United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 1993 HQ Rulings > HQ 0556195 - HQ 0556469 > HQ 0556363

Previous Ruling Next Ruling


HQ 556363


February 16, 1993

CLA-2 CO:R:C:S 556363 MLR

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. xxxx-xx- xxxxxx; Denial of partial duty exemption under HTSUS subheading 9802.00.80 to multiple outlet strips; painting

Dear Mr. Lawrence:

This is in reference to a protest and application for further review filed by S.L. Waber contesting the denial of the partial duty exemption under subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to certain multiple outlet strips.

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, HTSUS, because the cans and backs were painted in Mexico. Furthermore, it was determined that some of the cans and backs were formed in Mexico from U.S.-origin metal sheets; however, we have been informed that the entries covered by this protest only involve cans and backs that were formed in the U.S.

S.L. Waber has provided additional information on the painting operation performed in Mexico. The cans and backs are received in bulk from U.S. suppliers. The cans and backs contain a coat of die oils which is a remnant of the punch press and die manufacturing process and which prevents the formation of rust. These die oils are removed by the paint department by placing the cans and backs on a chain conveyor that carries them through a spray wash and dry system. It is stated that the washed cans and backs will exhibit rust in a few days if they are not painted immediately; consequently, they are loaded on tree racks (five backs or five cans per rack) and placed 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 cans or backs are painted by an electrostatic spray gun with one coat of paint. The hanging method and tree rack design causes each can to receive more paint on the outside than the inside. The third stage of 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 cans and backs are stored until they are ready to be assembled with the other raw materials into multiple outlet strips.

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

Item Cost Paint Labor Paint Overhead Total

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

The total assembly value of a multiple outlet strip is stated to be $5.42028.

ISSUE:

Whether the multiple outlet strips qualify for the partial duty exemption available under subheading 9802.00.80, HTSUS, when returned to the United States.

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 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 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, lamination, 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. See 19 CFR 10.16(a). 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 subheading 9802.00.80, HTSUS, to that component. See 19 CFR 10.16(c).

In C.S.D. 90-79 (HRL 555580 dated April 2, 1990), we considered the assembly of guide shoes used in oil well cementing equipment. It was held 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, were operations incidental to the assembly process pursuant to 19 CFR 10.16(b). We have also held in HRL 555569 dated August 1, 1990, that painting centralizers in Mexico, solely for rust protection purposes, was an operation incidental to assembly process pursuant to 19 CFR 10.16(b)(3). Therefore, we conclude that painting the cans and backs in this instance to prevent rust is an operation incidental to the assembly of the multiple outlet strips.

We also note that with respect to the cans and backs which may be manufactured both in Mexico and the U.S. (i.e., "dual- sourced" parts), only the cans and backs of U.S. origin may receive the benefits of subheading 9802.00.80, HTSUS. Although it has been indicated that the entries covered by this protest involve cans and backs manufactured in the United States, we have consistently taken the position that under section 10.24, Customs Regulations (19 CFR 10.24), a subheading 9802.00.80, HTSUS, allowance may be granted only if the importer can demonstrate, for each and every entry for which the allowance is claimed, that those components claimed to be products of the U.S. are, in fact, products of the U.S. Section 10.24, however, further provides that the entry-by-entry documentary requirements may be waived by the District Director if the district is satisfied that the importer and assembler have established reliable controls, including the strict physical segregation of U.S. and foreign components and the maintenance of any other records pertaining to the U.S. components so that the District Director can identify by audit, if necessary, the specific components of U.S. origin in particular shipments for which a subheading 9802.00.80, HTSUS, allowance is claimed. See also HRL 555505 dated December 28, 1989. Therefore, it is incumbent upon the importer to establish to the satisfaction of the your office the precise quantity and identity of the U.S. components involved in the entries subject to this protest.

HOLDING:

On the basis of the information provided, it is our opinion that the operations performed to the cans and backs are considered proper assembly steps or operations incidental to the assembly process. Therefore, the imported multiple outlet strips may be entered under subheading 9802.00.80, HTSUS, with allowances in duty for the cost or value of the U.S. components incorporated therein. With respect to components sourced both in the U.S. or abroad, reliable controls must be established to ensure that the precise quantity and identity of the U.S. components can be determined on an entry-by-entry basis. Accordingly, provided you are satisfied that the cans and backs involved in the protest are of U.S. origin, the protest should be granted. A copy of this decision should be attached to Customs Form 19, Notice of Action, to be sent to the protestant.

Sincerely,

John Durant, Director

Previous Ruling Next Ruling

See also: