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HQ 555780


May 24, 1991

CLA-2 CO:R:C:S 555780 LS

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Jeffery E. Brown
Intertrans Corporation
250 Lee Burbank Highway
Revere, Massachusetts 02151

RE: Applicability of subheading 9802.00.80, HTSUS, to disk subsystem storage device; soldering; use of fasteners, connectors, tape and other adhesives; stripping excess paint; use of touch-up paint; inspection; "tweaking"; snapping; plugging; drilling holes; cutting to length; assembly; incidental operations; 061429; 555564

Dear Mr. Brown:

This is in response to your letter of October 30, 1990, requesting a ruling, on behalf of EMC-2 Corporation, concerning the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to a disk subsystem storage device.

FACTS:

The following information is based upon your letter, and telephone conversations of a member of my staff with a representative of EMC-2 Corporation. EMC-2 Corporation will be shipping various components of U.S. and foreign origin to Ireland for assembly into a product called the "ORION," which is a solid state disk subsystem storage device to be used with a mainframe computer. It appears that the major components are of U.S. origin. The foreign components consist primarily of screws and other fasteners, cables, a battery, and packaging. The foreign operations result in the creation of four subassemblies which are then assembled together into the final product. The four subassemblies consist of a front panel assembly, a fan assembly, a rear panel assembly, and a tower assembly or cabinet. You have submitted detailed assembly instructions for each subassembly in a manual marked "Attachment C." Since each subassembly operation involves numerous steps, we will summarize the major steps which are common to each in items 1 through 5 below.

1. Adhering label stickers or tie wrap mounts onto the surface of other components by peeling off an adhesive backing. A tie wrap mount is a plastic container which adheres to a metal surface and is used to hold wrapped wires or cables to prevent them from hanging loose.

2. Use of various types of fasteners to attach and secure solid components together. The fasteners include screws, washers, nuts, hinge pins, and tape. When the three sub- assemblies, other than the tower assembly, are completed, they are joined together by screwing or snapping. They are then fit into the tower subassembly or cabinet. All the subassemblies are then plugged into one power unit. Another type of operation, referred to as "tie wrapping," involves tying two or more wires or cables together by use of a plastic connector known as a "tie wrap." The tie wraps are used to keep the wires in a bundle and prevent them from hanging loose. After the tie wrapping, the wires are sometimes placed in a tie wrap mount.

3. Connecting two or more solid components by snapping them together or plugging a component into a plug unit which serves as a connector. An example of such an operation, described on page 18 (step 8) of the manual, consists of plugging eight ribbon cables into four grey bus/tag connectors and four black bus/tag connectors.

4. Soldering one end of a cable to a ground filter. The other end of the cable is inserted into an eyelet of a ground screw, bent backwards, and soldered in place.

5. Sliding one component onto another component by use of cuts or tracks in the sheet metal. Screws are then used to further secure the components together.

The following operations are limited to a particular subassembly:

6. Using tape to join filler blanks to card cage, both of which are components of the tower assembly.

7. Stripping paint from threaded studs on the rear of the front panel component of the front panel assembly. The studs are metal protrusions which are used in joining the front panel component to the controller board component. This step, which is employed only when there is excess paint on the threaded studs, prevents such paint from interfering with the threads of the studs when the studs are screwed into holes in the controller board. The stripping operation consists of the following steps: (a) a drop of cutting oil is placed on the tip of the stud; (b) a die is screwed onto the threads of the stud; and (c) the die is removed by turning, as a result of which the paint is scraped from the threads.

8. Inspection of the chassis of the tower assembly.

9. Minor modifications may be made to older designs of the tower assembly chassis to enable a proper fitting of the hinge within the chassis. In these instances, a small piece of metal is trimmed from the rear of the chassis by using a saw and file.

10. An adjustment to the hinges of the rear panel assembly and the chassis of the tower assembly when these two sub- assemblies are joined. This adjustment is achieved through a process known as "tweaking," which essentially involves a jiggling operation to insure that the two subassemblies are lined up properly.

