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