H335581

H335581 August 30, 2024 OT:RR:VSP: H335581 RSD CATEGORY: Classification TARIFF NO.: 9802.00.80 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 2 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 3 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. 4 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

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 th