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HQ 557630


September 1, 1994

CLA-2 CO:R:C:S 557630 BLS

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Mr. Russell L. Jones, President
R. L. Jones Customhouse Brokers, Inc.
P.O. Box 488
San Luis, Arizona 85349

RE: Applicability of subheading 9802.00.80, HTSUS, to spring brakes assembled in Mexico; Incidental to assembly; HRL 556124; HRL 557018

Dear Sir:

This is in reference to your letter dated October 8, 1993, on behalf of TSE Brakes, Inc. ("TSE"), requesting a ruling that the zinc plating of air spring actuators ("spring brakes") is an operation incidental to assembly for purposes of determining the eligibility of the articles for the partial duty exemption under subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS). In a letter dated August 5, 1994, TSE advises that the plating operation is currently being performed in the U.S., but that a transfer of this function to Mexico may occur in the future.

FACTS:

The facility in Mexico assembles spring brakes from U.S. and foreign parts for heavy duty truck and trailer brake system applications. By telephonic communication, you advised that the assembly operations involved are essentially similar to the operations described in Headquarters Ruling Letter (HRL) 556124, dated October 31, 1991. However, this process differs from the operations performed in HRL 556124, in that the latter operation involved a powder coating, and not zinc plating, of the component parts. We also understand that not all of the components presently used to produce the brakes are of U.S. origin, and that the mix of foreign and U.S.-origin components with respect to future importations may be subject to variation.

During the plating process, which occurs prior to assembly, the parts are dipped into tanks containing a zinc solution with an electrical current passing through it, which causes the zinc to adhere to the bare metal. TSE specifies 0.003" (3 thousandth of an inch) thickness for the plating. Zinc is used because,
unlike steel, it inhibits rust. The process is intended to protect brakes from salt and other highway cleaning solvents used for snow and ice removal. You state that only those spring brakes which are to be used in cold weather climates will undergo these operations. On the premier units, a protective powder coating is added over the top of the zinc plate. During this process, a coating consisting of pigment and epoxy is sprayed over the parts, which are then heated over an oven. The heating process causes the powder to melt and flow evenly across the metal parts and bond with the exposed parts of the brake.

The components involved in the assembly process are as follows:

1. spring housing;
2. push rod;
3. return spring;
4. dust cap;
5. main spring;
6. clamp;
7. o'ring;
8. warning tag;
9. push rod plate;
10. diaphragm

The first phase of the assembly operation consists of the subassembly of the adapter base. The next phase consists of positioning the spring housing into a single assembly press. The main spring is then placed into the spring housing. The press plate is placed onto the main spring in order to completely compress the main spring into the spring housing. A diaphragm is placed in the spring housing on top of the press plate. The pre- assembled adapter base is then placed onto the diaphragm. Clamps are positioned around the spring housing, and nuts and bolts are used to tighten them to approximately 25 pounds of torque. Warning tags are then slipped over the clamp bolts. A dust cap is snapped onto the spring housing which completes the assembly of a single spring brake.

You have also provided the following information: Cost of Plating

The costs enumerated below reflect the cost of plating the highest volume parts, as compared to the total cost of these components and the cost of the assembly process, and are representative of all components used to produce the brakes. (The individual component costs include labor, freight, and tooling.)

1) Part 1023001 (spring housing) - Cost of component - $1.75; Cost of plating - $0.32.

2) Part 1003011 (push rod assembly) - Cost of component - $1.36; Cost of plating - $0.25.

3) Part 1223019 (service base assembly) - Cost of component - $2.42; cost of plating - $0.30.

The average cost of the entire assembly process, which includes plating, is $23.57. The cost of the assembly process, excluding the plating, is $18.56 (from bill of materials), or $19.40 (from financial statements). We are advised that costs fluctuate due to frequent price changes in materials and the use of multiple vendors. The costs for lower volume parts, not reflected in the above examples, will be higher than the high volume parts, while the costs of plating remain constant.

Time Required - Plating Process

The total time required to plate one specific part is approximately 50 minutes. The process includes hanging the part on a rack (along with 10-50 other parts, depending on the size of the part), transporting the part through a series of baths which clean and prepare the part surface, and plating. Approximately 600 parts per hour are plated. In comparison, an average of 44 brake units are assembled in an hour's time. (However, this does not include the time required to assemble other sub-assemblies used to supply the final assembly line, or for the powder coating process used for premium units.)

