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HQ 556864


December 9, 1992
CLA-2 CO:R:C:S 556864 BLS

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Ms. Catherine Weeks
United Customhouse Brokers, Inc.
9950 Marconi Drive
Otay Mesa, CA 92173

RE: Applicability of Subheading 9802.00.80, HTSUS, to trailer beams; cutting; shaping; 19 CFR 10.14(a) and 10.16; Samsonite; Mast; General Instrument

Dear Ms. Weeks:

This is in reference to your letter dated July 17, 1992, and a clarifying fax dated October 26, 1992, on behalf of Hyundai Precision America, Inc., concerning the applicability of a duty allowance under subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to trailer beams imported from Mexico. The beams are used in the assembly of a trailer chassis imported into the United States to haul cargo containers.

FACTS:

The raw material sent to the manufacturing facility in Mexico consists of two 23 foot beams (main rails), a front and rear bolster, a slide bogie assembly, two axles, landing gear, tire assembly, all lighting and electrical harnesses, and the brake system. All of these materials are of U.S. origin. This was confirmed by telephonic conversation with Catherine Weeks, United Customhouse Brokers ("United").

The beams are cut in Mexico to effect a "gooseneck" configuration. Approximately four feet of the beams are cut away and discarded, constituting about 18 percent of the total length of the beam. The beams are then marked and drilled. (A schematic drawing of the beams as processed is attached to the submission.)

The rear bolster is welded to the rear end of the main beams. Six cross members (small cross beams) are connected to the main beams. The cross members are placed along the width of
the chassis, and welded at the end of the cross member to the main beam axle. It is stated that very little welding is involved in the final assembly. The electrical system and brake piping are assembled to the main frame. The bogie assembly is then assembled with the suspension, axles, wheels and tires, to the main frame. The total time involved in assembling the chassis is 150 hours, of which 30 minutes is devoted to cutting the gooseneck. The total expense involved in assembly of the chassis is $820, $3 of which represents the cost of cutting the gooseneck.

The landing gear can be lowered and raised to stabilize the entire unit and assist in securing a container that may be placed on the chassis. The gooseneck is the raised portion of the chassis which actually attaches to the tractor for the purpose of towing.

ISSUE:

Whether the marking and cutting of the trailer beams to a specific shape constitutes a process of fabrication, or rather is an operation incidental to assembly of the trailer chassis for purposes of subheading 9802.00.80, HTSUS.

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)), 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. Materials undefined in final dimensions which are cut into specific shapes or patterns abroad are not considered fabricated 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. Such incidental operations include trimming, filing, or cutting off of small amounts of excess materials; and adjustments in the shape or form of a component to the extent required by the assembly being performed abroad. 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).

United equates the type of processing herein involved with the operations performed in General Instrument Corp. v. United States, 499 F.2d 1318 (CCPA 1974), involving spooled wire sent abroad to be used in certain television components. United also points out that the time and cost expended to cut the beam is minimal, as compared to the total time and cost involved in assembly of the entire chassis. This was one of the factors deemed to be relevant by the court in United States v. Mast Industries, Inc., 69 CCPA 47, 668 F.2d 507 (1981), in determining whether certain operations constituted steps incidental to assembly or were rather processes of fabrication.

In General Instrument, spooled wire was sent abroad and despooled, cemented, taped and wound around ferrite cores, for use in television deflector yokes. The court found that while there was some change in the form or shape of the wire, such change was insufficient to alter the physical identity of the wire. Accordingly, the operations performed abroad were considered to be steps incidental to assembly and did not constitute a process of fabrication.

In Samsonite Corp. v. United States, 12 C.I.T. 1146, 702 F. Supp.908 (1988), aff'd, 898 F.2d 1074 (1989), (involving Item 807, TSUS, the precursor to 9802.00.80), U.S. origin strips of steel were exported to be incorporated into luggage as the frame. Before assembly, the steel strip was bent into a square-sided letter "C". The facts also reflected that this bending process had at one time been performed in the United States before assembly abroad. The Court of International Trade held that because the bending created the component to be assembled, the essence of which was its configuration, the process was one of fabrication and not of mere assembly.

In affirming the lower court, the Court of Customs and Patent Appeals noted that the steel strips underwent a complete change in shape in Mexico, which configuration was necessary before the strip could serve its ultimate function as part of the frame of the luggage. The court emphasized that the critical question in determining whether fabrication rather than an operation incidental to assembly took place is not the amount of processing that occurs, but its nature. (The bending process constituted approximately 1.5% of the value of the frame, and 1.4% of the time required for the assembly process.) Thus, it found that "...what emerged after the bending operation was a different object from that which left the United States. The latter was a steel strip; the former was a metal frame for a piece of luggage." The court distinguished General Instrument, pointing out that there the wire underwent no basic change in connection with its incorporation into the television set component, while the steel strip underwent a significant change in shape before the actual assembly of the luggage could begin.

Similarly, in the instant case, the shape of the beam was undefined prior to the cutting operation. What left the United States was a metal beam; what emerged after the cutting operation was no longer a mere beam, but rather a new item, a metal "gooseneck" ready to be assembled (with some incidental processing) as part of the trailer chassis. The complete change in the shape of the beam was necessary before it could be used in the assembly of the trailer chassis. Such cutting did not constitute a mere adjustment to the beam incidental to the assembly process, but rather created the component to be assembled, i.e., the "gooseneck".

HOLDING:

The cutting of the trailer beams abroad was not an operation incidental to assembly as the processing was necessary to complete the fabrication of the beams. Therefore, the beams do not qualify for an allowance in duty under subheading 9802.00.80, HTSUS when returned to the U.S. as part of the trailer chassis.

Sincerely,

John Durant, Director
Commercial Rulings Division

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