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HQ 555885


June 17, 1991

CLA-2 CO:R:C:S 555885 GRV/JLV

CATEGORY: CLASSIFICATION

TARIFF NO.: 8703.24.00; 8704.31.00; 9802.00.80

District Director of Customs
Lincoln Juarez Bridge, Bldg #2
P.O. Box 3130
Laredo, Texas 78044-3130

RE: Protest Nos. 2304-90-000058-60, 78-83, 93-96, 99, 100, 108, 109, 120, 121, 134-137, 139-141, 152, 153, 156-161, contesting tariff classification of vehicles and denial of HTSUS subheading 9802.00.80 treatment to certain U.S.- origin sheet metal components assembled into vehicles abroad and subjected to finish coat painting

Dear Sir:

The above-referenced protests contest the classification of motor vehicles known as the two-door Chrysler Ramcharger, under subheading 8704.31.00, Harmonized Tariff Schedule of the United States (HTSUS), and the denial of allowances in duty under HTSUS subheading 9802.00.80 for certain exterior sheet metal components of U.S. origin which were assembled into Chrysler vehicles in Mexico and subjected to finish coat painting operations prior to the vehicles' return to the U.S.

FACTS:

Chrysler Motors Corporation exports U.S.-stamped sheet metal (vehicle body parts) and other components to Chrysler de Mexico for assembly into various motor vehicles. Loose body panels are first spot and resistance welded to form a subassembly, which is then transferred to the main assembly line where other body panels are welded onto it through a series of further welding processes. After the body of the vehicle is assembled, the unit is sent to the panel fitting area, where doors, fenders, front end panel and hood are added, fitted and adjusted for gaps and flushness. Stud welds are made for the subsequent attachment of moldings and exterior ornamentation, which is added after the painting process.

The assembled vehicle body is then subjected to a painting process which consists of adding various layers of coatings and sealers. Specifically, the process entails (1) washing the complete body of the vehicle so that all oils and other contaminants are removed; (2) dipping the body into a phosphate chemical bath at high temperatures, which prepares (sensitizes) the metal and ensures the proper adhesion of the primer coat; (3) sealing all joints of the body to prevent moisture, dirt and noise from entering the interior of the body; (4) spraying a primer coat over the entire body, inside and out, which is then baked at high temperatures to cure the coating; and, (5) spraying a color coat, and, in some cases, an additional clear coat, over the entire body, inside and out. Each of these coats also is baked at high temperatures to cure the coating.

The finish painted vehicle body is then moved to the dress-up line where hardware, windows and other final trim work are installed and attached by screws, nuts, bolts and clips. The finished vehicles imported into the U.S. and subject to these protests comprise Chrysler Ramchargers, Club Cabs and K-Cars.

The two-door Ramcharger vehicles were entered under HTSUS subheading 8703.24.00 and protestant claimed entitlement to the partial duty exemption under HTSUS subheading 9802.00.80 for all vehicles. Your office reclassified the Ramchargers under HTSUS subheading 8704.31.00 and, with respect to all vehicles, dis- allowed the duty exemption under HTSUS subheading 9802.00.80 for the sheet metal components subjected to finish coat painting.

Regarding the reclassification of the Ramchargers under HTSUS subheading 8704.31.00, your office determined that they constituted multipurpose vehicles for the transport of goods and persons, thereby precluding their classification under HTSUS subheading 8703.24.00, which provides for motor vehicles principally designed for the transport of persons. Protestant notes that in Headquarters Ruling Letter (HRL) 806815 dated August 15, 1983, Customs held that, for purposes of classification under the Tariff Schedules of the United States (TSUS), the Ramcharger vehicle "is essentially a motor vehicle for carriage of persons and their personal gear in much the same manner as a large full-sized station wagon." According to protestant, as no notice of the revocation of HRL 806815 was provided to Chrysler, as required by section 177.9(d), Customs Regulations (19 CFR 177.9(d)), the holding in HRL 806815 should be controlling in this case.

Concerning the imported vehicles' eligibility for HTSUS subheading 9802.00.80 tariff treatment, your denial of the duty exemption for certain sheet metal components was based on HRL 553640 dated August 9, 1985, which held that the finish painting of component parts in assembled vehicles is a significant step in the fabrication of the vehicles and not merely an incidental part of the assembly. Therefore, we determined that the U.S.-origin body parts which were finish painted abroad were ineligible for a duty allowance under item 807.00, TSUS (the precursor provision to HTSUS subheading 9802.00.80).