Plating Process - When Performed

Plating must be performed after the stamping/forming process because the stretching and bending of the metal in stamping would destroy and remove the plating. It must also be done after any welding, because welding burns off the plating, which makes the part vulnerable to corrosion. Welding often causes "flash rust" when rust prevention steps such as plating are not done very soon after the welding process. Powder coating for premium units must be done after plating, but prior to final assembly. Plating and powder coating must also be done prior to final assembly because the entire part must be covered, including the internal as well as the external surfaces. (TSE has also telephonically advised that since the plating operation is currently being performed in the U.S., certain parts exported to Mexico for welding are returned to the U.S. for plating, and then returned to Mexico for assembly.)

ISSUE:

Whether zinc plating of the spring brake parts is an operation incidental to assembly for purposes of the partial duty exemption under 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 10.16(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 whether performed before, during, or after assembly, do not constitute further fabrication, and shall not preclude the application of the exemption. An example of an operation which is considered incidental to the assembly process is the application of preservative paint or coating, including preservative metallic coating, lubricants, or protective encapsulation. See, section 10.16(b)(3), Customs Regulations (19 CFR 10.16(b)(3)). Pursuant to 19 CFR 10.16(c)(5), any operation, treatment or process which imparts significant new characteristics or qualities to the article affected is considered an operation not incidental to the assembly process. Included in the examples of such an operation in this subsection is "plating (other than plating incidental to the assembly)."

In HRL 556124, supra, involving a powder coating used as a preservative, we found that the identical operations, whereby the U.S. components were securely joined by force fitting and the use of nuts and bolts, were considered acceptable assembly operations. The question which we must now address is whether the zinc plating process is an operation incidental to the assembly operation.

In United States v. Mast Industries, Inc., 1 CIT 230, 517 Fed. Supp. 694 (1981), aff'd, 69 CCPA 55/ 668 F.d 501 (1981), the court stated that 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 indicated that dependant on the particular case, relevant factors may include:

1) the relative time and cost of the particular operation;

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) if performed concurrently with assembly, whether economic or practical considerations dictate that the operations be so performed.

In General Motors Corp. v. U.S., 15 CIT 372, 770 F. Supp. 641 (1991), rev'd, 976 F.2d 716 (Fed. Cir. 1992), the Court of International Trade held that topcoat painting operations performed on U.S. origin sheet metal components shipped to Mexico for assembly into automobiles were "incidental to assembly" within the meaning of TSUS item 807.00 (now HTSUS subheading 9802.00.80). On appeal, the Court of Appeals for the Federal Circuit reversed the lower court and held that, considering the cost of all of the painting operations performed abroad (including undercoating, sanding, baking, topcoating, and waxing), these operations were not minor, and, therefore, not "incidental to assembly." As a result, no duty allowance under item 807.00 was permitted for the cost or value of the U.S. components which were subjected to the painting operations.

The appellate court reasoned that, although item 807.00 specifically refers to "painting," it is simply an example of an operation which is potentially incidental to the assembly process- - not a definitive statement that all painting operations, no matter how extensive, are allowed under item 807.00. The court recognized from the statute's legislative history that only operations (including painting) "of a minor nature incidental to the assembly process" are permitted. Id. at

719.

It is apparent from the cited decisions that while the preservative nature of the plating process may suggest that the operation is incidental to assembly, a more thorough examination of all relevant factors, applying the principles of Mast and General Motors, is required to determine whether the operation is in fact incidental to the assembly process.

In the instant case, we note that the time required to complete the plating process is approximately 50 minutes, whether one part or 50 parts are plated. This period of time is substantial, as compared to the total time required to complete the assembly process, and supports a finding that this operation is a significant, and not a minor, operation. See, e.g., Headquarters Ruling Letter (HRL) 557018 dated March 28, 1994, involving gas sterilization of medical products. Furthermore, since the current practice is to plate the parts in the U.S. before assembly, or after partial assembly (some parts), it is apparent that the plating operation can be (and is) performed other than concurrently with the assembly process. In this regard, we do not consider the cost of the plating operation, which equals about 12- 21% of the cost of the individual components, and about 17% of the cost of the assembly process, to be of a minor nature. We understand from comunication with TSE that the current practice of plating the parts in the U.S. is due to economic considerations.

Under the circumstances, after weighing all relevant factors, we find that the plating operation is not a minor operation incidental to assembly, but constitutes a further fabrication of the brake parts.

HOLDING:

Zinc plating of the brake parts is considered a significant and not a minor operation incidental to assembly, under the provisions of subheading 9802.00.80, HTSUS. Therefore, the zinc- plated brake parts will not be eligible for a partial duty exemption upon importation into the U.S.

Sincerely,

John Durant, Director

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