CLA-2 CO:R:C:S 557630 BLS
Mr. Russell L. Jones, President
R. L. Jones Customhouse Brokers, Inc.
P.O. Box 488
San Luis, Arizona 85349
RE: Applicability of subheading 9802.00.80, HTSUS, to
spring brakes assembled in Mexico; Incidental to
assembly; HRL 556124; HRL 557018
Dear Sir:
This is in reference to your letter dated October 8, 1993, on
behalf of TSE Brakes, Inc. ("TSE"), requesting a ruling that the
zinc plating of air spring actuators ("spring brakes") is an
operation incidental to assembly for purposes of determining the
eligibility of the articles for the partial duty exemption under
subheading 9802.00.80, Harmonized Tariff Schedule of the United
States (HTSUS). In a letter dated August 5, 1994, TSE advises that
the plating operation is currently being performed in the U.S., but
that a transfer of this function to Mexico may occur in the future.
FACTS:
The facility in Mexico assembles spring brakes from U.S. and
foreign parts for heavy duty truck and trailer brake system
applications. By telephonic communication, you advised that the
assembly operations involved are essentially similar to the
operations described in Headquarters Ruling Letter (HRL) 556124,
dated October 31, 1991. However, this process differs from the
operations performed in HRL 556124, in that the latter operation
involved a powder coating, and not zinc plating, of the component
parts. We also understand that not all of the components presently
used to produce the brakes are of U.S. origin, and that the mix of
foreign and U.S.-origin components with respect to future
importations may be subject to variation.
During the plating process, which occurs prior to assembly,
the parts are dipped into tanks containing a zinc solution with an
electrical current passing through it, which causes the zinc to
adhere to the bare metal. TSE specifies 0.003" (3 thousandth of
an inch) thickness for the plating. Zinc is used because,
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unlike steel, it inhibits rust. The process is intended to protect
brakes from salt and other highway cleaning solvents used for snow
and ice removal. You state that only those spring brakes which are
to be used in cold weather climates will undergo these operations.
On the premier units, a protective powder coating is added over the
top of the zinc plate. During this process, a coating consisting
of pigment and epoxy is sprayed over the parts, which are then
heated over an oven. The heating process causes the powder to melt
and flow evenly across the metal parts and bond with the exposed
parts of the brake.
The components involved in the assembly process are as
follows:
1. spring housing;
2. push rod;
3. return spring;
4. dust cap;
5. main spring;
6. clamp;
7. o'ring;
8. warning tag;
9. push rod plate;
10. diaphragm
The first phase of the assembly operation consists of the
subassembly of the adapter base. The next phase consists of
positioning the spring housing into a single assembly press. The
main spring is then placed into the spring housing. The press
plate is placed onto the main spring in order to completely
compress the main spring into the spring housing. A diaphragm is
placed in the spring housing on top of the press plate. The pre-
assembled adapter base is then placed onto the diaphragm. Clamps
are positioned around the spring housing, and nuts and bolts are
used to tighten them to approximately 25 pounds of torque. Warning
tags are then slipped over the clamp bolts. A dust cap is snapped
onto the spring housing which completes the assembly of a single
spring brake.
You have also provided the following information:
Cost of Plating
The costs enumerated below reflect the cost of plating the
highest volume parts, as compared to the total cost of these
components and the cost of the assembly process, and are
representative of all components used to produce the brakes. (The
individual component costs include labor, freight, and tooling.)
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1) Part 1023001 (spring housing) - Cost of component - $1.75;
Cost of plating - $0.32.
2) Part 1003011 (push rod assembly) - Cost of component - $1.36;
Cost of plating - $0.25.
3) Part 1223019 (service base assembly) - Cost of component -
$2.42; cost of plating - $0.30.
The average cost of the entire assembly process, which
includes plating, is $23.57. The cost of the assembly process,
excluding the plating, is $18.56 (from bill of materials), or
$19.40 (from financial statements). We are advised that costs
fluctuate due to frequent price changes in materials and the use
of multiple vendors. The costs for lower volume parts, not
reflected in the above examples, will be higher than the high
volume parts, while the costs of plating remain constant.
Time Required - Plating Process
The total time required to plate one specific part is
approximately 50 minutes. The process includes hanging the part
on a rack (along with 10-50 other parts, depending on the size of
the part), transporting the part through a series of baths which
clean and prepare the part surface, and plating. Approximately
600 parts per hour are plated. In comparison, an average of 44
brake units are assembled in an hour's time. (However, this does
not include the time required to assemble other sub-assemblies used
to supply the final assembly line, or for the powder coating
process used for premium units.)