Protestant maintains that the finish coat painting of exterior sheet metal components is incidental to the assembly process and should not preclude granting the duty exemption under this tariff provision for these components. ISSUES:

I. Does a ruling letter, issued under the TSUS on the tariff classification of a Ramcharger motor vehicle, control classification under the HTSUS until revoked or modified in writing?

II. Under the HTSUS, is the two-door Ramcharger classified as a motor vehicle principally designed for the transport of persons, in subheading 8703.24.00, HTSUS?

III. Whether the finish painting of sheet metal components is an operation incidental to vehicle assembly operations for purposes of HTSUS subheading 9802.00.80 eligibility.

LAW AND ANALYSIS:

I. TSUS Ruling Letter

In HRL 086448 dated March 6, 1990, we held that the classifi- cation of a two-door Toyota 4Runner under the HTSUS was not controlled by a ruling letter issued in 1983 under the former tariff nomenclature, even though the ruling had never been revoked or modified in writing. The law and analysis expressed in that ruling applies to the facts in this case.

II. HTSUS Classification

Motor vehicles falling in heading 8703, HTSUS, must be "principally designed" for the transport of persons. The two-door Ramcharger is a motor vehicle within the class of multi- purpose vehicles that are based on structural features designed for carrying goods. These vehicles typically have engine and transmission performance characteristics that suit them for towing or hauling heavy loads, suspension and chassis designs that provide strength, coach or body designs that provide interior volume, and flat floors which facilitate the loading, transport, and unloading of goods. These structural features are indicative of a motor vehicle designed for the transport of goods, even if, as in this case, a rear seat is added. See HRLs 083081 dated May 4, 1989, and 086448 dated March 6, 1990.

The design of the two-door Ramcharger incorporates the features described above. The protestant has not submitted any factual information which would indicate a significant addition or change to these structural features. Therefore, we conclude that the two- door Ramcharger is not a motor vehicle principally designed for the transport of persons, and is properly classified in HTSUS subheading 8704.31.00.

III. Applicability of HTSUS subheading 9802.00.80 to vehicle components subjected to finish coat painting abroad

HTSUS subheading 9802.00.80 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 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 a duty upon the full value of the imported assembled article, less the cost or value of the U.S. components assembled therein, provided there has been compliance with the documentation requirements of section 10.24, Customs Regulations (19 CFR 10.24).

Fabricated components subject to the exemption are provided for at section 10.14(a), Customs Regulations (19 CFR 10.14(a)), which 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.

Operations incidental to the assembly process are not consid- ered further fabrication, as they are of a minor nature and cannot always be provided for in advance of the assembly operation, although they may precede, accompany or follow the actual assembly operation. Examples of operations considered incidental to the assembly process are delineated at section 10.16(b), Customs Regulations (19 CFR 10.16(b)), which specifically enumerates the application of a preservative paint or coating. 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. See, 19 CFR 10.16(c)(3) (painting primarily intended to enhance the appearance of an article or to impart distinctive features or characteristics is not considered incidental to assembly).

As protestant notes, the issue under consideration here is presently before the Court of International Trade in General Motors Corp. v. United States, No. 87-03-00471. In that case, the court is reviewing Customs denial of classification under item 807.00, TSUS, for a painting operation claimed to be incidental to the assembly of certain trucks in Mexico. As part of this assembly operation, GM requested TSUS item 807.00 treatment for the application of several coats of enamel finish paint to the assembly trucks. We held that such an operation was neither minor nor incidental to the assembly of the vehicles.

Pending the issuance of a decision in the General Motors case, we continue to believe that our position on this issue, as reflected in the Customs Regulations and our rulings (e.g., HRL 553340 dated December 14, 1984), is consistent with the statute and numerous court decisions interpreting this tariff provision. Therefore, in regard to the facts of the instant case, we find that the sheet metal components of U.S. origin which are subjected to the finish coat painting process in Mexico are not entitled to the duty exemption under HTSUS subheading 9802.00.80.

HOLDING:

On the basis of the record in this matter, it is our opinion that the two-door Ramcharger is not a motor vehicle principally designed for the transport of persons. Therefore, these vehicles are classified at HTSUS subheading 8704.31.00.

The finish painting operations performed on the assembled vehicle body parts are not minor operations incidental to the assembly process, but rather are significant operations, which preclude the application of HTSUS subheading 9802.00.80 tariff treatment to those components subjected to such operations.

Accordingly, these protests should be denied in full. A copy of this decision should be attached to the Form 19 to be sent to the protestant.

Sincerely,

John Durant, Director

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