CLA-2 CO:R:C:V 555732 GRV
Mr. John W. Cain
Cain Customs Brokers, Inc.
421 Texano
P.O. Box 150
Hidalgo, Texas 78557
RE: Applicability of partial duty exemption under HTSUS subhead-
ing 9802.00.80 to various spiral wound subassemblies and
spiral wound gaskets from Mexico.Bending;slitting;forming;
further fabrication;compression rings;C.S.D. 90-27;
incidental operations;19 CFR 10.16(c);significant processing
Dear Mr. Cain:
This is in response to your letter of September 7, 1990, on
behalf of the Furon Company, requesting a ruling on the
applicability of subheading 9802.00.80, Harmonized Tariff
Schedule of the United States (HTSUS), to various spiral wound
subassemblies and gaskets to be imported from Mexico. A sample
of a completed gasket and a wound subassembly were submitted for
examination.
Your inquiry into the country of origin marking
requirements of the returned gaskets will be the subject of a
separate letter.
FACTS:
Coiled stainless steel strip, sheets of grafoil (a material
made of 99% graphite) and compression rings, all of U.S.
manufacture, will be sent to Mexico to be made into various
spiral wound subassemblies and completed spiral wound gaskets.
In Mexico, the stainless steel strip is unrolled through a wheel
housing that puts a bend (crown) in the strip, and the grafoil
sheets are slit into individual narrow strips, which are then cut
to length. To make the wound subassemblies, a steel strip is
wound around a wheel-mandrel three times and spot welded. A
grafoil strip is then alternately layered with a steel strip
until the desired diameter is achieved. The last layer of steel
is then spot welded and the steel strip is cut. The spiral wound
subassembly is then pushed off the wheel-mandrel and held
together with a loop of twisted wire. In other instances, the
wound subassemblies are further assembled into carbon steel
compression rings by a manual force fitting operation. The
various subassemblies and completed gaskets are then returned to
the U.S.
ISSUE:
Whether the returned articles are entitled to the partial
duty exemption under HTSUS subheading 9802.00.80.
LAW AND ANALYSIS:
HTSUS subheading 9802.00.80 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 HTSUS subheading 9802.00.80 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 value of the imported assembled article, less the
cost or value of the U.S. components assembled therein, provided
there has been compliance with the documentation requirements of
section 10.24, Customs Regulations (19 CFR 10.24).
Fabricated components subject to the exemption are provided
for at section 10.14(a), Customs Regulations (19 CFR 10.14(a)),
which 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.
Operations incidental to the assembly process are not
considered further fabrication, as they are of a minor nature and
cannot always be provided for in advance of the assembly
operation, although they may precede, accompany or follow the
actual assembly operation. Examples of operations considered
incidental to the assembly process are delineated at section
10.16(b), Customs Regulations (19 CFR 10.16(b)), which
specifically enumerates the cutting to length of foil exported in
continuous length, but does not provide for slitting operations.
Further, 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. See, 19 CFR
10.16(c).
Assembly operations for purposes of HTSUS subheading
9802.00.80 may consist of any method used to join or fit together
solid components, and 19 CFR 10.16(a) specifically enumerates
force fitting and the use of fasteners as acceptable means of
assembly.
In this case, we do not believe that the coiled stainless
steel strip or the sheets of grafoil are exported in condition
ready for assembly without further fabrication, as required by
clause (a) of the tariff provision. We find that the bending of
the stainless steel strip and the slitting of the grafoil sheets
are manufacturing processes which complete the materials to be
assembled, thereby precluding the applicability of the duty
exemption to these materials. In Headquarter Ruling Letter (HRL)
555214 dated December 26, 1989 (published as C.S.D. 90-27, 24
Cust.Bull. ___ (1990) and reconsidered and affirmed in HRL 555612
dated September 13, 1990), we considered whether the bending of a
plastic picture frame strip around a 3- or 4-part picture print
sandwich constituted a further fabrication of the exported
material in light of the decision in Samsonite Corporation v.
United States, 12 CIT ___, 702 F.Supp. 908 (CIT 1988), and found
that it did. Similarly, the slitting of the grafoil sheets on a
cutting machine is deemed to constitute a further fabrication of
the exported material in this case. An examination of the
samples submitted shows that the bending and slitting operations
are significant operations that are not assembly operations and
whose primary purpose is the further fabrication of the component
to be assembled. Accordingly, the exported steel strip and
sheets of grafoil are not entitled to the duty exemption under
HTSUS subheading 9802.00.80.
Regarding the carbon steel compression rings into which some
of the wound subassemblies are subsequently force fitted, we are
satisfied, based on the description of this operation and after
examining the samples submitted, that the rings are exported in a
condition ready for assembly without further fabrication.
Accordingly, the partial duty exemption will be applicable to
the U.S.-made compression rings.
HOLDING:
On the basis of the information submitted and after
examining the samples submitted, the stainless steel and grafoil
strips used to make the various spiral wound subassemblies are
not eligible for the duty exemption under HTSUS subheading
9802.00.80, as these materials are not exported in condition
ready for assembly, but require further fabrication to complete
them. However, the carbon steel compression rings are exported
in condition ready for assembly and merely assembled to some of
the wound subassemblies by force fitting. Accordingly, the
compression rings are eligible for the partial duty exemption
under HTSUS subheading 9802.00.80 when returned to the U.S. as
part of the wound gaskets, provided there is compliance with the
documentary requirements of 19 CFR 10.24.
Sincerely,
John Durant, Director
Commercial Rulings Division