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HQ 555416


September 19, 1990

CLA-2 CO:R:C:V 555416 LS

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Mr. James J. McNamara
Rudolph Miles & Sons, Inc.
P.O. Box 2489
Laredo, Texas 78044-2489

RE: Applicability of partial duty exemption under subheading 9802.00.80, HTSUS, to mechanical cable formed by squaring, cutting to length, and deburring core component, and force fitting core component with other components. Assembly; incidental operation; further fabrication; C.S.D.84-39

Dear Mr. McNamara:

This is in response to your letter of June 6, 1990, on behalf of Flexible Controls Corp., requesting a ruling on the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to mechanical cable which is used in automobile power seats. Samples of the mechanical cable and one of the components, the core, were submitted for our examination, along with a diagram showing the squaring and cutting operations.

FACTS:

Flexible Controls Corp. plans to ship reels of bulk flexible shafting or core, vinyl casing, stop collars, couplings, and grease, all of U.S. origin, to Mexico for processing into a mechanical cable. The core is made of carbon wire steel. The assembled cable, when imported into the U.S., will serve as a flexible shaft of an automobile power seat so that one end will be joined to a motor and the other end fitted into an actuator, a device which moves on a track in the power seat. The following facts are based upon your letter of June 6, 1989, a supplemental fax of August 16, 1990, and a telephone conversation with a member of my staff.

Two operations which are performed upon the bulk core prior to assembly with the other components are currently being performed in the U.S. These operations consist of squaring the bulk core and cutting it to length. Flexible Controls Corp. plans to perform these operations in Mexico instead of the U.S. in order to reduce labor and shipping costs and to better insure compliance with quality control procedures.

You ask us to specifically address the issue of whether these two operations performed in Mexico are considered to be incidental to the assembly process so as to allow a partial duty exemption for the core component under subheading 9802.00.80, HTSUS. The reels of core will be cut and squared on the same machinery. According to the samples of the already cut and squared core and a diagram you submitted, the machine works the core in a "squaring" operation whereby, at intervals of approximately 13 inches, an area of the core, consisting of approximately 2 inches in length, is re-shaped into a square formation with right angles and flat surfaces. In the middle of this 2 inch area, a "dimple" or indentation is made to mark the point for cutting. After the bulk core is cut at each interval, the cut core is straightened and pulled to length before being removed from the machine. The cores are then deburred manually, which basically involves filing the rough edges at each end. The finished core thus has a squared section of approximately 1 inch at each end. You state that the squaring is not related to the assembly in the sense that the squared ends are not required to enable the core to be assembled or fitted into the other components. Instead, the squaring is necessary so that when the final product, the mechanical cable, will be put to its ultimate use in the U.S., it will fit into the motor and actuator which run the power seat. You also have provided a data sheet which indicates that the cost and time required to perform both the squaring and cutting operations each represents approximately 9 percent of the total cost and time required for all the Mexican operations. You state that the time and cost of the squaring operation alone each represents approximately one-half of the 9 percent figure.

The actual assembly operations consist of several steps. First, one of the stop collars, a small round plastic part, is forced onto one end of the fabricated core, resulting in a "first collared core." Grease is then applied to the first collared core to reduce friction inside the final assembled mechanical cable when it is in use. Next, one coupling is fit onto each end of the vinyl casing, which results in a "plastic subassembly." The greased first collared core is then inserted into the plastic subassembly. Finally, the second stop collar is fitted onto the other end of the core. The stop collars securely hold the core inside the plastic subassembly. In the final product, i.e., the mechanical cable, a small portion of the inner core protrudes from the plastic subassembly on each end.

ISSUE:

Whether the mechanical cable will qualify for the partial duty exemption under subheading 9802.00.80, HTSUS, when imported into the U.S.

LAW AND ANALYSIS:

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 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 subheading 9802.00.80, HTSUS, must be satisfied before a component may receive a duty allowance. An article entered under subheading 9802.00.80, HTSUS, is subject to duty upon the full value of the imported assembled article less the cost or value of the U.S. components, upon compliance with the documentary requirements of section 10.24, Customs Regulations (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 exportation 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. Materials undefined in final dimensions and shapes, which are cut into specific shapes or patterns abroad are not considered fabricated components.

According to section 10.16(a), Customs Regulations (19 CFR 10.16(a)), assembly operations may consist of any method used to join or fit together solid components. Force fitting is specifically enumerated as an acceptable assembly operation.

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. See 19 CFR 10.16(a). Examples of operations considered incidental to the assembly process are delineated at 19 CFR 10.16(b). However, any significant process, operation, or
treatment whose primary purpose is the fabrication, completion, or physical or chemical improvement of a component precludes the application of the exemption under subheading 9802.00.80, HTSUS. See 19 CFR 10.16(c).

Pursuant to 19 CFR 10.16(a), we find that the following steps constitute acceptable assembly operations: (1) forcing a stop collar, first, onto one end of the fabricated core, and as the last step, onto the other end of the core; (2) fitting one coupling onto each end of the vinyl casing, resulting in a "plastic subassembly"; and (3) inserting the core with a collar at one end into the plastic subassembly. All of these operations constitute, or are analogous to, a force fitting operation.

With respect to the core shipped to Mexico on reels, the operation of cutting it to length is incidental to the assembly process pursuant to 19 CFR 10.16(b)(6). However, the squaring operation--whereby certain sections of the core, which become the ends of the cut core, are re-shaped into a square formation with right angles and flat surfaces--constitutes a further fabrication of the core, rather than an incidental operation. First, the core, as exported, is not a fabricated component ready for assembly, pursuant to 19 CFR 10.14(a), because the squaring operation redefines the shape of the ends of the core which is necessary to the function of the completed mechanical cable. Second, the squaring constitutes a further fabrication or completion of the component within the meaning of 19 CFR 10.16(c)(5), since it is a machining operation which imparts a significant new characteristic to the core. See C.S.D. 84-39 (Headquarters Ruling Letter 071451 dated September 30, 1983), 18 Cust. Bull. 932 (1984) (cumulative foreign operations of folding raw coil material into newly designed configuration, and subsequently annealing to strengthen and temper the metal into the final new shape, constitute a fabrication that produces substantially new properties and characteristics that did not exist at the time of export). Furthermore, the squaring operation is not related to the assembly process in that the resulting squared ends do not enable the core to be fitted into the other components to form the mechanical cable. See 19 CFR 10.16(c).

Since the core component does not meet the requirements of clause (a) of subheading 9802.00.80, HTSUS, no allowance in duty may be made for its cost or value. However, an allowance may be made for the vinyl casing, stop collars, and couplings, all of U.S. origin, since they satisfy clause (a) and have not been advanced in value or improved in condition except by being assembled or by operations incidental to the assembly. Assuming that the grease is in a liquid form as exported, it does not
qualify as a "fabricated component, the product of the U.S." The legislative history of subheading 9802.00.80, HTSUS, makes it clear that the exemption applies to U.S.-made fabricated components which are of types designed to be fitted together with other components, and does not apply to chemical products, food ingredients, liquids, gases, powders, etc. H.R. Rep. No. 342, 89th Cong., 1st Sess. 49 (1965). Therefore, the grease is not eligible for the partial duty exemption under the statute.

HOLDING:

The mechanical cable will qualify for the partial duty exemption under subheading 9802.00.80, HTSUS, when imported into the U.S., with allowances in duty permitted only for the cost or value of the vinyl casing, stop collars, and couplings, all of U.S. origin. No allowance may be made for the core component since it is subject to a squaring operation in Mexico which is considered to be a further fabrication. In addition, no allowance may be made for the grease because it is not a fabricated component of a type designed to be fitted together with other components.

Sincerely,

John Durant, Director
Commercial Rulings Division

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