CLA-2 CO:R:C:S 556422 SER
Mr. Philip Freeman
Cain Customs Brokers, Inc.
421 Texano
P.O. Box 150
Hidalgo, TX 78557
RE: Applicability of partial duty exemption to air conditioning
hoses from Mexico; 19 CFR 10.12, 10.16(a), (b), and (c),
10.24; Samsonite v. U.S.; HRL 555503
Dear Mr. Freeman:
This is in reference to your letter of November 25, 1991, on
behalf of S & H Fabricating and Engineering, Inc. ("S & H"),
concerning the eligibility for a partial duty exemption under
subheading 9802.00.80, Harmonized Tariff Schedule of the United
States Annotated (HTSUSA), of automobile air conditioning hoses
from Mexico.
Facts:
S & H plans to assemble and import from Mexico, automobile
air conditioning hoses. The hoses are used to convey freon
(liquid or gas) between the compressor, condenser, and evaporator
in automobile air conditioning systems.
The air conditioning hoses consist primarily of aluminum
tubing with steel fittings, nylon or rubber sheathing and plastic
fittings, and in some models rubber hoses. You represented that
all of these products are of U.S. origin consistent with the
requirements of section 10.12(e) of the Customs Regulations (19
CFR 10.12(e)). S & H plans to produce several models of air
conditioning hoses to fit different makes of automobiles. The
following description of operations in Mexico, however, is
representative of all models that will be assembled in and
imported from, Mexico.
In Mexico, aluminum tubes, in coil form, are loaded on a
tube cutting machine and are cut to the desired lengths. The cut
tubes are swaged on both ends, and fittings are attached on one
end. A hole or holes are pierced or drilled in the tubes and
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valve bodies are attached to the tubes either by brazing or
welding. Valve cores are then screwed into the valve bodies.
The aluminum subassemblies are tested for leaks by applying 300
pounds air pressure and submerging under water for 45 seconds.
Rubber hoses are also shipped to Mexico in coil form and cut
to length. In some models, nylon sheathing is cut to length and
slipped over the cut rubber hoses. The tested aluminum tubes
with fittings are then assembled to the rubber hoses by crimping
a shell fitting onto the rubber hose. The aluminum tube and
rubber hose subassemblies are then loaded onto a bending machine
and bent into various shapes as required by the customer.
Plastic end caps are then assembled to the fittings. In some
models, plastic protective sheathing are cut to length and
slipped over the tubing. The completed hoses are then inspected
and packed.
ISSUE:
Whether the automobile air conditioning hoses will qualify
for the partial duty exemption available under subheading
9802.00.80, HTSUSA, when imported into the U.S.
LAW AND ANALYSIS:
Subheading 9802.00.80, HTSUSA, 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 subheading 9802.00.80, HTSUSA, 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 gluing, laminating, welding soldering, riveting, force
fitting, sewing, or the use of fasteners.
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Operations incidental to the assembly process are not
considered further fabrication operations, as they as of a minor
nature and cannot always be provided for in advance of the
assembly operations. Examples of operations which are
incidental to the assembly process include trimming, filing, or
cutting off of small amounts of excess materials. See, section
10.16(b), Customs Regulations (19 CFR 10.16(b)). 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, HTSUSA, to that component. See, section
10.16(c), Customs Regulations (19 CFR 10.16(c)).
It is our position that a duty allowance may not be made for
the aluminum tubes since they are not articles exported in a
condition ready for assembly without further fabrication. The
courts and Customs have ruled on bending operations for purposes
of subheading 9802.00.80, HTSUSA. In Samsonite Corporation v.
U.S., 702 F.Supp. 908 (CIT 1988), aff'd, 889 F.2d 1074 (Fed.Cir.
1989), straight steel strips were sent abroad for bending into a
squared "C" shape and then assembled into luggage. The plaintiff
argued that the bending of the strips was a mere adjustment in
shape required by the assembly being performed abroad. The Court
of International Trade held that the bending process to which the
strips were subjected did more than adjust the article, the
process created the component to be assembled, the essence of
which is its configuration. Without the resultant shape the
final article could not be completed, and, therefore, further
fabrication was necessary.
Similarly, in this case, the tubes are bent to
configurations required by the customer, and, therefore, the
bending of the tubes goes beyond mere adjusting the aluminum
tubes in the process of assembly. The bending creates the final
configuration which is the essence of the tubing. Thus, the
change in shape of the aluminum tube is a significant process
and cannot be considered an operation incidental to assembly.
As the aluminum tubing does not meet the requirement of section
10.16 of the Customs Regulations (19 CFR 10.16), no allowance in
duty can be made for the cost or value of the U.S. aluminum.
An allowance in duty, however, can be made for the cost or
value of the U.S. rubber hoses. The rubber hoses are cut to
length and attached to the aluminum tubing by crimping a shell
fitting to the hose. The cutting to length of the rubber hoses
is considered an operation incidental to the assembly process
pursuant to 19 CFR 10.16(b)(6). See also Headquarters Ruling
Letter (HRL) 555503 dated March 15, 1990. Furthermore, the
attachment of the rubber hoses to the aluminum tubing by crimping
the shell fittings would be an acceptable assembly operation
pursuant to 19 CFR section 10.16(a), which allows for assembly by
the use of fasteners.
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The cutting to length of the nylon sheathing, which is
placed over the rubber hose, also would be an acceptable
operation under the regulations. Therefore, an allowance in duty
can be made for the cost or value of the U.S. sheathing.
The shell fitting, which is used to attach the rubber hose
to the aluminum tubing, is stated to be deformed in the process
to allow it to grip the rubber hose. It is our position that the
deformation of the shell fitting in connection with its use to
join together the aluminum tubing and rubber hose, is an
operation which is incidental to the assembly process pursuant to
section 10.16(b)(5) of the Customs Regulations (19 CFR
10.16(b)(5)). Therefore, the shell fittings will not be
precluded from an allowance in duty under subheading 9802.00.80,
HTSUSA. In addition, the remaining U.S.-origin fittings used in
the assembly process would be eligible for a duty allowance under
this subheading.
HOLDING:
On the basis of the information presented, the bending of
the aluminum tubing would constitute a further fabrication of the
material and precludes a duty allowance under subheading
9802.00.80, HTSUSA, for the aluminum tubing. An allowance in
duty may be made under subheading 9802.00.80, HTSUSA, for the
cost or value of the U.S.-origin rubber hoses, nylon sheathing,
shell and other type fittings, provided that the proper
documentation requirements of 19 CFR 10.24 are satisfied.
Sincerely,
John Durant, Director
Commercial Rulings Division