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HQ 555185


July 31, 1989

CLA-2 CO:R:C:V 555185 GRV

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Leslie Alan Glick, Esq.
Porter, Wright, Morris & Arthur
1233 20th Street, N.W., 4th Floor
Washington, D.C. 20036-2395

RE: Applicability of partial duty exemption under HTSUS subhead- ing 9802.00.80 to aluminum louvers created by cutting extruded profiles and wire mesh to length, hole punching/ drilling the parts to facilitate assembly operations, consisting of clipping and screwing the components together, then chemically cleaning and coating the finished articles. Fabricated components;19 CFR 10.14(a);Assembly;19 CFR 10.16(a);Incidental operations;19 CFR 10.16(b);554790; C.S.D. 81-52;Oxford Industries (1981);post-assembly operations;19 CFR 10.16(c); General Motors (pending litigation);19 CFR 177.7(b).

Dear Mr. Glick:

This is in response to your letters of November 18, 1988, and March 14, 1989, on behalf of Construction Specialties, Inc., 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 extruded aluminum louvers to be imported from Mexico. Samples of the various components to be assembled were submitted for examination.

FACTS:

You state that various U.S. fabricated components, identi- fied as louver blades, vertical frame jambs, bottom frame sills, top frame heads, aluminum wire mesh and perimeter frame, and structural supports in the form of angles or channels, will be sent to Mexico for assembly operations. All of the components are extruded aluminum profiles exported in continuous twenty foot lengths, except the aluminum wire mesh which is exported in a continuous roll.

Prior to assembly, the various aluminum extruded profiles and the wire mesh are cut to various lengths to meet the dimen- sional requirements of the louver. Holes are then punched or drilled into the resulting aluminum jambs, structural supports and perimeter frames to facilitate assembly. The assembly operation entails attaching the wire mesh to the perimeter frame with metal clips, then assembling the vari- ous components into the finished product with screws. The assem- bled louvers are then cleaned in a chemical bath to remove oil, grease and other contaminants. A chemical conversion coating is then applied, which serves to prepare the metal for optimum bonding with an organic fluorocarbon polymeric finish coating-- available in different colors--, which is baked on. You state that this coating operation imparts long-term corrosion resistant properties to the aluminum louvers and conforms to the American Architectural Manufacturers Association's (AAMA's) Voluntary Specification for High Performance Organic Coatings on Architec- tural Extrusions and Panels (Publication No. 605.2-85), thereby enabling the importer to offer a twenty-year warranty for coated louvers. The assembled louvers are then packed and crated for return to the U.S.

Regarding your assertion that the application of the poly- meric finish is an operation incidental to the assembly process, you state that the coating is primarily for preservative pur- poses, within the intendment of section 10.16(b)(3), Customs Regulations (19 CFR 10.16(b)(3)), that the total cost of the coating operation in labor and materials is approximately 6.9 to 7.7% of the total cost of the finished louver assembly, and that the labor cost and time involved are approximately 10% of the labor time and cost involved in the overall assembly operation. You submit that these statistics attest to the minor nature of the foreign operation, citing Oxford Industries v. United States, 517 F.Supp. 694, 1 CIT 230 (1981), aff'd, 69 CCPA 55, 668 F.2d 507 (1981).

ISSUE:

Whether the extruded aluminum louvers will qualify for the partial duty exemption under HTSUS subheading 9802.00.80 when returned to the U.S.

LAW AND ANALYSIS:

As you know, the HTSUS superseded and replaced the TSUS, effective January 1, 1989. TSUS item 807.00 was carried over into the HTSUS without change as subheading 9802.00.80. This tariff provision provides a partial duty exemption for:

[a]rticles assembled abroad in whole or in part of fab- ricated 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.

All three requirements of HTSUS subheading 9802.00.80 must be satisfied before a component may receive a duty allowance. An article entered under HTSUS subheading 9802.00.80 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 section 10.24, Customs Regula- tions (19 CFR 10.24).

Section 10.14(a), Customs Regulations (19 CFR 10.14(a)), provides, in part, that:

[t]he components must be in condition ready for assembly without further fabrication at the time of their exporta- tion from the United States to qualify for the exemption. Components will not lose 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 con- sidered further fabrication operations, as they are of a minor nature and cannot always be provided for in advance of the assem- bly operation. Examples of operations considered incidental to the assembly process are delineated 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 pre- cludes the application of the exemption under HTSUS subheading 9802.00.80. See, 19 CFR 10.16(c).

Assembly operations are addressed at 19 CFR 10.16(a), which provides, in part, that:

[t]he assembly operations 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....

In this case, all the U.S. components are exported in con- tinuous lengths or rolls and cut to length to meet the dimension- al requirements of the louver. The mere cutting to length of finished components exported in continuous lengths is an accept- able incidental operation explicitly enumerated at 19 CFR 10.16(b)(6), and does not preclude the application of the duty exemption available under HTSUS subheading 9802.00.80. Headquarters Ruling Letter (HRL) 554790 (October 30, 1987) (extruded aluminum strips cut to specific lengths abroad). Further, the punching or drilling of holes may constitute an incidental operation, provided the operation is not substantial and is a necessary preliminary step to completion of the assembly. HRL 061429 (March 28, 1980, published as C.S.D. 81-52, 15 Cust.Bull. 844). After examining the samples submitted, we believe that the hole punching aspect of the foreign operation is necessary to complete the assembly process and is not substan- tial. Therefore, the hole punching qualifies as an operation incidental to the assembly process.

The actual assembly operation entails attaching wire mesh to the perimeter frame using metal clips and fitting together the remaining component parts with screws, both methods constituting acceptable means of assembly.

Regarding the post-assembly operations--chemical cleaning, application of chemical conversion and fluoropolymer coatings, and baking--, the chemical cleaning of the assembled louvers to remove oil, grease and other contaminants constitutes an accept- able incidental operation, as it is explicitly delineated in the statute. With respect to the coating operations, 19 CFR 10.16(c)(3) provides that the application of preservative paint or coatings, including preservative metallic coatings, lubri- cants, or protective encapsulation, constitutes an incidental operation to assembly. However, 19 CFR 10.16(c)(3) provides that painting primarily intended to enhance the appearance of an article or to impart distinctive features or characteristics is a significant operation, not incidental to the assembly process.

The question as to what painting operations meet the re- quirements of TSUS item 807.00 is now before the Court of Inter- national Trade in General Motors Corp. v. United States, No. 87- 03-0047. This case involves Customs denial of a TSUS item 807.00 classification for a painting operation claimed to be "inciden- tal" to the assembly of certain trucks abroad. We held that the foreign operation, which consisted of applying several coats of enamel finish paint to completed trucks, was neither "minor" nor "incidental" to the assembly of the vehicles. Thus, the pending case puts before the court the question of whether a quantitative or qualitative test should be used in determining when a painting operation is "incidental to assembly," for purposes of TSUS item 807.00. A decision in this case is expected to shed more light on the controlling criteria where painting operations are in issue and, pursuant to 19 CFR 177.7(b), we decline to issue a ruling on this issue while it is before the court. HOLDING:

In light of the pending litigation on the issue of what painting constitutes an operation incidental to the assembly process, we decline to address the issue of whether the chemical conversion and fluorocarbon polymeric coating of the louvers in this case constitute acceptable operations incidental to the assembly process. However, on the basis of the information and exhibits presented, it is our opinion that, with the exception of the post-assembly coating and baking operations, the operations to be performed abroad constitute acceptable assembly operations and operations incidental thereto under HTSUS subheading 9802.00.80.

Sincerely,


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