HQ 555416: Applicability of partial duty exemption under subheading 9802.00.80, HTSUS, to mechanical cable formed by squaring, cutting to length, and deburring core component, and force fitting core component with other components. Assembly; incidental operation; further fabrication; C.S.D.84-39

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 555416

                                 September 19, 1990

          CLA-2  CO:R:C:V  555416 LS

          CATEGORY:  Classification

          TARIFF NO.:  9802.00.80

          Mr. James J. McNamara
          Rudolph Miles & Sons, Inc.
          P.O. Box 2489
          Laredo, Texas 78044-2489

          RE:   Applicability of partial duty exemption under subheading
                9802.00.80, HTSUS, to mechanical cable formed by squaring,
                cutting to length, and deburring core component, and force
                fitting core component with other components.  Assembly;
                incidental operation; further fabrication; C.S.D.84-39

          Dear Mr. McNamara:

                This is in response to your letter of June 6, 1990, on
          behalf of Flexible Controls Corp., requesting a ruling on the
          applicability of subheading 9802.00.80, Harmonized Tariff
          Schedule of the United States (HTSUS), to mechanical cable which
          is used in automobile power seats.  Samples of the mechanical
          cable and one of the components, the core, were submitted for our
          examination, along with a diagram showing the squaring and
          cutting operations.

          FACTS:

                Flexible Controls Corp. plans to ship reels of bulk
          flexible shafting or core, vinyl casing, stop collars, couplings,
          and grease, all of U.S. origin, to Mexico for processing into a
          mechanical cable.  The core is made of carbon wire steel.  The
          assembled cable, when imported into the U.S., will serve as a
          flexible shaft of an automobile power seat so that one end will
          be joined to a motor and the other end fitted into an actuator, a
          device which moves on a track in the power seat.  The following
          facts are based upon your letter of June 6, 1989, a supplemental
          fax of August 16, 1990, and a telephone conversation with a
          member of my staff.

                Two operations which are performed upon the bulk core prior
          to assembly with the other components are currently being
          performed in the U.S.  These operations consist of squaring the
          bulk core and cutting it to length.  Flexible Controls Corp.
          plans to perform these operations in Mexico instead of the U.S.
          in order to reduce labor and shipping costs and to better insure
          compliance with quality control procedures.











                                        - 2 -

                You ask us to specifically address the issue of whether
          these two operations performed in Mexico are considered to be
          incidental to the assembly process so as to allow a partial duty
          exemption for the core component under subheading 9802.00.80,
          HTSUS.  The reels of core will be cut and squared on the same
          machinery.  According to the samples of the already cut and
          squared core and a diagram you submitted, the machine works the
          core in a "squaring" operation whereby, at intervals of
          approximately 13 inches, an area of the core, consisting of
          approximately 2 inches in length, is re-shaped into a square
          formation with right angles and flat surfaces.  In the middle of
          this 2 inch area, a "dimple" or indentation is made to mark the
          point for cutting.  After the bulk core is cut at each interval,
          the cut core is straightened and pulled to length before being
          removed from the machine.  The cores are then deburred manually,
          which basically involves filing the rough edges at each end.
          The finished core thus has a squared section of approximately 1
          inch at each end.  You state that the squaring is not related to
          the assembly in the sense that the squared ends are not required
          to enable the core to be assembled or fitted into the other
          components.  Instead, the squaring is necessary so that when the
          final product, the mechanical cable, will be put to its ultimate
          use in the U.S., it will fit into the motor and actuator which
          run the power seat.  You also have provided a data sheet which
          indicates that the cost and time required to perform both the
          squaring and cutting operations each represents approximately 9
          percent of the total cost and time required for all the Mexican
          operations.  You state that the time and cost of the squaring
          operation alone each represents approximately one-half of the 9
          percent figure.

                The actual assembly operations consist of several steps.
          First, one of the stop collars, a small round plastic part, is
          forced onto one end of the fabricated core, resulting in a "first
          collared core."  Grease is then applied to the first collared
          core to reduce friction inside the final assembled mechanical
          cable when it is in use.  Next, one coupling is fit onto each end
          of the vinyl casing, which results in a "plastic subassembly."
          The greased first collared core is then inserted into the plastic
          subassembly.  Finally, the second stop collar is fitted onto the
          other end of the core.  The stop collars securely hold the core
          inside the plastic subassembly.  In the final product, i.e., the
          mechanical cable, a small portion of the inner core protrudes
          from the plastic subassembly on each end.