Plating Process - When Performed
Plating must be performed after the stamping/forming process
because the stretching and bending of the metal in stamping would
destroy and remove the plating. It must also be done after any
welding, because welding burns off the plating, which makes the
part vulnerable to corrosion. Welding often causes "flash rust"
when rust prevention steps such as plating are not done very soon
after the welding process. Powder coating for premium units must
be done after plating, but prior to final assembly. Plating and
powder coating must also be done prior to final assembly because
the entire part must be covered, including the internal as well as
the external surfaces. (TSE has also telephonically advised that
since the plating operation is currently being performed in the
U.S., certain parts exported to Mexico for welding are returned to
the U.S. for plating, and then returned to Mexico for assembly.)
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ISSUE:
Whether zinc plating of the spring brake parts is an operation
incidental to assembly for purposes of the partial duty exemption
under subheading 9802.00.80, HTSUS.
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 10.16(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 whether
performed before, during, or after assembly, do not constitute
further fabrication, and shall not preclude the application of the
exemption. An example of an operation which is considered
incidental to the assembly process is the application of
preservative paint or coating, including preservative metallic
coating, lubricants, or protective encapsulation. See, section
10.16(b)(3), Customs Regulations (19 CFR 10.16(b)(3)). Pursuant
to 19 CFR 10.16(c)(5), any operation, treatment or process which
imparts significant new characteristics or qualities to the article
affected is considered an operation not incidental to the assembly
process. Included in the examples of such an operation in this
subsection is "plating (other than plating incidental to the
assembly)."
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In HRL 556124, supra, involving a powder coating used as a
preservative, we found that the identical operations, whereby the
U.S. components were securely joined by force fitting and the use
of nuts and bolts, were considered acceptable assembly operations.
The question which we must now address is whether the zinc plating
process is an operation incidental to the assembly operation.
In United States v. Mast Industries, Inc., 1 CIT 230, 517 Fed.
Supp. 694 (1981), aff'd, 69 CCPA 55/ 668 F.d 501 (1981), the court
stated that 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 indicated that dependant on the
particular case, relevant factors may include:
1) the relative time and cost of the particular operation;
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) if performed concurrently with assembly, whether
economic or practical considerations dictate that the
operations be so performed.
In General Motors Corp. v. U.S., 15 CIT 372, 770 F. Supp. 641
(1991), rev'd, 976 F.2d 716 (Fed. Cir. 1992), the Court of
International Trade held that topcoat painting operations performed
on U.S. origin sheet metal components shipped to Mexico for
assembly into automobiles were "incidental to assembly" within the
meaning of TSUS item 807.00 (now HTSUS subheading 9802.00.80). On
appeal, the Court of Appeals for the Federal Circuit reversed the
lower court and held that, considering the cost of all of the
painting operations performed abroad (including undercoating,
sanding, baking, topcoating, and waxing), these operations were not
minor, and, therefore, not "incidental to assembly." As a result,
no duty allowance under item 807.00 was permitted for the cost or
value of the U.S. components which were subjected to the painting
operations.
The appellate court reasoned that, although item 807.00
specifically refers to "painting," it is simply an example of an
operation which is potentially incidental to the assembly process-
- not a definitive statement that all painting operations, no
matter how extensive, are allowed under item 807.00. The court
recognized from the statute's legislative history that only
operations (including painting) "of a minor
nature incidental to the assembly process" are permitted. Id. at
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719.
It is apparent from the cited decisions that while the
preservative nature of the plating process may suggest that the
operation is incidental to assembly, a more thorough examination
of all relevant factors, applying the principles of Mast and
General Motors, is required to determine whether the operation is
in fact incidental to the assembly process.
In the instant case, we note that the time required to
complete the plating process is approximately 50 minutes, whether
one part or 50 parts are plated. This period of time is
substantial, as compared to the total time required to complete
the assembly process, and supports a finding that this operation
is a significant, and not a minor, operation. See, e.g.,
Headquarters Ruling Letter (HRL) 557018 dated March 28, 1994,
involving gas sterilization of medical products. Furthermore,
since the current practice is to plate the parts in the U.S. before
assembly, or after partial assembly (some parts), it is apparent
that the plating operation can be (and is) performed other than
concurrently with the assembly process. In this regard, we do not
consider the cost of the plating operation, which equals about 12-
21% of the cost of the individual components, and about 17% of the
cost of the assembly process, to be of a minor nature. We
understand from comunication with TSE that the current practice of
plating the parts in the U.S. is due to economic considerations.
Under the circumstances, after weighing all relevant factors,
we find that the plating operation is not a minor operation
incidental to assembly, but constitutes a further fabrication of
the brake parts.
HOLDING:
Zinc plating of the brake parts is considered a significant
and not a minor operation incidental to assembly, under the
provisions of subheading 9802.00.80, HTSUS. Therefore, the zinc-
plated brake parts will not be eligible for a partial duty
exemption upon importation into the U.S.
Sincerely,
John Durant, Director
Commercial Rulings Division