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