us-cbp-cross-rulings-hq-555580•HQ 555580: Applicability of partial duty exemption under subheading 9802.00.80, HTSUS, to guide shoes imported from Mexico
HQ 555580: Applicability of partial duty exemption under subheading 9802.00.80, HTSUS, to guide shoes imported from Mexico
us-cbp-cross-rulings-hq-555580HQ 555580: Applicability of partial duty exemption under subheading 9802.00.80, HTSUS, to guide shoes imported from MexicoGuidance
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 555580
April 2, 1990
CLA-2 CO:R:C:V 555580 LS
CATEGORY: Classification
TARIFF NO.: 9802.00.80
Mr. John W. Cain
Cain Customs Brokers, Inc.
421 Texano
P.O. Box 150
Hidalgo, Texas 78557
RE: Applicability of partial duty exemption under subheading
9802.00.80, HTSUS, to guide shoes imported from Mexico
Dear Mr. Cain:
This is in response to your letter of January 6, 1990,
requesting a ruling on the applicability of subheading
9802.00.80, Harmonized Tariff Schedule of the United States
(HTSUS), to guide shoes to be imported from Mexico. Diagrams and
literature regarding the product were submitted.
FACTS:
3D Border Industries is planning to import guide shoes on
behalf of Halliburton Services. A guide shoe is a part used in
oil well cementing equipment. It fits onto the end of a string
of pipe casing after a well has been drilled. The guide shoe is
designed to direct the casing away from ledges to minimize
sidewall caving and to guide the casing through hard shoulders
and crooked holes.
The components of the guide shoe are a premachined metal
cylinder and concrete, both of U.S. origin. In a telephone
conversation with an attorney on my staff, you have stated that
the inside of the metal cylinder is threaded on one end and that
this threading is necessary to make the cylinder ready for the
assembly of the guide shoe. The threading allows the completed
guide shoe to be fitted onto the bottom of the first joint of
pipe casing. Under the first fact situation you presented, the
threading operation occurs in the U.S. before the metal cylinder
is shipped to Mexico. Under an alternative set of facts, the
threading occurs in Mexico after the cylinder is exported from
the U.S. and before the assembly of the guide shoe begins. The
concrete mix, which is exported from the U.S. in sacks, consists
of class "C" cement, "20-40 mesh" sand, a friction reducer, and
an air-entraining agent.
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The assembly process in Mexico consists of the following
steps. First, the premachined metal cylinder is degreased with a
soap and water mixture. It is then placed into a mold and
transported to the pouring station. The concrete is mixed with
water and poured into the cylinder in the mold. The filled mold
is placed on a vibrating conveyor belt to expel air. The
concrete then cures at room temperature. Next, the guide shoe is
taken out of the mold and excess concrete is removed with a wire
brush. The mold is cleaned and prepared for reuse. The guide
shoe is then painted with waterbase red paint which is for
purposes of rust protection when the guide shoes are stored
outside. Finally, the painted guide shoes are allowed to dry and
are packaged for shipping.
ISSUE:
(1) Whether the guide shoes, consisting of concrete and a
metal cylinder threaded in the U.S., will qualify for the partial
duty exemption under subheading 9802.00.80, HTSUS, when returned
to the U.S.?
(2) Whether the guide shoes, consisting of concrete and a
metal cylinder threaded in Mexico, will qualify for the partial
duty exemption under subheading 9802.00.80, HTSUS, when returned
to the U.S.?
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).
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I. Guide shoes in which the metal cylinder component is threaded
in the U.S.
We must first determine whether the concrete and the metal
cylinder threaded in the U.S. are "fabricated components, the
product of the U.S." Fabricated components subject to the duty
exemption are provided for at 19 CFR 10.14(a), which 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. . . .
Materials undefined in final dimensions and shapes, which
are cut into specific shapes or patterns abroad are not
considered fabricated components.
The legislative history of this tariff provision 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).
