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HQ 557133




June 3, 1993

CLA-2 CO:R:C:S 557133 WAW

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Mr. Neal Bryant
Robinson Nugent, Inc.
800 East Eighth Street
P.O. Box 1208
New Albany, IN 47151-1208

RE: Applicability of the partial duty exemption available under subheading 9802.00.80, HTSUS, to clips used in electronic pinsockets; assembly; plating; force-fitting; General Motors; Mast

Dear Mr. Bryant:

This is in response to your letter dated December 23, 1992, concerning the applicability of the partial duty exemption available under subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to clips used in electronic pinsockets. Additional information was obtained via telephone conversations with a member of my staff which took place on May 10th, 11th, 12th, and 19th, 1993. Samples of the merchandise were also provided for our review.

FACTS:

You state that your company, Robinson Nugent, Inc., manufactures and distributes electronic sockets and connectors worldwide. Some of the pinsockets are subassembled in your Robinson Nugent, S.A. (RNSA) plant, located in Delemont, Switzerland, with multi-finger clips of U.S. origin.

The RNSA plant purchases the multi-finger clips from a U.S. company that stamps and ships the clip from their facility located in the U.S. The raw material for the clips also is obtained from a U.S. supplier. The clips are shipped to RNSA where they are plated with ten microinches of gold, and then force-fitted inside metal shells. Each clip is inserted into only one shell. The subassemblies are referred to as "pinsockets." You state that the gold plating is required to provide the maximum electrical conductivity while reducing the rate of oxidation of the metal. For cost control purposes, Robinson Nugent, Inc., identifies and monitors separately the Clip cost and gold content cost. The pinsocket is then shipped to your facility in the U.S. where it is press fitted into holding devices. The new and final assemblies containing the six-finger pinsockets are called pin grid array (PGA) assemblies. PGA assemblies may have 64 to 441 six-finger pinsockets depending upon the size. The new and final assemblies containing the four-finger pinsockets are called integrated circuit assemblies (ICA). ICA's may have 6 to 64 four-finger pinsockets depending upon the size. The PGA's and ICA's are used as sockets to hold electronic components in the printed circuit boards of the electronic industries.

The cost of plating (labor and overhead) the six-finger and four-finger clips in Switzerland represents 11.7 percent and 13.1 percent, respectively, of the cost of the U.S.-origin clip. In a telephone conversation between you and a member of my staff which occurred during May 10th-12th, 1993, we were advised that during the plating operation two million clips are placed in a container and batch plated at the same time. You also indicated that this plating procedure requires approximately 4 1/2 hours to complete. We were advised that the assembly operation is performed by a high-speed machine which assembles the pinsockets at a rate of approximately 38,000 per hour. The individual parts are fed into a machine which automatically pushes the clips into the shells to form the finished pinsocket. The assembly operation involves thirty assembly machines which are operated by five workers. Therefore, based on this information, we calculated that the total time involved in plating two million clips (4 1/2 hours) represents 2.6 times the amount of time required to assemble the clips into the shells (1.75 hours) to produce the finished pinsockets. Moreover, we were advised via telephonic communication on May 12, 1993, with a member of my staff, that the capital investment required for the machinery used in the plating operation represents approximately $178,080, while the investment cost of the machinery used in the assembly operation represents approximately $35,000.

ISSUE:

Whether plating the clips in Switzerland constitutes an operation incidental to assembly, which would not preclude the clips from qualifying for the partial duty exemption available under subheading 9802.00.80, HTSUS, when returned to the U.S. as part of pinsockets.

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 subheading 9802.00.80, HTSUS, is subject to duty upon the full value of the imported assembled article less the cost or value of the U.S. components, 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, in part, that:

The assembly operations 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, and may be preceded, accompanied, or followed by operations incidental to the assembly as illustrated in paragraph (b) of this section.

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 operation. See section 10.16(a), Customs Regulations (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 HTSUS subheading 9802.00.80 to that component. See 19 CFR 10.16(c).

The force fitting of a component into another component by manual or pneumatic press is an acceptable assembly operation pursuant to 19 CFR 10.16(a)- See HRL 555437 dated July 16, 1990 (force fitting components together to form a valve constitutes an acceptable assembly operation).

Regarding the plating operation, 19 CFR..10.16(c)(5) provides that "plating (other than plating incidental to the assembly)" is an example of an operation which is not incidental to assembly. Therefore, as plating is specifically cited in the regulations as generally "not incidental to the assembly" process, the burden falls upon the importer to establish that the plating operation in this case is incidental to the assembly process.

In United States v. Mast Industries. Inc., 515 F. Supp. 43, 1 CIT 188 (1981), aff'd, 69 CCPA 47, 668 F.2d 501 (1981), the court, in examining the legislative history of the meaning of "incidental to the assembly process," stated that:

[t]he apparent legislative intent was to not preclude operations that provide an "independent utility" or that are not essential to the assembly process; rather, 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 then indicated that relevant factors included:

(1) whether the relative cost and time required by the operation are such that the operation may be considered minor;
(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) whether economic or other practical considerations dictate that the operation be performed concurrently with assembly.

