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 > 1995 HQ Rulings > HQ 558677 - HQ 558835 > HQ 558813

Previous Ruling Next Ruling
HQ 558813




February 1, 1995

CLA-2-05-CO:R:C:S 558813 DEC

CATEGORY: CLASSIFICATION

TARIFF NO: 9802.00.80

Mr. Robert Noel
Cain Customs Brokers
Texano Industrial Park
415 South Industrial
Hidalgo, Texas 78557

RE: NAFTA Article 509; 19 CFR 10.16; United States v. Mast Industries, Inc.,
515 F.Supp. 43, 1 CIT 188, aff'd, 69 CCPA 47, 668 F.2d 501 Originating good; HRL 554920; C.S.D. 93-7; C.S.D. 90-53; C.S.D. 89-121

Dear Mr. Noell:

This is in response to your letter dated September 29, 1994, in which you seek a ruling regarding the eligibility for the partial duty exemption under the Harmonized Tariff Schedule of the United States (HTSUS) subheading 9802.00.80. In addition, you seek a ruling with respect whether the article qualifies as an originating good under the North American Free Trade Agreement (NAFTA).

FACTS:

The Alco Controls Division of Emerson Electric plans to import valves from Mexico. The valves are designed to control refrigerant flow in air conditioning and refrigeration systems. The component parts of the valves are of U.S.-origin that will be sent to Mexico to undergo the following processes:

1. The piston is placed in a fixture and bleed holes are drilled through it.
The piston is unloaded and deburred.

2. The ring grove of the piston is then remachined to insure that the grove will allow the piston gasket to seat properly.

3. The piston seat is pressed into the piston. One edge of the piston is "rolled" (ground off at an angle). A diameter hole is drilled through the piston seat. The piston seat is then deburred. The drilling is done subsequent to pressing since pressing would deform the piston seat if it already had a hole in it.

4. The piston ring is then opened and placed in the piston grove.

5, The body is then stamped with the part number. The seat of the body is "faced" (a cleaning operation to insure that the valve will close completely).

6. The end of the plunger is lathed and finished to a 60 degree angle.

7. An O ring is put over the threaded end of the enclosing tube and collar assembly. The compression spring is inserted into the plunger. The plunger, with the spring and the piston, are placed in the tube and collar assembly. The tube and collar assembly is screwed into the body.

8. The assembled valve is tested for leaks. The closures are placed on the ends of the copper tubing. The valve is then packed for shipping.

ISSUE:

1. Whether the United States-made components that are transported to Mexico to undergo the operations described above are entitled to subheading 9802.00.80, HTSUS treatment.

2. Whether the imported valves qualify as originating goods under the North American Free Trade Agreement.

LAW AND ANALYSIS:

1. Applicability of Subheading 9802.00.80, HTSUS

Subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS) provides for 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 United States components assembled abroad provided the section 10.24, Customs Regulations (19 CFR 10.24) documentary requirements are satisfied.

Section 10.14(a), Customs Regulations (19 CFR 10.14(a)), states, in part, that

The 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.

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, 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 United States v. Mast Industries, Inc., 515 F.Supp. 43, 1 CIT 188, aff'd, 69 CCPA 47, 668 F.2d 501 (1988), 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 of 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 this case, you have indicated that all the components of the valve that are sent to Mexico for assembly are of United States origin. The operations performed in Mexico include the drilling of bleed holes and removing the burrs from the piston. In addition, the ring grove of the piston is remachined so that the piston gasket will sit properly. The piston seat is pressed into the piston and a hole is drilled though it. The piston ring is opened and placed in the piston grove. The body is stamped with a part number. The seat of body is cleaned. The end of the plunger is lathed and finished. An O-ring is placed over the threaded end of the tube and collar assembly. The compression spring is inserted into the plunger. The plunger with the spring and piston are placed in the tube and collar assembly. The tube and collar assembly is screwed into the body. The assembled valve is tested for leaks and packaged.

