HQ 555513: Applicability of partial duty exemption under HTSUS subhead- ing 9802.00.80 to retractile cords imported from Mexico. 19 CFR 10.14;further fabrication (coiling, heat curing and reverse winding);Zwicker;Dillingham;Samsonite;19 CFR 10.16(c);significant operations;Mast;Surgikos;relative time/cost

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 555513

                         October 9, 1990

CLA-2  CO:R:C:V  555513 GRV

CATEGORY:  CLASSIFICATION

TARIFF NO:  9802.00.80

Mr. David S. Simpson, Jr.
Vice President
William F. Joffroy Custom House Brokers, Inc.
Nogales, Arizona  85628-0698

RE:  Applicability of partial duty exemption under HTSUS subhead-
     ing 9802.00.80 to retractile cords imported from Mexico. 19
     CFR 10.14;further fabrication (coiling, heat curing and
     reverse winding);Zwicker;Dillingham;Samsonite;19 CFR
     10.16(c);significant operations;Mast;Surgikos;relative
     time/cost

Dear Mr. Simpson:

     This is in response to your letters of October 18, and
November 8, 1989, on behalf of Whitney Blake Company of Vermont,
Inc., requesting a ruling on the applicability of subheading
9802.00.80, Harmonized Tariff Schedule of the United States
(HTSUS), to retractile cords imported from Mexico.  Photographs
of the foreign operation and samples of the article were
submitted for examination.

FACTS:

     Reels of straight wire (denominated "cordage") and various
terminals (connectors) will be exported to Mexico for operations
resulting in retractile cords.  In Mexico, the wire will be
despooled, cut-to-length, coiled onto mandrel rods, heated in an
oven to cure the coil, unwound from the mandrel rods, and reverse
wound on a rotating arbor.  The ends of the wire will then have
connectors attached to them.

     The finished cords will then be inspected and packaged for
return to the U.S.

ISSUE:

     Whether the U.S. components are entitled 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 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 HTSUS subheading 9802.00.80 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 10.14(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 exporta-
     tion from the United States to qualify for the exemption.

     As there is no one, all-embracing definition of what steps
or processes constitute "further fabrication" within the meaning
of this statutory provision, whether a particular foreign process
constitutes a "further fabrication" depends upon the facts of the
particular case.  See, Zwicker Knitting Mills v. United States,
C.D. 4786, 82 Cust.Ct. 34, 469 F.Supp. 727 (1979), aff'd, C.A.D.
1240, 67 CCPA 37, 613 F.2d 295 (1980).

     In E. Dillingham, Inc., v. United States, C.D. 4278, 67
Cust.Ct. 226 (1971), modified, C.A.D. 1078, 60 CCPA 39, 470 F.2d
629 (1972), fiber and fabric were exported to be assembled into
papermaker's felts.  However, before the fibers were needled into
the fabric, they were subjected to certain preparatory processing
steps.  Stating that "the correct starting point for the
application of item 807.00 [the precursor tariff provision to
HTSUS subheading 9802.00.80] must be the components as
"exported," in the condition in which they leave the United
States," the court found the opening, oiling, and carding
operations performed on fiber exported in bulk, baled form before
it met up with the fabric component constituted "further
fabrication" of the fiber within clause (a) of TSUS item 807.00,
for without the performance of these operations, the en masse
fiber component was not ready for assembly.  The raw material was
worked upon to change it into an altered form having new
properties.  Accordingly, the duty exemption was denied to the
fiber.  However, the U.S. fabric component, into which the fibers
were needled, was found entitled to TSUS item 807.00.

     In the recent case of Samsonite Corporation v. United
States, Slip Op. 88-166, 12 CIT ___, 702 F.Supp. 908 (1988),
aff'd, 8 Fed.Cir. ___, 889 F.2d 1074 (1989), reh'g denied In
Banc, (January 25, 1990), straight strips of U.S. steel were
exported to be assembled into luggage bags.  Once abroad, the
strips were bent by machine into a form analogous to a square-
sided letter C and subjected to other operations prior to being
assembled into the luggage bags.  As the straight strips of steel
could not be placed immediately into the assembly of the luggage
bags without the bending operation, the court found that the
strips were not exported in condition ready for assembly.  In
considering whether the bending of the strips was an incidental
operation, the court found that the bending process did more than
"adjust" the article within the ambit of section 10.16 (b)(5),
Customs Regulations (19 CFR 10.16(b)(5)), but rather created the
component to be assembled, the essence of which was its
configuration.  Accordingly, the court upheld Customs denial of
the duty allowance under TSUS item 807.00.

     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 delineated 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 to that component.  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 (1981), the court, in
considering 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 and time required by the
         operation 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.

However, in Surgikos, Inc. v. United States, 12 CIT __, Slip Op.
88-35 (1988), the court applied the Mast criteria to certain
operations performed on surgical sheets and found that the
fenestration and finish folding 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.

     In the present case, the straight wire component is exported
on reels.  The wire is despooled, cut-to-length, coiled onto
mandrel rods, heated in an oven to cure the coil, unwound from
the mandrel rods, and reverse wound on a rotating arbor before
any assembly operations are begun.  Just as the preparatory steps
in the Dillingham and Samsonite cases resulted in a change in
the form or shape of the exported U.S. product, the pre-assembly
operations performed in this case significantly change the shape
of the exported straight wire.  Therefore, we find that the wire
was not exported in condition ready for assembly as required by
clause (a) of the statute.

     Further, the nature of the coiling and other operations
performed on the wire before its assembly with the connectors
compels us to conclude that it is not an operation incidental to
the assembly process, but rather constitutes a significant
process whose primary purpose is the fabrication and physical
improvement of the wire component, as provided for at 19 CFR
10.16(c).  Information provided regarding the time and cost of
the foreign operations performed on the wire (until the
retractile cords are inspected and packaged for return to the
U.S.) shows that 40% of the total time and cost is required for
the cutting-to-length, coiling, heat curing and reverse winding
operations.  This militates against a conclusion that these
operations are "minor."   Moreover, no information has been
submitted to indicate that these operations are necessary or so
related to the assembly that they are logically performed
concurrently with assembly.  Therefore, we believe that the wire
component is not entitled to a duty allowance, as it fails to
meet the requirements of both clause (a) and clause (c) of HTSUS
subheading 9802.00.80.

     However, the connector components will be entitled to the
duty exemption, as they are merely attached to the ends of the
retractile cords by a crimping operation, which constitutes an
acceptable assembly operation.

HOLDING:

     On the basis of the information and samples/photographs
submitted, we conclude that no allowance in duty may be made for
the cost or value of the wire component under HTSUS subheading
9802.00.80, as it is not exported in condition ready for
assembly but, rather, is subjected to operations deemed to
constitute further fabrication.  However, allowances in duty may
be made for the cost or value of the various terminals under this
tariff provision, upon compliance with the documentary
requirements set forth in 19 CFR 10.24.

                              Sincerely,





                              John Durant, Director
                              Commercial Rulings Division