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HQ 555237


November 24, 1989

CLA-2 CO:R:C:V: 555237 KAC

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Mr. David S. Simpson, Jr.
William J. Joffroy, Inc.
P.O. Box 698
Nogales, Arizona 85628-0698

RE: Applicability of partial duty exemption under HTSUS subheading 9802.00.80 to fishing rod guides to be imported from Mexico.

Dear Mr. Simpson:

This is in response to your letters of December 5, 1988, and October 24, 1989, on behalf of Perfection Tip Company, requesting a ruling on the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS) (formerly item 807.00, Tariff Schedules of the United States (TSUS)), to fishing rod guides to be imported from Mexico. Samples showing the various stages of the assembly process were submitted for examination.

FACTS:

In your December 5, 1988, letter, you initially stated that a metal ring, metal arch, shock ring and ceramic ring of U.S. origin would be exported to Mexico for assembly. However, the "assembly description worksheet" in your October 24, 1988, letter states that the ceramic ring's country of origin is Korea. Therefore, the actual fishing rod guide's components consist of the metal ring, metal arch, and shock ring (U.S. components), and the ceramic ring (Korean component) which will be exported to Mexico for assembly operations consisting of:

(1) welding the metal ring to the metal arch; (2) polishing and pickling the above assembled guide to prepare it for plating;
(3) plating the guide;
(4) inspecting the guide;
(5) force fitting the shock ring to the guide by a hand press;
(6) force fitting the ceramic ring to the guide by a hand press;
(7) final inspection; and
(8) packaging the finished fishing rod guide.

The completed and packaged fishing rod guide will then be imported into the U.S.

ISSUE:

Whether the foreign operation constitutes an "assembly," thereby entitling the fishing rod guide to the partial duty exemption under HTSUS subheading 9802.00.80 when returned to the U.S.

LAW & ANALYSIS:

HTSUS subheading 9802.00.80 provides for a partial duty exemption for:

[a]rticles 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, lubrication, and painting....

All three requirements of HTSUS subheading 9802.00.80 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 value of the imported assembled article, less the cost or value of such U.S. components, upon compliance with the documentary requirements of 10.24, Customs Regulations (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 United States to qualify for the exemption. Components will not loose their entitlement to the exemption by being subjected to operations incidental to the assembly either before, during, or after their assembly with other components.

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 operation. Examples of operations considered incidental to the assembly process are listed at section 10.16(b), Customs Regulations (19 CFR 10.16(b)). 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 HTSUS subheading 9802.00.80 (19 CFR 10.16(c)).

In United States v. Mast Industries, Inc., 515 F.Supp. 43, 1 CIT 188, aff'd, 69 CCPA 47, 668 F.2d 501 (1988), the court, in examining the legislative history of the meaning of "incidental to the assembly process," stated that:

[t]he apparent legislative intent was to not preclude operations that provide an "independent utility" or that are not essential to the assembly process; rather, Congress intended a balancing of all relevant factors to ascertain whether an operation of a "minor nature" is incidental to the assembly process.

The court then indicated that relevant factors included:

(1) Whether the relative cost of the operation and time required by the operator were such that the operation may be considered minor;
(2) Whether the operation is necessary to the assembly process;
(3) Whether the operation is so related to the assembly that it is logically performed during assembly; and (4) Whether economic or other practical considerations dictate that the operation be performed concurrently with assembly.

We have previously held that plating of various components in order to prevent corrosion are not considered operations incidental to the assembly process. See Headquarter Ruling Letters 553840 dated September 30, 1985, 071448 dated November 16, 1983, and 054530 dated January 20, 1978.

As your documentation and samples attest, the three U.S. components meet the requirements of clauses (a) and (b) of HTSUS subheading 9802.00.80. However, upon applying the Mast criteria to the facts in this case, we find that the polishing/pickling and plating operations performed during the assembly process do not constitute operations "incidental to the assembly process" and, therefore, fail to meet clause (c) of HTSUS subheading 9802.00.80.

The first of the Mast criteria involves a comparison of the relative cost and time required to perform the operations in question with the cost and time required to perform the entire assembly operation. According to your October 24, 1989, letter, the entire labor and overhead cost for each guide is $.0812, whereas the cost of the polishing/pickling and plating labor and overhead is $.0459. Thus, the polishing/pickling and plating operations constitute 56.5% of the entire Mexico labor and overhead cost. You estimate that the time required to perform the above operations is 18% of the total foreign assembly time. These cost and time comparisons indicate that the polishing/pickling and plating operations are not of a minor nature. (Cf., Surgikos, Inc. v. United States, 12 CIT , Slip Op. 88-35 (1988), wherein the court, applying the Mast criteria, found that fenestration and finishing folding operations performed after assembly operations did not constitute minor operations, as these operations constituted over one-fourth of the labor-related costs and amounted to almost one-third of the time involved to assemble the article.)

Second, we find that the polishing/pickling and plating steps are not necessary to the assembly process. The fishing rod guide clearly can be assembled without the above operations. Polishing and pickling prepare the guide for the plating operation. The plating operation coats the guide, thereby increasing the value of the guide, as it inhibits corrosion during use in fresh and/or salt water. As seen from your sample, the plating also enhances the appearance of the guide by giving it an even, shining, all-over metallic color. Regarding the last two Mast criteria, we acknowledge that, for practical reasons, the polishing/pickling and plating operations are logically performed at the indicated position in the assembly process. The polishing/pickling and plating operations cannot be performed until the arch and ring are welded together in order to ensure that a solid connection is formed between the two components. However, we find that on balancing the relevant factors, the polishing/pickling and plating operations in this assembly do not constitute incidental assembly operations.

HOLDING:

On the basis of the information and samples provided, it is our opinion that the polishing/pickling and plating of the ring and arch are not incidental to the assembly of those two components. Therefore, the ring and arch are not entitled to duty-free treatment under subheading 9802.00.80, HTSUS, although an allowance in duty may be made under this tariff provision for the cost or value of the shock ring of U.S. origin, which is properly assembled with the guide after the plating operation.

Sincerely,

John Durant, Director
Commercial Rulings Division

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