11. After the rear panel assembly is inserted into the tower assembly, any resulting scratches are removed from the smooth finish of the rear panel using a pencil eraser.

12. Touch-up paint is then used to cover all other blemishes or scratches where original paint was removed as a result of the joinder of the various subassemblies.

13. Drilling holes in the grounding strip component of the tower assembly to allow the grounding strip to be fastened to the chassis by means of screws.

14. Cutting the "schroff insulators" (plastic strips with holes along their body) to length. The insulators, which are part of the card cage component of the tower assembly, are exported from the U.S. in a continuous strip and broken or cut along existing perforations into six pieces, each 7 and 3/8 inches in length.

ISSUE:

Whether the "ORION" product 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 10.16(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 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, or which is not related to the assembly process, is not regarded as incidental to the assembly and precludes the application of the exemption under subheading 9802.00.80, HTSUS. See 19 CFR 10.16(c).

The processes described in Steps 1 through 6, which result in securely joining solid components together, constitute acceptable assembly operations since they involve soldering; use of fasteners, tape or other adhesive; and other processes which are analogous to those described in 19 CFR 10.16(a). See Headquarters Ruling Letter (HRL) 555564 dated May 1, 1990 (eight subassemblies were created and then joined into a final article, a cellular telephone, using assembly operations such as inserting, snapping, and sliding one component over another component).

Steps 7 through 14 constitute operations incidental to the various assembly processes, pursuant to 19 CFR 10.16(b). The process of stripping paint from the threaded studs to permit the studs to be used in a subsequent assembly is encompassed by 19 CFR 10.16(b)(4), which provides for "trimming, filing, or cutting off of small amounts of excess materials." The modifications described in Step 9 also constitute a trimming operation. Step 8 constitutes a form of testing, as described in 19 CFR 10.16(b)(7). Step 10 constitutes a minor adjustment or alignment which may be needed as a result of an assembly operation, and is analogous to the type of adjustments encompassed by 19 CFR 10.16(b)(5). Steps 11 and 12, which involve removing or covering up scratches or other blemishes with touch-up paint or a pencil eraser, both constitute a form of cleaning operation incidental to assembly. See 19 CFR 10.16(b)(1). Step 14, which involves separating the strip of insulators into individual lengths by cutting or breaking, is encompassed by 19 CFR 10.16(b)(6).

We find that Step 13, which involves drilling holes in the grounding strip to allow the insertion of screws for use in attaching or assembling the strip to the chassis, constitutes an operation incidental to assembly. See Miles v. United States, C.A.D. 1202, 65 CCPA 32, 567 F.2d 979 (1978), rev'g, C.D. 4689, 78 Cust. Ct. 35, 427 F. Supp. 417 (1977) (burning of holes and slots into Z-beams in Mexico, so that wear and support plates and other components could be attached prior to the beams' joinder to boxcars constituted an operation incidental to the assembly because it was concomitant with the assembly and was not substantial enough to preclude qualification under item 807.00, Tariff Schedules of the United States (TSUS) (the precursor of subheading 9802.00.80, HTSUS)). Similarly, drilling holes in the grounding strip is concomitant with the assembly of the strip to the chassis and is not a substantial operation. See HRL 061429 dated March 28, 1980 (holes drilled and punched through plastic cabinet, wood decal, and oscillator shield to accommodate locks and coil were deemed to be incidental to assembly).

HOLDING:

The overseas processes outlined in this ruling constitute either assembly operations or operations incidental thereto, pursuant to 19 CFR 10.16(a),(b). Thus, the "ORION" product will be eligible for the partial duty exemption under subheading 9802.00.80, HTSUS, when imported into the U.S., upon compliance with the documentary requirements of 19 CFR 10.24. Based upon the material you have submitted, we cannot specifically identify which components in each process are of U.S. origin. In each of the operations described above, a duty allowance will be permitted under subheading 9802.00.80, HTSUS, for the cost or value of only those components which are of U.S. origin.

Sincerely,

John Durant, Director

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