          ISSUE:

                Whether the mechanical cable will qualify for the partial
          duty exemption under subheading 9802.00.80, HTSUS, when imported
          into the U.S.












                                        - 3 -

          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 subheading 9802.00.80, HTSUS, is subject to
          duty upon the full value of the imported assembled article less
          the cost or value of the U.S. components, 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)),
          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.  Materials undefined in
                final dimensions and shapes, which are cut into specific
                shapes or patterns abroad are not considered fabricated
                components.

                According to section 10.16(a), Customs Regulations (19 CFR
          10.16(a)), assembly operations may consist of any method used to
          join or fit together solid components.  Force fitting is
          specifically enumerated as an acceptable assembly operation.

                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.  See 19 CFR 10.16(a).  Examples of operations
          considered incidental to the assembly process are delineated at
          19 CFR 10.16(b).  However, any significant process, operation, or














                                       - 4 -

          treatment whose primary purpose is the fabrication, completion,
          or physical or chemical improvement of a component precludes the
          application of the exemption under subheading 9802.00.80, HTSUS.
          See 19 CFR 10.16(c).

                Pursuant to 19 CFR 10.16(a), we find that the following
          steps constitute acceptable assembly operations:  (1) forcing a
          stop collar, first, onto one end of the fabricated core, and as
          the last step, onto the other end of the core; (2) fitting one
          coupling onto each end of the vinyl casing, resulting in a
          "plastic subassembly"; and (3) inserting the core with a collar
          at one end into the plastic subassembly.  All of these
          operations constitute, or are analogous to, a force fitting
          operation.

                With respect to the core shipped to Mexico on reels, the
          operation of cutting it to length is incidental to the assembly
          process pursuant to 19 CFR 10.16(b)(6).  However, the squaring
          operation--whereby certain sections of the core, which become the
          ends of the cut core, are re-shaped into a square formation with
          right angles and flat surfaces--constitutes a further fabrication
          of the core, rather than an incidental operation.  First, the
          core, as exported, is not a fabricated component ready for
          assembly, pursuant to 19 CFR 10.14(a), because the squaring
          operation redefines the shape of the ends of the core which is
          necessary to the function of the completed mechanical cable.
          Second, the squaring constitutes a further fabrication or
          completion of the component within the meaning of 19 CFR
          10.16(c)(5), since it is a machining operation which imparts a
          significant new characteristic to the core.  See C.S.D. 84-39
          (Headquarters Ruling Letter 071451 dated September 30, 1983), 18
          Cust. Bull. 932 (1984) (cumulative foreign operations of folding
          raw coil material into newly designed configuration, and
          subsequently annealing to strengthen and temper the metal into
          the final new shape, constitute a fabrication that produces
          substantially new properties and characteristics that did not
          exist at the time of export).  Furthermore, the squaring
          operation is not related to the assembly process in that the
          resulting squared ends do not enable the core to be fitted into
          the other components to form the mechanical cable.  See 19 CFR
          10.16(c).

                Since the core component does not meet the requirements of
          clause (a) of subheading 9802.00.80, HTSUS, no allowance in duty
          may be made for its cost or value.  However, an allowance may be
          made for the vinyl casing, stop collars, and couplings, all of
          U.S. origin, since they satisfy clause (a) and have not been
          advanced in value or improved in condition except by being
          assembled or by operations incidental to the assembly.  Assuming
          that the grease is in a liquid form as exported, it does not












                                        - 5 -

          qualify as a "fabricated component, the product of the U.S."  The
          legislative history of subheading 9802.00.80, HTSUS, makes it
          clear that the exemption applies to U.S.-made fabricated
          components which are of types designed to be fitted together with
          other components, and does not apply to chemical products, food
          ingredients, liquids, gases, powders, etc.  H.R. Rep. No. 342,
          89th Cong., 1st Sess. 49 (1965).  Therefore, the grease is not
          eligible for the partial duty exemption under the statute.

          HOLDING:

                The mechanical cable will qualify for the partial duty
          exemption under subheading 9802.00.80, HTSUS, when imported into
          the U.S., with allowances in duty permitted only for the cost or
          value of the vinyl casing, stop collars, and couplings, all of
          U.S. origin.  No allowance may be made for the core component
          since it is subject to a squaring operation in Mexico which is
          considered to be a further fabrication.  In addition, no
          allowance may be made for the grease because it is not a
          fabricated component of a type designed to be fitted together
          with other components.

                                        Sincerely,



                                        John Durant, Director
                                        Commercial Rulings Division