In order to be considered incidental to assembly, the foreign operations should be such that they ordinarily cannot be provided for in advance, are concomitant with and closely related to the assembly process, and are of such a minor nature as to leave no doubt that they are merely incidental to the assembly process. This would exclude those operations considered substantial or material in nature so as to approach the status of a fabrication that significantly advances the components in value or condition while abroad.

We have previously held that under certain circumstances, coating or plating of various components to prevent corrosion is considered an operation incidental to assembly. See HRL 556197 dated December 4, 1991, in which we held that gunite coating of steel water pipes to prevent corrosion associated with water was considered an operation incidental to assembly. See also HR 556124 dated October 31, 1991, in which we held that powder coating spring brakes to protect against corrosion associated with snow and ice removal was considered an operation incidental to assembly; and HRL 556271 dated January 15, 1992, which held that plating cases and covers for use in the production of gas furnace ignition devices was considered an operation incidental to assembly.

However, we have also held in HRL 071448 dated November 16, 1983, that nickelplating the copper metal surfaces of anode and cathode housing parts for use in the assembly of certain anode and cathode electrode devices was not an operation incidental to assembly pursuant to item 807.00, Tariff Schedules of the United States (TSUS)~(the precursor to subheading 9802.00.80, HTSUS). In HRL 071448, the nickelplating was performed to preserve the electrical conductivity by preventing corrosion which could have otherwise rendered useless the finished product. We held that the plating operation was appropriately characterized as a finishing operation which had to be performed before the housing components could be considered fabricated components and ready for assembly. Further work was required to nickelplate the components to insure required specifications of thickness and hardness before they were ready for assembly. Additionally, we held that the nickelplating imparted new and different characteristics to the housing parts that became an integral part of the metal portion, and produced a new electroplated article that did not exist prior to exportation. Thus, we concluded that the extensive plating operations were considered too substantially superimposed over the assembly process to be considered an incidental part thereof. See also HRL 067943 dated October 8, 1982 (stating that nickelplating of metal housing components prior to assembly is of such a substantial nature as to amount to a fabrication, and therefore, the plating operations can neither be considered minor in nature nor incidental to the assembly); and HRL 071079 dated March 18, 1983 (plating of anode and cathode housings prior to assembly is considered to result in a further fabrication of the exported components prior to assembly and cannot be considered incidental to assembly).

In the instant case, based on the information provided in your submission and through telephonic communication with a member of my staff regarding the cost and time of the plating operation, we conclude that the plating operation is not incidental to the assembly operation. We are of the opinion that the plating in the instant case is analogous to those types of plating operations performed in HRL's 071448, 067943 and 071079, because it significantly alters the fundamental characteristics of the clips, thereby making it the type of plating operation which is precluded under the 19 CFR 10.16(c)(5). We were advised that the plating operation requires 4 1/2 hours to perform because a long period of time is required to transfer the metal substance onto two million of the clips simultaneously and that the gold used in the plating operation is gold salt which is in solution. The amount of time required to plate the clips suggests that this operation indeed imparts new and different characteristics to the metal clips.

Unlike the plating operation in HRL 556271 (described above) where the time involved in plating a case and cover for a gas furnace ignition device with zinc dichromate represented 2.6 percent of the total assembly time, here, the time involved in plating the clips (4.5 hours per two million clips) represents approximately 72 percent of the total time involved in the assembly of two million clips (6.25 hours). Furthermore, we are not satisfied that the plating operation is logically performed concurrently with the assembly in view of economic and other practical considerations- There is no indication that the clips cannot be plated in the U.S. prior to being exported to Switzerland for assembly. Thus, we find no evidence that the plating is so closely related to the assembly process as to make it logically performed concurrently with that operation in this case.

Finally, we note that the capital investment for the plating operation is much more significant than for the assembly operation. While the importer states that the plating equipment may be used for different varieties of clips in addition to the clips at issue here, the machinery for the assembly operation is not necessarily limited to assembly of clips that will be exported to the U.S. Capital investment is one of the factors that the Court of Appeals for the Federal Circuit considered in the General Motors v. United States, 770 F. Supp. 641 (CIT 1991) decision in determining whether paint shop operations performed on U.S.-origin sheet metal components shipped to Mexico for assembly into automobiles were "incidental to assembly" within the meaning of TSUSA item 807.00 (now HTSUS subheading 9802.00.80). Therefore, the cost of the plating operation, which includes the labor, overhead and capital investment, relative to the cost of the clip, is not incidental or minor in nature.

Thus, applying the Mast and General Motors criteria and consistent with our previous rulings, it is our opinion that the plating operation is not incidental to the assembly process.

HOLDING:

On the basis of the information provided, it is our opinion that the plating operation is not considered an operation incidental to assembly. Therefore, no allowances in duty may be made under subheading 9802.00.80, HTSUS, for the cost or value of the U.S. clips.

Sincerely,

John Durant, Director
Commercial Rulings Division

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