HQ 555237: Applicability of partial duty exemption under HTSUS subheading 9802.00.80 to fishing rod guides to be imported from Mexico.

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 555237

                        November 24, 1989

CLA-2 CO:R:C:V: 555237 KAC

CATEGORY:    Classification

TARIFF NO.:  9802.00.80

Mr. David S. Simpson, Jr.
William J. Joffroy, Inc.
P.O. Box 698
Nogales, Arizona  85628-0698

RE:  Applicability of partial duty exemption under HTSUS
     subheading 9802.00.80 to fishing rod guides to be imported
     from Mexico.

Dear Mr. Simpson:

     This is in response to your letters of December 5, 1988, and
October 24, 1989, on behalf of Perfection Tip Company, requesting
a ruling on the applicability of subheading 9802.00.80,
Harmonized Tariff Schedule of the United States (HTSUS) (formerly
item 807.00, Tariff Schedules of the United States (TSUS)), to
fishing rod guides to be imported from Mexico.  Samples showing
the various stages of the assembly process were submitted for
examination.

FACTS:

     In your December 5, 1988, letter, you initially stated that
a metal ring, metal arch, shock ring and ceramic ring of U.S.
origin would be exported to Mexico for assembly.  However, the
"assembly description worksheet" in your October 24, 1988,
letter states that the ceramic ring's country of origin is Korea.
Therefore, the actual fishing rod guide's components consist of
the metal ring, metal arch, and shock ring (U.S. components), and
the ceramic ring (Korean component) which will be exported to
Mexico for assembly operations consisting of:

     (1)  welding the metal ring to the metal arch;
     (2)  polishing and pickling the above assembled guide to
          prepare it for plating;
     (3)  plating the guide;
     (4)  inspecting the guide;
     (5)  force fitting the shock ring to the guide by a hand
          press;
     (6)  force fitting the ceramic ring to the guide by a hand
          press;
     (7)  final inspection; and
     (8)  packaging the finished fishing rod guide.

The completed and packaged fishing rod guide will then be
imported into the U.S.

ISSUE:

     Whether the foreign operation constitutes an "assembly,"
thereby entitling the fishing rod guide to the partial duty
exemption under HTSUS subheading 9802.00.80 when returned to the
U.S.

LAW & ANALYSIS:

     HTSUS subheading 9802.00.80 provides for 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 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.

     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 operation.  Examples of operations considered incidental
to the assembly process are listed at 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 HTSUS subheading
9802.00.80 (19 CFR 10.16(c)).

     In United States v. Mast Industries, Inc., 515 F.Supp. 43,
1 CIT 188, aff'd, 69 CCPA 47, 668 F.2d 501 (1988), 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 of the operation and time
          required by the operator were 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.

     We have previously held that plating of various components
in order to prevent corrosion are not considered operations
incidental to the assembly process.  See Headquarter Ruling
Letters 553840 dated September 30, 1985, 071448 dated November
16, 1983, and 054530 dated January 20, 1978.

     As your documentation and samples attest, the three U.S.
components meet the requirements of clauses (a) and (b) of HTSUS
subheading 9802.00.80.  However, upon applying the Mast criteria
to the facts in this case, we find that the polishing/pickling
and plating operations performed during the assembly process do
not constitute operations "incidental to the assembly process"
and, therefore, fail to meet clause (c) of HTSUS subheading
9802.00.80.

     The first of the Mast criteria involves a comparison of the
relative cost and time required to perform the operations in
question with the cost and time required to perform the entire
assembly operation.   According to your October 24, 1989, letter,
the entire labor and overhead cost for each guide is $.0812,
whereas the cost of the polishing/pickling and plating labor and
overhead is $.0459. Thus, the polishing/pickling and plating
operations constitute 56.5% of the entire Mexico labor and
overhead cost.   You estimate that the time required to perform
the above operations is 18% of the total foreign assembly time.
These cost and time comparisons indicate that the
polishing/pickling and plating operations are not of a minor
nature.  (Cf., Surgikos, Inc. v. United States, 12 CIT     , Slip
Op. 88-35 (1988), wherein the court, applying the Mast criteria,
found that fenestration and finishing folding operations
performed after assembly operations did not constitute minor
operations, as these operations constituted over one-fourth of
the labor-related costs and amounted to almost one-third of the
time involved to assemble the article.)

     Second, we find that the polishing/pickling and plating
steps are not necessary to the assembly process. The fishing rod
guide clearly can be assembled without the above operations.
Polishing and pickling prepare the guide for the plating
operation.  The plating operation coats the guide, thereby
increasing the value of the guide, as it inhibits corrosion
during use in fresh and/or salt water.  As seen from your sample,
the plating also enhances the appearance of the guide by giving
it an even, shining, all-over metallic color.  Regarding the last
two Mast criteria, we acknowledge that, for practical reasons,
the polishing/pickling and plating operations are logically
performed at the indicated position in the assembly process.  The
polishing/pickling and plating operations cannot be performed
until the arch and ring are welded together in order to ensure
that a solid connection is formed between the two components.
However, we find that on balancing the relevant factors, the
polishing/pickling and plating operations in this assembly do not
constitute incidental assembly operations.

HOLDING:

     On the basis of the information and samples provided, it is
our opinion that the polishing/pickling and plating of the ring
and arch are not incidental to the assembly of those two
components.  Therefore, the ring and arch are not entitled to
duty-free treatment under subheading 9802.00.80, HTSUS, although
an allowance in duty may be made under this tariff provision for
the cost or value of the shock ring of U.S. origin, which is
properly assembled with the guide after the plating operation.


                                   Sincerely,



                                   John Durant, Director
                                   Commercial Rulings Division