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