CLA-2 CO:R:C:S 555671 KCC
Margaret R. Polito, Esq.
Coudert Brothers
200 Park Avenue
New York, New York 10166
RE: Wooden venetian blinds created by cutting to length, hole
punching, securely joining components together, threading;
and painting.Assembly; incidental operations; Mast; Mattell;
Rudolph Miles; 555564; 061429; 555394; 058865; 10.16(b)(6)
Dear Ms. Polito:
This is in response to your letter dated June 4, 1990, and
fax dated March 4, 1991, on behalf of Hunter Douglas, Inc.,
requesting a ruling concerning the applicability of subheading
9802.00.80, Harmonized Tariff Schedule of the United States
(HTSUS), to wooden venetian blinds from Mexico. Samples of the
components exported to Mexico for assembly and a completed
venetian blind were submitted for examination.
FACTS:
Hunter Douglas produces various types of window shades and
blinds. You state that Industrias Campeon SA de CV ("Campeon"),
Hunter Douglas' wholly owned Mexican subsidiary, presently
produces the wooden venetian blinds in question from the
following components which are exported from the U.S.: wooden
venetian blind slats, wooden bottom rails, wooden valances, head
rails (containing returns), tilting wands, various mechanical
components (tape rolls, tape roll supports, finished cord lock
assembly, tilt rod, and tilter), ladder tape, lifting cord, and
wooden tassel.
Certain of the mechanical components are made in the U.S.,
in part from foreign-origin parts. The remaining components
presumably are made in the U.S. exclusively from U.S. materials.
As no details were provided concerning the domestic operations
performed to create the mechanical components containing foreign
parts, we are unable to determine whether the foreign-origin
parts have been substantially transformed into U.S.-origin
components. For purposes of this ruling letter, we are assuming
that all of the components exported to Mexico are of U.S.-origin.
However, as you know, it is necessary for Hunter Douglas to
establish to the satisfaction of the district director at the
port of entry that the components claimed to be entitled to the
subheading 9802.00.80, HTSUS, exemption are, in fact, of U.S.-
origin.
Wooden Components: The wooden slats, rails and valances shipped
to Mexico have been subjected to the following operations in the
U.S.: cutting to appropriate widths, sanding, finishing, and
painting or staining a uniform color to protect the wood from rot
and swelling caused by water. In Mexico, the wooden slats and
rails are cut to the desired length for factory and custom
ordered blinds. The slats are punched with route holes so that
the lifting cord can be inserted through them. Campeon then
paints or stains the small portion of wood that is exposed
during the cutting in Mexico of the slats and rails.
In Mexico, the valances are created in one of two ways.
The inside mount valance is created by cutting the valance to
length using a square cut and affixing self-adhesive Velcro to
the back of the valance. Campeon then paints or stains the
portion of wood that is exposed by the cutting operation. The
outside mount in which the valance wraps around the head rail is
created by miter cutting the valance to the appropriate length.
Plastic or wooden returns are then glued or hinged to the ends of
the valance and self-adhesive Velcro is affixed to the back of
the valance. The plastic returns are manufactured in the U.S.
Like the wooden slats and rails, the wooden returns are
manufactured in the U.S. by cutting to width, sanding, finishing
and painting or staining. Campeon miter cuts the wooden returns
to the appropriate length to correspond with the width of the
head rail, affixes the returns to the ends of the valance and
attaches the self-adhesive Velcro onto the back of the valance.
Head Rail: In Mexico, Campeon cuts the U.S. manufactured steel
or aluminum head rail to the desired length and then punches
holes into it for the subsequent insertion of ladder tape and
lifting cord.
Tilting Wands and Cord: The wooden wands shipped to Mexico have
been shaped, painted or stained, cut to length, and a small hole
has been drilled into the top of the wand. Campeon inserts a
plastic plug into the hole, inserts an oval-shaped wire into the
hole near the plug and covers the hole, plug, and bottom portion
of the wire form with a plastic cover. The wand is then packaged
with the completed blind and the consumer attaches the wand to
the blind during installation.
