CLA-2 CO:R:C:V 555569 KAC
Mr. Phil Freeman
Cain Customs Brokers, Inc.
421 Texano
P.O. Box 150
Hidalgo, Texas 78557
RE: Applicability of duty exemption in HTSUS subheading
9802.00.80 to centralizers created by welding, force
fitting, heat treatment, sandblasting, and painting.
Assembly;incidental operations;19 CFR 10.16(a);19 CFR
10.16(b)(1);19 CFR 10.16(b)(3);053159;043591
Dear Mr. Freeman:
This is in response to your letter of January 6, 1990, and
fax dated July 10, 1990, on behalf of 3D Border Industries,
requesting a ruling on the applicability of subheading
9802.00.80, Harmonized Tariff Schedule of the United States
(HTSUS), to centralizers imported from Mexico.
FACTS:
3D Border Industries plans on shipping U.S.-origin
components to Mexico for assembly into centralizers. The
centralizer is a part used in the oil well industry, and is
designed to center the pouring of cement around a steel casing in
order for the casing to be uniformly cemented on all sides and
held in place in the wellbore. The assembly process consists of:
(1) tack welding preformed metal strapping and collars;
(2) placing two halves of the centralizer together and
inserting hinge pins in the hinges;
(3) welding the points which were tack welded;
(4) heat-treating the centralizer with propane burners for
one to three minutes to relieve weld stress;
(5) sandblasting;
(6) dipping the centralizer into waterbase paint for rust
protection;
(7) packaging for transportation.
Upon completion of the above operations, the centralizers
will be imported into the U.S.
ISSUE:
Whether the centralizers will qualify for the duty exemption
available under HTSUS subheading 9802.00.80 when returned to the
U.S.
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, lubrication, 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 such 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 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 HTSUS subheading
9802.00.80 to that component. See, 19 CFR 16(c).
Tack welding, welding and inserting hinge pins in hinges are
acceptable assembly operations pursuant to 19 CFR 10.16(a). We
have previously held that sandblasting merely for the purpose of
removing rust and dirt from metal is not further processing, but
rather a cleaning operation for purposes of item 806.30, Tariff
Schedules of the United States (TSUS) (the precursor provision to
subheading 9802.00.60, HTSUS). See, Headquarters Ruling Letter
(HRL) 053159 dated September 13, 1977. In the instant case, as
the sandblasting will be performed to clean the surface of the
metal before the painting operation is performed, it is
considered an incidental operation pursuant to 19 CFR
10.16(b)(1), which states that cleaning is an incidental
operation. The sole purpose of dipping the centralizer into
paint is to protect the centralizer from rust for a period of two
years. Therefore, the painting operation is considered an
operation incidental to the assembly process pursuant to 19 CFR
10.16(b)(3), which states that the application of preservative
paint or coating is an incidental operation.
A "heat treatment" operation can be used for several
reasons. In HRL 043591 dated January 28, 1976, we found that
heat treatment performed to standardize metal's stiffness from
lot to lot to permit precise forming in subsequent operations was
a process of manufacture and beyond the scope of an incidental
operation in item 807.00, TSUS (the precursor provision to
subheading 9802.00.80, HTSUS). However, if heat treatment is
used to regain the initial stress-free metallurgical structure,
to clean the surface of the components from contamination, or to
restore those qualities which may have deteriorated during
handling and processing, heat treatment is regarded as an
operation incidental to the assembly process within item 807.00,
TSUS. Therefore, heat treatment is a permissible incidental
operation where it restores those qualities in the metal which
may have deteriorated during the handling and processing
operations during the assembly.
In the present case, the heat treatment operation is
performed to relieve stress in the metal after the welding
operation. This type of heat treatment is an incidental
operation, as its purpose is to restore the metal to its stress-
free condition before the welding operation.
HOLDING:
From the information presented, it is our opinion that the
operations performed abroad to create the centralizers are
considered proper assembly operations or operations incidental to
the assembly process. Therefore, the imported centralizers may
be entered 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