The drilling of bleed holes in the piston is not an assembly operation or an operation incidental to assembly. Customs has previously ruled on several occasions that drilling or punching holes in various components is an operation incidental to assembly where the operation is not substantial. See, Headquarters Ruling Letter (HRL) 061429, dated March 28, 1980 (holes drilled and punched through plastic cabinet, wood decal, and oscillator shield to accommodate locks and coil were deemed to be incidental to assembly, as they were not substantial); and HRL 555394, dated August 15, 1989 (punching a hole into a vertical blind strip, which allows for the subsequent attachment of a plastic hook, is considered an incidental operation). However, the drilling operations in question are distinguishable from the above-described cases since the holes made by burning, drilling or punching were subsequently used in the assembly process. In this case, the holes drilled in the piston are not used in the subsequent assembly of the valve, but, rather, are created to allow gas or liquid to flow or drain through the insert. See HRL 554920, dated January 3, 1989 (punching a hole in one end of a fabric vane for receipt of a removable plastic hanger insert was not incidental to assembly as the attachment of the hanger did not constitute an assembly operation). Moreover, an analysis of the Mast criteria supports the conclusion that the drilling of the bleed holes is not an incidental operation. The drilling operation appears to be a significant step in the fabrication of the pistons. It
clearly is not a necessary prerequisite to the subsequent assembly of the valve, and the operation is not related directly to the assembly process. Weighing the above factors, we conclude that the drilling operation is not an incidental operation within the meaning of subheading 9802.00.80, HTSUS, but rather evidences that the piston is not exported in condition ready for assembly without further fabrication. Therefore, no duty allowance under subheading 9802.00.80, HTSUS, will be allowed for the cost or value of the piston.

The pressing of the piston seat into the piston is an acceptable assembly as force fitting is specifically enumerated as an acceptable assembly operation in 19 CFR 10.16(a). Customs is satisfied that the drilling into the piston seat does not disqualify it from subheading 9802.00.80, HTSUS, because the piston seat would be deformed during the pressing process if it already had a hole in it, and the hole facilitates the subsequent fitting of the piston to the plunger.

Opening the piston ring and placing it in the piston groove is an acceptable assembly operation. In addition, the stamping of the valve body with the part number and the "facing" (a cleaning operation to insure that the valve will close completely) of the body are operations incidental to the assembly of the valve (see 19 CFR 10.16(b)(1) and 10.16(b)(7)). Therefore, the piston ring and the valve body are eligible for the subheading 9802.00.80, HTSUS, duty exemption.

The plunger is not entitled to a duty exemption because the lathing operation is a further fabrication pursuant to 19 CFR 10.16(c)(5). The lathing operations, which impart significant new characteristics to the plunger by altering its shape, indicate that it is not exported in a condition ready for assembly without further fabrication.

The placement of the O-ring and the compression spring, the screwing together of the tube and collar assembly to the valve body, and the force fitting of the closures on the ends of the copper tubing are all acceptable assembly operations. Accordingly, the O-ring, compression spring, the tube and collar assembly, the valve body, and the closures are entitled to the duty exemption under subheading 9802.00.80, HTSUS. In addition, the testing of the valve for leaks (see 19 CFR 10.16(b)(7)) is an operation incidental to the assembly of the valve.

2. NAFTA Originating Materials

General Note 12, HTSUS provides that
goods imported into the customs territory of the United states are eligible for the tariff treatment
and quantitative limitations set forth in the tariff schedule as `goods originating in the territory of a NAFTA party' only if--

(i) they are goods wholly obtained or produced in the territory of Canada, Mexico and/or the United States; or
. . .
(iii) they are goods produced entirely in the territory of Canada, Mexico, and/or the United States exclusively from originating materials . . ..

You advise that all of the components used in the assembly of the valves are of U.S. origin. Assuming that these components qualify as "originating materials" under General Note 12, HTSUS, the assembled valves to be imported will qualify as originating goods and will be entitled to the NAFTA preferential rate of duty.

HOLDING:

1. Based on the information provided, the piston and the plunger will be subjected to operations abroad that are deemed to be further fabrications of those components. Therefore, these two components will not qualify for a duty allowance under subheading 9802.00.80, HTSUS. However, the cost or value of all of the other U.S.-origin components that will be used to produce the finished valve may receive duty allowances under 9802.00.80, HTSUS, as the operations performed to those components in Mexico constitute acceptable assembly operations and operations incidental thereto.

2. Assuming that these components qualify as "originating materials" under General Note 12, HTSUS, the assembled valves to be imported will qualify as originating goods and will be entitled to the NAFTA preferential rate of duty.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

John Durant
Director, Commercial Rulings Division

Previous Ruling Next Ruling

See also: