HQ 960554

August 17, 1998

CLA-2 RR:CR:GC 960554 DWS

CATEGORY: Classification

TARIFF NO.: 8479.89.95; 9801.00.10; 9802.00.80

Port Director of Customs

33 New Montgomery Street, #1501

San Francisco, CA 94105

RE: Protest 2809-96-101144; Components of Physical Vapor

Deposition Apparatus

Dear Port Director:

The following is our decision regarding Protest 2809-96-101144
concerning your action in classifying and assessing duty

on components of physical vapor deposition (PVD) apparatus under

the Harmonized Tariff Schedule of the United States (HTSUS).

In a facsimile letter dated August 7, 1998, counsel for the

protestant withdrew from the protest the issue regarding the

classification of parts for the physical vapor deposition

apparatus.

FACTS:

The merchandise consists of several entries of components

two of which containing components of an electron beam machine

(Model 1850-634, Beta V) and four of which containing components

of a sputter deposition machine (Model FBR 1400 SP-5C, Beta III).

Based upon a review of the entry documents, the bulk of the

components making up the electron beam machine and the sputter

deposition machine were contained within one entry for each

machine.

In its complete form, the sputter deposition machine is a

vacuum deposition apparatus incorporating thermal evaporation and

sputtering deposition sources capable of physical deposition of

various metals on flexible base materials, such as polyimide,

polyester, or other polymeric substrates. It possesses multiple

processing subchambers, including multiple sputtering sources for

production of monolithic or graded adhesion layers and/or a

copper adhesion flash, and an indirectly heated resistive

evaporation source which can attain the requisite temperatures

for the evaporation of copper. This source is constructed of

materials compatible with copper evaporation, and normally

operates at a crucible temperature of 1425 to 1470 degrees

Celsius (C). Additional thermal sources are also installed for

the evaporation of aluminum materials.

In its complete form, the electron beam machine is a vacuum

deposition apparatus incorporating electron beam deposition

sources capable of physical deposition of various metals on

flexible base materials, such as polyimide, polyester, or other

polymeric substrates. It also possesses multiple subchambers.

In an affidavit on behalf of the protestant, it is stated

that the two machines:

belong to a class of large scale roll-to-roll vacuum deposition

apparatus the principle use of which

include the manufacture and production of thin film flexible printed

circuits for the automotive,

electronics, computer, and communications industries, and for the

production of optically (laser)

readable disks.

The PVD apparatus consists of three main sections; the

vacuum chamber with the evaporation source, the loading and

unloading apparatus, and the pumping group. Key equipment within

the article are of U.S. origin in order to facilitate the

maintenance and repair or replacement of these items. The

equipment of U.S. origin include: 1) two vacuum pumps; 2) six

diffusion pumps; 3) two cryogenic refrigeration systems; 4) eight

source evaporators; 5) standalone control units ; 6) power

supplies; 7) two Shrader Octal feed- throughs; 8) 16 Telemark

high voltage feed-throughs; and 9) 120 feet of high voltage

electrical cable.

The vacuum and diffusion pumps were used to create the high

vacuum environment inside the chamber so that the evaporated

metals can bond to the surface of the material to be coated. The

two Kinney KT 505-LP vacuum pumps were connected to the PVD

apparatus via piping by being bolted to flanges in the piping.

They were also connected to their respective electrical systems

and painted to match the color of the vacuum chamber. After

testing, they were detached from the PVD apparatus for shipment

to the U.S., although they remained attached to their respective

rotary pump frames.

The six Varian HS20 diffusion pumps were attached to the PVD

apparatus in Great Britain. The processing included attachment

to the PVD apparatus by bolting the pumps to their respective

chamber manifolds and piping system. The pumps were also

connected to their respective electrical systems and painted to

match the color of the vacuum chamber. Four of the diffusion

pumps were later disassembled for shipment back to the U.S.

The two Polycold refrigeration units remove water vapor from

inside the chamber. They were connected to the PVD apparatus by

two copper refrigeration coils, which were mounted inside the

vacuum chamber and connected to the refrigeration units in Great

Britain by piping.