Hunter Douglas can also use a plastic wand or cord tilter in
its wooden venetian blinds. The plastic wand is completely
manufactured in the U.S., shipped to Mexico and packaged with the
completed blind. The cord tilter is produced in Mexico by
cutting to length U.S. manufactured cord and threading the cord
through the tilting mechanism.
Mechanical Components: In the U.S., Hunter Douglas manufactures
the following finished mechanical components that are used in the
assembly of the blinds:
1. Lifting Mechanism: Tape rolls, tape roll supports and
finished cord lock assemblies are manufactured in the U.S. from
various components. In Mexico, Campeon snaps a tape roll
support into the head rail and then places a tape roll onto the
support. Campeon will subsequently affix ladder tape to the tape
roll. Thereafter, Campeon inserts the lift cord through the dog
and idler contained in the cord lock assembly and secures the
cord lock assembly to the head rail.
2. Tilting Mechanism: In the U.S., tilt rods are
manufactured from metal or plastic which are shaped to pass
through the holes in the tilt rolls. In Mexico, Campeon cuts the
rod to the desired length and inserts it through the center of
the tape rolls. One end of the tilt rod is connected to a
component known as a tilter which is manufactured in the U.S.
The tilter contains a driving gear, worm and housing. Campeon
then snaps the tilter into the head rail and inserts one end of
the tilt rod into the worm. The wire form that protrudes from
the tilt wand is then attached to the driving gear.
Ladder Tape: In Mexico, Campeon attaches one end of U.S.
manufactured ladder tape to the bottom rail by a knot/grommet.
Thereafter, the slats are placed across the rungs of the ladder
tape. The tape is then cut to length, and the top of the tape
is attached to the tape roll.
Lifting Cord: In Mexico, Campeon inserts U.S. manufactured
lifting cord in continuous lengths through the dog and idler of
the lifting mechanism and then runs if across the top of the
head rail. The cord is then inserted down through one series of
slat route holes and up through the next series of slat route
holes. This process is repeated and then the end of the lifting
cord is attached to the bottom rail by means of a knot/grommet.
The final step performed in Mexico is the attachment of a
U.S. manufactured wooden tassel to the end of the lifting cord.
The tassel has no specific function and is merely for decorative
purposes.
ISSUE:
Whether the wooden venetian blinds will qualify for the
partial duty exemption available under subheading 9802.00.80,
HTSUS, when returned to the U.S.
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 loose 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,
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. 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, 668 F.2d 501, 69 CCPA 47, (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 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.
Those operations to be performed in Mexico which result in
securely joining components together by gluing, hinging,
riveting, affixing by self-adhesive glue (Velcro), snapping,
force fitting and attachment by knot/grommet are considered
acceptable assembly operations pursuant to 19 CFR 10.16(a). The
operations that involve threading various cords and wires
through the mechanical components, such as tilter and finished
cord assembly, and attaching the wooden tassels to the lifting
cord are considered an acceptable joinder of two or more
components. See, 19 CFR 10.16(a) and Headquarters Ruling Letter
(HRL) 555564 dated May 1, 1990, which held that sliding one
component over another, resulting in securely joining the
components together, is an acceptable assembly operation. Even
though the joinder does not appear to be permanent as the
components may be detached from one another, the components are
not designed to be detached and the joinder is necessary for the
assembled article to function properly. See, Mattell, Inc. v.
United States, 67 CCPA 74, C.A.D. 1248, 624 F.2d 1076 (1980),
rev'd, 82 Cust.Ct. 234, C.D. 4805, 475 F.Supp. 683 (1979), in
which the court held that phonograph records packaged in
envelopes and stapled to talking toy phones were classified under
item 807.00, Tariff Schedules of the United States (TSUS) (the
precursor provision to subheading 9802.00.80, HTSUS).
Cutting the slats, rails, valances (inside and outside
mounts), cord, tilt rod, ladder tape, head rail and wooden
returns to length is considered an operation incidental to the
assembly process pursuant to 19 CFR 10.16(b)(6). Additionally,
punching holes into the slats, rails and head rail which will
later be used in the subsequent assembly operation is incidental
to the assembly of the wooden venetian blinds.
