HQ 544159: Request for Partial Reconsideration of Headquarters Ruling Letter 554539 (August 25, 1987)

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                                      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