The eight sets of high voltage feed-through\'s and 120 feet

of high voltage cable provided the high voltage electrical

connection between the Temescal EB power supplies, and the

Temescal Electron Beam source evaporators which were mounted

inside the vacuum chamber in Great Britain. The cable was cut to

length and used to connect the evaporators to the high voltage

feed-throughs abroad. The high voltage feed-throughs\'s were used

\"as is\" and were simply inserted into their respective ports

leading to the vacuum chamber and bolted in place abroad. The

feed-through\'s allow the electrical connection between the

external EB power supplies and the EB source evaporators inside

the chamber while maintaining the integrity of the vacuum. The

feed-throughs remain attached to the vacuum chamber after

testing.

The EB source evaporators were bolted to individual support

plates and to a frame on the floor of the vacuum chamber in Great

Britain.

After testing, the power supplies and control units were

disconnected for shipment to the U.S. With regard to the power

supplies, control units and the two cryogenic refrigeration

units, they were only assembled abroad and then disassembled.

The protestant states that \"nothing was done\" to these

components; there were no holes drilled or any other work done on

these components abroad other than the assembly and disassembly.

In all instances, the U.S. origin articles were attached to

the PVD system by bolts abroad, so as to allow the units to be

readily removed for maintenance or repair.

Once the construction of the PVD apparatus was completed

abroad, the vacuum system was tested by powering up the system

and checking for leaks in the vacuum chamber and for the proper

operation of the pumps.

After testing, the system was partially disassembled for

shipment. The entire system was then shipped to the U.S. and

installed at the importer\'s facilities in the U.S.

The importer states that in each instance, the U.S.-produced

articles were assembled in or connected to the PVD system in the

condition in which they were received in Great Britain.

The merchandise was entered on January 12, February 12, 14,

19, and 21, 1996, under subheading 8479.89.85, HTSUS, as machines

for production and assembly of diodes, transistors, and similar

semiconductor devices and electronic integrated circuits, or

machines for the manufacturing of video laser discs. The entries

were liquidated on May 31, June 7, and 21, 1996, under subheading

8479.89.95, HTSUS, as other machines having individual functions,

not specified or included elsewhere in chapter 84, HTSUS. The

protest was timely filed on August 27, 1996.

ISSUE:

Whether the bulk of components for the creation of the

electron beam machine contained in one of the two entries impart

the essential character of a complete electron beam machine.

Whether the bulk of components for the creation of the

sputter deposition machine contained in one of the four entries

impart the essential character of a complete sputter deposition

machine.

If so, whether the components imparting the essential

character of each complete machine are classifiable under

subheading 8479.89.85, HTSUS, as machines for production and

assembly of diodes, transistors, and similar semiconductor

devices and electronic integrated circuits, or machines for the

manufacturing of video laser discs, or under subheading

8479.89.95, HTSUS, as other machines having individual functions,

not specified or included elsewhere in chapter 84, HTSUS.

Whether the equipment of U.S. origin is eligible for

preferential duty treatment under subheading 9802.00.80, HTSUS,

subheading 9801.00.1025, HTSUS, or subheading 9802.00.50, HTSUS.

LAW AND ANALYSIS:

CLASSIFICATION

Classification of merchandise under the HTSUS is in

accordance with the General Rules of Interpretation (GRI\'s). GRI

1 provides that classification is determined according to the

terms of the headings and any relative section or chapter notes.

The 1996 HTSUS provisions under consideration are as

follows:

8479 Machines and mechanical appliances having individual

functions, not specified

or included elsewhere in this chapter; parts thereof:

Other machines and mechanical appliances:

8479.89 Other:

8479.89.85 Machines for processing of semiconductor

materials;

machines for production and assembly of

diodes,

transistors and similar semiconductor

devices and

electronic integrated circuits; machines

for the

manufacturing of video laser discs.

8479.89.95 Other.

\* \* \* \* \* \* \* \* \*

We must first determine whether the components in the

entries containing the bulk of components making up the sputter

deposition and electron beam machines impart the essential

character of complete machines. GRI 2(a) states that:

GRI 2(a) states that:

\[a\]ny reference in a heading to an article shall be taken to include a

reference to that article incomplete or unfinished, provided that, as

entered, the incomplete or unfinished article has the essential

character of the complete or finished article. It shall also include a

reference to that article complete or finished (or falling to be

classified as complete or finished by virtue of this rule), entered

unassembled or disassembled.

Based upon an analysis of the entry documents, it is our

position that the components in the two entries mentioned above

impart the essential character of each of the subject machines.

Therefore, we must now ascertain the proper classification of

complete electron beam and sputter deposition machines under the

HTSUS.

Because the complete PVD apparatus are machines not

described elsewhere in chapter 84, HTSUS, they meet the terms of

heading 8479, HTSUS. However, based upon the information

provided, as the subject machines are used for the production of

flexible printed circuits and not diodes, transistors, or similar

semiconductor devices and integrated circuits, the machines are

precluded from that portion of subheading 8479.89.85, HTSUS.

Additional U.S. Rule of Interpretation 1(a), HTSUS, states:

1\. In the absence of special language or context which otherwise

requires\--

\(a\) a tariff classification controlled by use (other than actual

use) is to be determined in accordance with the use in the

United States at, or immediately prior to, the date of

importation, of goods of that class or kind to which the imported goods
belong, and the controlling use is the principal use.

GRI 6 states that:

\[f\]or legal purposes, the classification of goods in the subheadings
of

a heading shall be determined according to the terms of those

subheadings and any related subheading notes and,

mutatis mutandis, to the above rules, on the understanding that only

subheadings at the same level are comparable. For the purposes of this

rule, the relative section, chapter and subchapter notes also apply,
unless

the context otherwise requires.

GRI 6 allows us to apply additional U.S. rule of

interpretation 1(a) at the subheading level. As stated

previously, it has been stated on behalf of the protestant that

the subject machines are principally used for the production of

flexible printed circuits and laser disks. However, machines for

the production of flexible printed circuit boards and video disks

are classifiable under subheadings 8479.89.95 and 8479.89.85,

HTSUS, respectively. The protestant has not demonstrated that

the machines are principally used for the manufacture of laser

disks. Also, it is our understanding that the machines, in their

complete form, do not possess certain components necessary for

laser disk production (i.e., robotic handlers). Consequently, it

is our position that the machines are classifiable under

subheading 8479.89.95, HTSUS, and, in accordance with GRI 2(a),

the components contained in the entries imparting the essential

character of each complete machine are also classifiable under

subheading 8479.89.95, HTSUS.

Subheadings 9801.00.10, 9802.00.50, and 9802.00.80

The importer argues that the following articles qualify for

subheading 9802.00.80, HTSUS, treatment: 1) six diffusion pumps;

2\) two vacuum pumps; 3) two Shrader Octal feed-throughs; 4) eight

source evaporators; 5) 16 high voltage feed-throughs; and 6) 120

feet of high voltage electrical cable.

The importer contends that the power supplies, control units

and cryogenic refrigeration units qualify for treatment under

subheading 9801.00.1025, HTSUS.

The importer further contends that if the four diffusion

pumps which were disassembled from the PVD apparatus for shipment

back to the U.S. do not qualify for treatment under subheading

9802.00.80, HTSUS, they qualify for treatment under subheading

9802.00.50, HTSUS.

U.S. Note 2(a), subchapter II, Chapter 98, HTSUS, provides

that any product of the U.S. which is returned after having been

advanced in value or improved in condition abroad by any process

of manufacture or other means shall be treated as a foreign

article for duty purposes and shall be dutiable, unless exempt

under a specific HTSUS provision.

1\. Subheading 9802.00.80

Subheading 9802.00.80, HTSUS, provides a partial duty

exemption for:

\[a\]rticles \*\*\* assembled abroad in whole or in part of fabricated

components, the product of the U.S., 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.

All three requirements of subheading 9802.00.80, HTSUS, must

be satisfied before a component may receive a duty allowance. An

article entered under this tariff provision is subject to duty

upon the full cost or value of the imported assembled articles,

less the cost or value of the U.S. components assembled therein,

upon compliance with the documentary requirements of 19 CFR

10.24.