Rudolph Miles v. United States, C.A.D. 1202, 65 CCPA 32, 567
F.2d 979 (1979), rev'g, C.D. 4689, 78 Cust.Ct. 35, 427 F.Supp.
417 (1977), concerned whether the burning of slots and holes into
Z-beams in Mexico, so that wear and support plates and other
components could be attached prior to the beams' joinder to
boxcars, constituted a further fabrication of the beams. The
court held that the burning of the holes and slots was
concomitant with the assembly process and was not substantial
enough to preclude the application of item 807.00, TSUS. We have
previously ruled on several occasions that drilling or punching
holes in various components is an operation incidental to the
assembly where the drilling or punching operation is not
substantial. See, 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).
Regarding the painting or staining operation, we note that
a painting operation is presently before the Court of
International Trade in General Motors Corporation v. United
States, No. 87-03-0047. This case involves Customs denial of a
item 807.00, TSUS, classification for a painting operation
claimed to be "incidental" to the assembly of certain trucks
abroad. We held that the foreign operation, which consisted of
applying several coats of enamel finish paint to completed
trucks, was neither "minor" not "incidental" to the assembly of
the vehicles. Thus, the pending case puts before the court the
question of whether a quantitative or qualitative test should be
used in determining whether an operation is "of a minor nature"
and "incidental to assembly," for purposes of item 807.00, TSUS.
A decision in this case is expected to shed more light on the
controlling criteria where painting operations of this kind are
in issue.
We are of the opinion that the painting or staining
operation under present consideration is not comparable to
General Motors, and, therefore, we can determine whether the
painting or staining operation is an incidental operation within
the meaning of this tariff provision. We believe that the touch-
up painting or staining of the small portions of the slates,
rails, and valances that are exposed during the cutting operation
in Mexico is considered an operation incidental to the assembly
process. The painting or staining operation serves two
purposes--preservative to reduce rot and water damage and the
enhancement of the appearance of components by establishing a
uniform color. Applications of preservative paint or coating
are considered to be incidental to the assembly process pursuant
to 19 CFR 10.16(b)(3). However, any significant process,
operation or treatment, such as painting primarily intended to
enhance the appearance of an article or to impart distinctive
features or characteristics, whose primary purpose is the
fabrication, completion, physical or chemical improvement of a
components shall not be regarded as an operation incidental to
the assembly. See, 19 CFR 10.16(c)(3).
Even though the touch-up painting or staining operation
serves to preserve the small portions of the wooden components
(19 CFR 10.16(b)(3)) and to enhance their appearance by
establishing a uniform color (19 CFR 10.16(c)(3)), we find that
the painting or staining operation is not a significant process,
operation or treatment, but rather an operation incidental to the
assembly process. An analysis of the Mast criteria verifies this
finding. A comparison of the relative cost required to perform
the painting or staining operation with the cost required to
perform the entire assembly reveals that three percent of the
cost is necessary to paint or stain the components after the
cutting to length operation. Although the painting or staining
operation may not be necessary to the assembly process, we
believe that the operation is sufficiently related to the
assembly so that it is logically performed concurrently with the
assembly. See also, HRL 058865 dated March 7, 1979, which held
that conformity painting is considered an incidental operation.
The painting or staining operation merely restores the components
to the condition they were in prior to the Mexican cutting
operation. As the painting or staining operation is not a
significant process, it is considered to be an operation
incidental to the assembly process.
HOLDING:
On the basis of the information and samples submitted, it is
our opinion that the operations performed abroad to create the
wooden venetian blinds are considered proper assembly operations
or operations incidental to the assembly process. Therefore, the
wooden venetian blinds may enter under subheading 9802.00.80,
HTSUS, with allowances in duty for the cost or value of the U.S.
components incorporated therein, upon compliance with the
documentary requirements of 19 CFR 10.24.
Sincerely,
John Durant, Director
Commercial Rulings Division