidental to the assembly and shall preclude the application of the exemption to such article. Section 10.16(c)(5) specifically lists burnishing as one of the operations, treatments or processes which imparts significant new characteristics or qualities to the article affected. Thus, it is not considered incidental to assembly. HOLDING: On the basis of the information submitted, it is our opinion that the burnishing of the cookies is not an operation incidental to assembly, and, therefore, no allowances in duty may be made under subheading 9802.00.80, HTSUS, for the cost or value of the magnetic media cookie. Sincerely, John Durant Director, Commercial Rulings Division