Section 10.14(a), Customs Regulations \[19 CFR 10.14(a)\],

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 U.S.

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.

Section 10.16(a), Customs Regulations \[19 CFR 10.16(a)\],

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 the use of fasteners.

Operations incidental to the assembly process are not

considered further fabrication operations as they are of a minor

nature and cannot always be provided for in advance of the

assembly operations. However, any significant process, operation

or treatment whose primary purpose is the fabrication,

completion, physical or chemical improvement of a component

precludes the application of the exemption under subheading

9802.00.80, HTSUS, to that component. See 19 CFR 10.16(c).

Regarding the foreign assembly operations performed in this

case, the information provided to us indicates that the U.S.

components were attached to the system with bolts. As stated

above, 19 CFR 10.16(a) states that any method used to join or fit

together solid components is acceptable and specifically states

that the use of fasteners is acceptable. The eight evaporators

were installed inside the vacuum chamber with the electrical

cable and feed-throughs. Therefore, the assembly operations

performed with regard to the evaporators, feed-throughs and

electrical cable are acceptable pursuant to 19 CFR 10.16. We

have no information that these U.S. made components were advanced

in value or improved in condition abroad except by the assembly

operations or operations incidental to the assembly. In

addition, these components remained in their assembled condition

when imported into the U.S.

The cutting of the electrical cable to length is an

operation that is incidental to the assembly process. See 19 CFR

10.16(b)(6).

The protestant states that the six diffusion and two vacuum

pumps were painted to match the color of the vacuum chamber.

Painting primarily intended to enhance the appearance of an

article is listed as an example of an operation that is not

considered incidental to the assembly process. See 19 CFR

10.16(c)(3). Since the painting operation done abroad with

regard to the diffusion and vacuum pumps appears to be for the

purpose of enhancing the appearance of the article, these

articles are not eligible for a duty allowance under subheading

9802.00.80, HTSUS. Further, four of the diffusion pumps were

completely disassembled from the PVD apparatus after testing for

shipment back to the U.S. Therefore, we find that these articles

were not returned in an assembled condition as required by

subheading 9802.00.80, HTSUS.

Therefore, we find that only the two Shrader Octal feed-throughs, eight
evaporators, 16 high voltage feed-throughs, and

the 120 feet of high voltage electrical cable are entitled to a

duty allowance under subheading 9802.00.80, HTSUS.

2\. Subheading 9801.00.1025

The second issue raised is whether the two refrigeration

systems, power supplies and control units are eligible for duty

free treatment under subheading 9801.00.1025, HTSUS.

Subheading 9801.00.1025, HTSUS, provides that products of

the U.S. when returned temporarily for repair, alteration,

processing or the like, after having been reexported without

having been advanced in value or improved in condition by any

process of manufacture or other means while abroad can be entered

duty free provided the documentary requirements of 19 CFR 10.1

are satisfied.

To the extent that U.S. components are totally disassembled

and imported in the same condition as exported, the U.S.

components would be entitled to duty free treatment under

subheading 9801.00.1025, HTSUS.

The question in the instant case is whether connecting the

power supplies, control units, and cryogenic refrigeration units

to the PVD system is considered an advancement in value or

improvement in condition. After testing, the power supplies,

control units, and two cryogenic refrigeration units were

disconnected from the PVD apparatus, for shipment to the U.S.

The court held in Border Brokerage Company, Inc. v. United

States, 314 F. Supp. 788 (1970), that tomatoes of American origin

were entitled to duty free entry under item 800.00, TSUS (the

predecessor to subheading 9801.00.10, HTSUS). The tomatoes were

shipped to Canada where they were unloaded, unpacked, sorted,

graded by color and size, and repacked. The court stated that

the test to be applied in item 800.00 cases is whether the

merchandise of American origin has itself (apart from its

container) been the object of advancement in value or improvement

in condition while abroad.