The concrete mix consists primarily of cement and sand in a
powder or granular form. Thus, according to the legislative
history, the concrete mix is a material expressly precluded from
the benefits of subheading 9802.00.80, HTSUS. See Headquarters
Ruling Letter 555057 (March 15, 1990) (crushed diamonds, in
granular form, constitute a powder within meaning of tariff
provision and are not entitled to exemption). Further, it is not
exported in condition ready for assembly since it must first be
mixed with water in Mexico before it can enter into the assembly
operation.
The metal cylinder which is threaded in the U.S. constitutes
a "fabricated component, the product of the U.S.," as it is
exported in a condition ready for assembly within the meaning of
clause (a) of subheading 9802.00.80, HTSUS. You have informed us
that the cylinder must be threaded in order to be in a condition
ready for assembly.
For purposes of subheading 9802.00.80, HTSUS, the term
"assembly" means the fitting or joining together of fabricated
solid components. 19 CFR 10.16(a); C.J. Tower & Sons of Buffalo,
Inc. v. United States, 62 Cust. Ct. 643, C.D. 3840, 304 F. Supp.
1187 (1969). Section 10.16(a), Customs Regulations (19 CFR
10.16(a)), further provides:
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The mixing or combining of liquids, gases, chemicals, food
ingredients, and amorphous solids with each other or with
solid components is not regarded as an assembly.
However, the courts have held that this language of 19 CFR
10.16(a), requires only that a component be a solid upon
completion of the assembly process. See C.J. Tower; Sigma
Instruments, Inc. v. United States, 5 CIT 90, 565 F. Supp. 1036
(1983), aff'd, 2 CAFC 24, 724 F.2d 930 (1984). "[N]othing in the
statute [or 19 CFR 10.16(a)] requires that whether a component is
a solid be determined as of the instant of initial contact."
Sigma, 724 F.2d at 931-932.
In Sigma, U.S. terminal pins were incorporated into header
assemblies by a transfer molding operation in Mexico. A molding
compound, exported to Mexico in rope form, was heated and
transformed into a viscous state before being joined to the
terminal pins. At the completion of the transfer molding
operation, the molding compound had substantially assumed a
definitive solidification, size, and shape. Through this process
the terminal pins became permanently fixed in their designed
configuration and spacing so that they could perform their
intended function as electrical relays. The court, relying upon
C.J. Tower, found that the transfer molding operation constituted
a permissible assembly within the purview of subheading
9802.00.80, HTSUS, and that Customs should have granted an
allowance in duty for the terminal pins.
Applying the rule in C.J. Tower and Sigma, we find that the
combined processes of pouring the concrete into the metal
cylinder in a mold, vibrating the mold to expel air, curing the
concrete at room temperature, and removing the resulting guide
shoe from the mold, constitute an acceptable assembly operation
for purposes of subheading 9802.00.80, HTSUS. Although the
concrete is in a viscous state when it first comes into contact
with the metal cylinder, it becomes a solid upon completion of
the combined assembly process. Thus, the process results in the
permanent joinder of two solids--the concrete and the metal
cylinder--and constitutes an acceptable assembly operation.
Section 10.14(a), Customs Regulations (19 CFR 10.14(a)),
further provides, in part, that:
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.
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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. 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
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).
Among the examples of operations incidental to the assembly
process which are listed in 19 CFR 10.16(b) are: cleaning;
removal of grease; and the application of preservative paints or
coatings. Thus, the following operations which relate to the
assembly of the guide shoes are considered operations incidental
to the assembly process: the preparatory step of degreasing the
metal cylinder with a soap and water mixture; the cleaning of the
mold after the assembly process; and the spray painting of the
guide shoe after the assembly for purposes of rust protection.
With respect to the packing prior to shipping, section
10.16(f), Customs Regulations (19 CFR 10.16(f)), provides, in
part, that an assembled article which otherwise qualifies for the
exemption under subheading 9802.00.80, HTSUS, will not be
disqualified by reason of having been packaged abroad.
