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HQ 556362


February 16, 1993

CLA-2 CO:R:C:S 556362 WAW

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

District Director
U.S. Customs Service
International & Terrace Sts
Nogales, Arizona 85621

RE: Application for Further Review of Protest No. 2604-91- 100030; multiple outlet strips; painting; 9802.00.80; incidental to assembly

Dear Sir:

This is in response to the above-referenced protest which was forwarded to our office concerning the applicability of the partial duty exemption under subheading 9802.00.80, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), to multiple outlet strips from Mexico.

FACTS:

S.L. Waber imports multiple outlet strips from Mexico, which consist of a can, a back, and various other subassemblies (i.e., circuit breakers, wires, switches, etc.). Your office denied the partial duty exemption under subheading 9802.00.80, HTSUSA, because the cans and backs were painted in Mexico. Protestant maintains that the subject entries should be entitled to the partial duty exemption under subheading 9802.00.80, HTSUSA.

Protestant sends unpainted cans and backs suitable for use in the production of the multiple outlet strips to Mexico where they are painted and then assembled with various other subassemblies into the finished article. The cans and backs used on the multiple outlet strips are received in bulk from protestant's suppliers. These parts are bulk released to protestant's paint department. The paint department unloads the cans or backs onto a chain conveyor that carries them through a spray wash and dry system to remove the die oils used by the U.S. suppliers to manufacture the parts in their punch presses and dies. The parts are then loaded onto tree racks (five backs or five cans per rack), on a progressive paint conveyor. The first stage of the conveyor is a final dry stage. The second stage is the paint booth where the rack spins and all five parts pass in front of an electrostatic spray gun and are painted with one coat of paint. Protestant states that the outside of the cans receive more paint than the inside due to the hanging method and tree rack design. During the third stage of production, the conveyor carries the parts into a propane fired drying oven for final paint drying. The conveyor exits the oven to stage four where the parts are unloaded onto pallets. The conveyor continues forward to the loading stage. The cans and backs are stored and issued to final assembly along with all other raw materials necessary to build the final product. After the cans and backs are painted the subassemblies are prepared and the components are loaded onto the can. The cans and backs may be painted a variety of colors, depending upon customer specification. Finally, the finished multiple outlet strip is tested and labeled, before it is packaged for shipment to the U.S. Protestant states that approximately 22 components are assembled manually by means of both soldering and screwing operations.

The time and costs necessary for washing and painting a set (can/back) of parts is as follows:

Item Cost Paint Labor Paint Overhead Total

Can $.485/ea $.00744/ea $.04464/ea $.53708 Back .115/ea .00558/ea .03348/ea .15406
Paint .086/set 0 0 .086 $.686/set $.01302/set $.07812/set $.77714/set

The total assembly value of a multiple outlet strip is calculated to be $5.42028/unit.

ISSUE:

Whether the multiple outlet strip from Mexico is entitled to the partial duty exemption available under subheading 9802.00.80, HTSUSA, when returned to the U.S.

LAW AND ANALYSIS:

Subheading 9802.00.80, HTSUSA, 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, HTSUSA, 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 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 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 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.

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 operations. However, any significant process, operations or treatment whose primary purpose is the fabrication, completion, physical or chemical improvement of a component precludes the application of the exemption under subheading 9802.00.80, HTSUSA, to that component. See 19 CFR 10.16(c).

We have previously held that dipping an article into waterbase paint for rust protection purposes is considered an acceptable incidental operation pursuant to 19 CFR 10.16(b)(3), which states that the application of preservative paint or coating is an incidental operation. See Headquarters Ruling Letter (HRL) 555569 dated August 1, 1990; C.S.D. 90-79 (HRL 555580 dated April 2, 1990) (holding that degreasing a premachined metal cylinder with a soap and water mixture and spray painting the resulting guide shoe with waterbase red paint, to protect it against rust, are operations incidental to the assembly process pursuant to 19 CFR 10.16(b)(3)). In the instant case, protestant states that the primary purpose of applying paint to the cans and backs of the multiple outlet strip is to protect these components from rust over the years. Moreover, based on the information provided in your submission regarding the cost and time of the painting operation, it appears that the operation is minor in comparison to the total assembly of the multiple outlet strips. Therefore, we are of the opinion that the painting operation is considered an operation incidental to the assembly process pursuant to 19 CFR 10.16(b)(3).

HOLDING:

Based on the information presented, it is our opinion that the operations performed abroad to create the multiple outlet strips are considered proper assembly operations or operations incidental to the assembly process. Therefore, the imported multiple outlet strips may be entered under subheading 9802.00.80, HTSUSA, with allowances in duty for the cost or value of the U.S. components incorporated therein, upon compliance with the documentary requirements of 19 CFR 10.24.

This protest is hereby granted in full. A copy of this decision should be attached to the Customs Form 19 and mailed to the protestant as part of the notice of action on the protest.

Sincerely,

John Durant, Director

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