The power supplies, control units, and two cryogenic

refrigeration units which were merely connected to the PVD

apparatus in Great Britain and then disconnected after testing,

were not the object of advancement in value or improvement in

condition. These articles returned to the U.S. in exactly the

same condition as when they were exported; there were no holes

drilled or any other work performed abroad other than the

assembly and disassembly. Therefore, these articles are entitled

to duty- free treatment under subheading 9801.00.1025, HTSUS.

3\. Subheading 9802.00.50

Subheading 9802.00.50, HTSUS, provides a partial duty

exemption for articles that are returned after having been

exported to be advanced in value or improved in condition by

means of repairs or alterations, provided that the documentary

requirements of 19 CFR 10.8 are met. For qualifying articles,

duty is assessed only on the cost or value of the foreign

processing.

However, in circumstances where the operations abroad

destroy the identity of the exported article or create a new or

commercially different article, entitlement to subheading

9802.00.50, HTSUS, is precluded. See A.F. Burstrom v. United

States, 44 CCPA 27, C.A.D. 631 (1956), aff\'d C.D. 1752, 36 Cust.

Ct. 46 (1956); Guardian Enterprises Corporation v. United States;

3 CIT 9 (1982). Additionally, entitlement to this tariff

treatment is not available where the exported articles are

incomplete for their intended purposes prior to their foreign

processing and the foreign processing is a necessary step in the

preparation or manufacture of the finished articles. Dolliff &

Company, Inc. v. United States, 455 F. Supp. 618 (CIT 1978),

aff\'d, 599 F.2d 1015 (Fed. Cir. 1979).

The court denied a partial duty exemption in Burstrom, which

involved steel ingots converted into steel slabs in Canada, in

Guardian Industries, which involved annealed glass tempered in

Canada, thus acquiring different characteristics, and in Dolliff

& Co., which involved greige goods dyed and made into a finished

fabric in Canada.

The four diffusion pumps under consideration were painted

abroad, which was a finishing step in the preparation of these

pumps. Since the pumps underwent a finishing operation abroad,

they were not finished articles when exported from the U.S.

Accordingly, we find that the diffusion pumps are not

eligible for a partial duty exemption under subheading

9802.00.50, HTSUS.

HOLDING:

In accordance with GRI 2(a), the components in the entries

containing the bulk of components making up the sputter

deposition and electron beam machines impart the essential

character of complete electron beam and sputter deposition

machines.

Those components are classifiable under subheading 8479.89.95,

HTSUS, as other machines having individual functions, not

specified or included elsewhere in chapter 84, HTSUS. With

regard to this classification issue, the protest should be

DENIED.

The protest should be GRANTED with regard to the claims for

a duty allowance under subheading 9802.00.80, HTSUS, with regard

to 1) the two Shrader Octal feed-throughs; 2) the eight

evaporators; 3) the 16 high voltage feed-throughs; and 4) the 120

feet of high voltage electrical cable. Further, the power

supplies, control units, and two cryogenic refrigeration units

are eligible for duty free entry under subheading 9801.00.1025,

HTSUS. The protestant has furnished a declaration of the foreign

shipper/ assembler and an importer\'s declaration which we believe

satisfy the documentation requirements of 19 CFR 10.1 and 10.24.

The protest should be DENIED with respect to the six

diffusion pumps and the two vacuum pumps, which are not eligible

for a partial duty exemption under subheading 9802.00.80, HTSUS.

The four unassembled diffusion pumps are also not eligible for a

partial duty exemption under subheading 9802.00.50, HTSUS.

In accordance with Section 3A(11)(b) of Customs Directive

099 3550-065, dated August 4, 1993, Subject: Revised Protest

Directive, this decision, together with the Customs Form 19,

should be mailed by your office to the protestant no later than

60 days from the date of this letter. Any reliquidation of the

entry in accordance with the decision must be accomplished prior

to mailing of this decision. Sixty days from the date of the

decision the Office of Regulations and Rulings will take steps to

make the decision available to Customs personnel via the Customs

Rulings Module in ACS and the public via the Diskette

Subscription Service, Freedom of Information Act, and other

public access channels.

Sincerely,

John Durant, Director

Commercial Rulings Division