We find that the guide shoes which include as a component
metal cylinders exported from the U.S. already threaded are
eligible for the partial duty exemption under subheading
9802.00.80, HTSUS. The threaded metal cylinder is a fabricated
component of U.S. origin which is in a condition ready for
assembly without further fabrication, does not lose its physical
identity in the assembly operation, and is not otherwise advanced
in value or improved in condition except by assembly operations
and operations incidental thereto. However, as explained above,
no allowance may be made under subheading 9802.00.80, HTSUS, for
the cost or value of the concrete mix.
II. Guide shoes in which the metal cylinder component is
threaded in Mexico prior to assembly
We next consider the alternative facts you have presented in
which the unthreaded metal cylinder is exported from the U.S. and
threaded in Mexico prior to being joined with the concrete.
Regarding the concrete mix, we apply the same analysis set forth
in Part I and find that it is precluded from the benefit of
subheading 9802.00.80, HTSUS.
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The metal cylinder which is unthreaded when exported from
the U.S. does not satisfy clause (a) of subheading 9802.00.80,
HTSUS, because it is not "in condition ready for assembly without
further fabrication." As stated in the facts above, the
threading is necessary in order to allow the completed guide shoe
to be attached to the bottom of the first joint of the pipe
casing. Therefore, the metal cylinder is not ready for assembly
into the guide shoe until it is threaded.
Whether a particular foreign process constitutes "further
fabrication" within the meaning of subheading 9802.00.80, HTSUS,
depends upon the facts of the particular case. Zwicker Knitting
Mills v. United States, 82 Cust. Ct. 34, C.D. 4786, 469 F. Supp.
727 (1979), aff'd, 67 CCPA 37, C.A.D. 1240, 613 F.2d 295 (1980).
In Samsonite Corp. v. United States, 12 CIT ___, 702 F. Supp. 908
(1988), aff'd, 8 Fed Cir. ___, 889 F.2d 1074 (1989), 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. Since
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 they were not exported in condition ready
for assembly. The court noted that, without the bending
operation, the original strips as exported could not serve their
ultimate function as part of the frame of the luggage. Thus, the
bending and shaping of the steel strips was a fabrication, within
the meaning of subheading 9802.00.80, HTSUS. Similarly, in the
instant case, the process of cutting threads inside the metal
cylinder in Mexico constitutes a further fabrication because,
absent the threading, the metal cylinder could not serve its
function of allowing the guide shoe to be attached to the pipe.
Thus, the unthreaded metal cylinder is an incomplete component as
exported.
Since neither the metal cylinder nor the concrete mix meets
the requirements of clause (a) of subheading 9802.00.80, HTSUS,
we find that the guide shoe is not eligible for the partial duty
exemption under subheading 9802.00.80, HTSUS, when returned to
the U.S.
HOLDING:
The guide shoes, consisting of concrete and a metal cylinder
threaded in the U.S., will be eligible for the partial duty
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exemption under subheading 9802.00.80, HTSUS, when returned to
the U.S., upon compliance with the documentary requirements of 19
CFR 10.24. The processes performed in Mexico on the metal
cylinder and concrete are considered acceptable assembly
operations or operations incidental to the assembly process. An
allowance in duty is permitted for the cost or value of the metal
cylinder which is a U.S. component exported in condition ready
for assembly. However, no allowance may be made for the cost or
value of the concrete mix because it is not a fabricated
component of a type designed to be fitted together with other
components.
The guide shoes, consisting of concrete and a metal cylinder
which is unthreaded when exported from the U.S. and then threaded
in Mexico prior to assembly, are not eligible for the partial
duty exemption under subheading 9802.00.80, HTSUS, when returned
to the U.S. The unthreaded metal cylinder is not exported in a
condition ready for assembly without further fabrication. For
the reason stated above, the concrete mix is also not a
fabricated component subject to the exemption.
Sincerely,
John Durant, Director
Commercial Rulings Division
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