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HQ 555646


March 15, 1991

CLA-2 CO:R:C:S 555646 KCC

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

District Director of Customs
880 Front Street
Suite 5-S-9
San Diego, CA 92188

RE: IA 26/90, concerning door locksets from Mexico.Further fabrication; incidental operation; Mast; Surgikos; polishing; buffing; cleaning; lacquer coating; 19 CFR 10.16(c)(5); 058249; 078204

Dear Sir:

This is in response to your memorandum of March 23, 1990, forwarding the above-referenced request for internal advice, initiated by Siegal, Mandell & Davidson, P.C. on behalf of Schlage Lock Company, regarding the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to door locksets from Mexico. Additional submissions dated December 12, 1990, and February 6, 1991, submitted by counsel for Schlage were given consideration in responding to this request. Samples of the knobs and roses, before and after the Mexican operations, were submitted to your office but were not forwarded to this office.

FACTS:

Schlage ships U.S.-origin brass knobs and roses to Mexico for assembly into door locksets. Before the assembly operations commence, the knobs and roses are subjected to a polishing/buffing, cleaning, and lacquer coating process. The polishing/buffing operation consists of placing the components against a polishing/buffing wheel which emits paste. The paste is then cleaned off the components and they are dried. The components are sprayed with a powder coating which is baked onto the surface. The knob and rose components are then assembled with other components to form the finished locksets which are individually packaged for retail sale and imported into the U.S.

Counsel states that the purpose of the polishing/buffing, cleaning and lacquering operations is to restore a uniform brass finish and to preserve the metal.

ISSUE:

Whether the door knobs and roses incorporated into the door locksets are eligible for the duty exemption available 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, lubrication, 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 article, less the cost or value of the U.S. components assembled therein, 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)), 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 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 HTSUS subheading 9802.00.80 to that component. See, section 10.16(c), Customs Regulations (19 CFR 10.16(c)).

In United States v. Mast Industries, Inc., 515 F. Supp. 43, 1 CIT 188, aff'd, 668 F.2d 501, 69 CCPA 47, (1981), 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 and time of the operation are 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.

Polishing/buffing is not considered an acceptable operation incidental to the assembly process where it imparts significant new characteristics or qualities to the article affected. See, 19 CFR 10.16(c)(5).

We have also held in Headquarters Ruling Letter (HRL) 058249 dated July 21, 1978, that a coating which is applied by spray painting and baking is not an acceptable assembly operation or operation incidental to the assembly. See also, HRL 078204 dated August 26, 1986 (application of a liquid enamel onto a plate and then baking the plate to create an enamel finish is not considered an operation incidental to the assembly process), and C.S.D. 90-32(3), 24 Cust.Bull. (1990) (HRL 555506 dated January 16, 1990) (glazing and firing chinaware after application of a decal is not an incidental operation).

In our opinion the polishing/buffing and lacquer coating operations enhance the appearance and impart significant, new characteristics to the knobs and roses. The articles start out in a cast condition and are finished to a bright brass by the polishing/buffing and lacquer coating operations. The knobs and roses are not ready for assembly, but require further fabrication whose primary purpose is the completion and physical improvement of the components.

In a letter dated December 12, 1990, counsel for the importer states that the polishing/buffing and lacquer coating operations should be considered incidental pursuant to Mast. However, we find that an analysis of Mast supports the conclusion that the polishing/buffing and lacquer coating operations are not incidental to the assembly. In applying the Mast criteria, the court in Surgikos, Inc. v. United States, 12 CIT , Slip Op. 88-35 (1988), found that fenestration and finishing folding operations performed after the assembly operation were not incidental to the assembly process, as the operations comprised over one-fourth of the cost and one-third of the time involved to assembly the article, they were not necessary prerequisites to the assembly of the article, they were not related directly to the assembly process, and practical considerations did not "dictate" that the article be produced in the exact manner performed.

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 the December 12, 1990, submission, the cost of all the Mexican operations for the F51 lockset is $0.8218 (and for the B160 lockset is $0.734), whereas the cost of the polishing/buffing and lacquer coating is $0.265 ($0.147). Thus, the polishing/buffing and lacquer coating operations constitute approximately 32% (20%) of the entire Mexican operation. Schlage also estimates that the time required to perform the above operations is 32% (20%) of the total foreign assembly time. These figures indicate that the polishing/buffing and lacquer coating operations are not incidental to the assembly.

We recognize that the polishing/buffing and lacquer coating operations must occur before the assembly. As counsel stated in their February 6, 1991, submission, the assembly machinery in Mexico cannot operate with brass components that have not been subjected to the brass polishing and lacquer coating operation. Counsel stated that the brass components in this condition are not of uniform dimensions because they contain surface impurities and grit attributable to the original manufacturing operations. Additionally, oily residues containing toxins can build up on the brass surface of non-polished and lacquer coated components. Counsel stated that if the components are not polished and coated, the oily residue would build up in the assembly machinery and the toxic residue may pose an unacceptable health risk to the employees. Although you state that these operations could be performed in the U.S. prior to exportation, the additional expenses that would result from the need to individually pack each component makes it commercially preferable to perform the polishing and coating operations in Mexico.

While these operations may be necessary to the assembly process, we do not find that they are so related to the assembly that they must necessarily be performed in Mexico rather than in U.S. Similarly, we are not persuaded from the information presented that economic or other practical considerations mandate that the polishing/buffing and lacquer coating operations be performed in Mexico immediately before the assembly. Weighing the above factors, we conclude that the polishing/buffing and lacquer coating operations are not incidental operations within the meaning of subheading 9802.00.80, HTSUS, but rather evidence that the knobs and roses are not exported in condition ready for assembly without further fabrication.

HOLDING:

On the basis of the information submitted and prior rulings, we are of the opinion that the polishing/buffing and lacquer coating processes are not operations incidental to the assembly, but rather constitute a further fabrication of the components. Therefore, the knobs and roses are not entitled to allowances in duty under subheading 9802.00.80, HTSUS, when returned to the U.S. incorporated into the locksets.

Sincerely,

John Durant, Director
Commercial Rulings Division

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