HQ 555616: Stretch limousines; assembly; incidental operations; 554539; 544159; 554808

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 555616

                         April 11, 1991

CLA-2  CO:R:C:S  555616 DSN

CATEGORY:  Classification

TARIFF NO.:  9802.00.80

John M. Peterson, Esquire
Neville, Peterson & Williams
39 Broadway
New York, New York 10006

RE:  Stretch limousines; assembly; incidental operations; 554539;
     544159; 554808

Dear Mr. Peterson:

     This is in response to your letters dated January 23, and
March 15, 1990, on behalf of the U.S. Coachbuilders Coalition for
Fair Trade and Southhampton Coachworks Ltd., requesting a ruling
on the applicability of subheading 9802.00.80, Harmonized Tariff
Schedule of the United States (HTSUS), to stretch limousines from
either Canada or Mexico.  We regret the delay in responding.

FACTS:

     According to your submissions, stretch limousines are not
manufactured by domestic automobile makers.  Instead, independent
manufacturers purchase U.S.-made automobiles and cut them in half
and insert midbodies.  There are three vehicles commonly
purchased for use as stretch limousines:  the Lincoln Town Car,
Cadillac Brougham and Mercury Grand Marquis.  The coachbuilding
industry refers to these vehicles as "chassis" which is a term
used to describe completed cars which are used as the basic
vehicles in the construction of stretch limousines.  Prior to
exportation, the above-mentioned automobiles are considered
"ready-to-drive" vehicles, featuring a complete outer body, a
full power train, and a finished interior.  Your client,
Southhamption Coachworks Ltd., intends to purchase the above
automobiles and export them to either Canada or Mexico for
assembly into stretch limousines.

     You state there are approximately eleven prinicpal
operations in the production of stretch limousines.  They are as
follows:

                              -2-

     1.  The interior furnishings of the vehicles are
     disassembled and removed.

     2.  The drive train is disconnected by removing the
     drive shaft and drive shaft couplings.

     3.  The "front-to-back" systems are severed including
     the electrical wiring, fuel lines, brake lines, and
     exhaust.  Various wires are also cut and stripped of
     insulation and are then prepared for retermination.
     Fuel and brake lines are flared to accept extension
     splices.

     4.  The dashboard and related controls are removed.

     5.  Metal brackets are welded to the inside of the vehicle
     to prevent any "twisting" when the chassis is bisected.

     6.  The vehicle is cut in half by a reciprocating saw,
     thermal arc cutter or oxy-acetylene torch.  At this stage
     the vehicle is separated into two halves with each half
     resting on its own axle.

     7.  Extra holes are cut into the frame to provide additional
     welding positions so that the extension can be properly
     integrated.

     8.  A recess is pressed into the original metal roof on both
     sides of the "cut" which enables acceptance of the extended
     sheet metal roof.

     9.  The original heating and air conditioning systems are
     drained to allow the lines to be spliced so that other
     valves can be inserted to the secondary climate system.

     10.  Certain trim components such as carpeting, headliner,
     chrome and panel trim are cut to allow splicing of added
     lengths.

     11.  Welding operations are performed to reconnect the
     vehicle with the addition of a center chassis extension.
     Other extensions such as frames, rocker panels, roof rails,
     floors, roof, windows, door posts, exhaust pipes and drive
     shafts are welded to the vehicle.  The "front-to-back"
     systems are attached to extension splices, and interior
     features are restored.

According to your submissions, the above operations are extremely
complex and require skilled labor to perform.


                              -3-

ISSUE:

     Whether the stretch limousines will qualify for the partial
duty exemption available under subheading 9802.00.80, HTSUS, when
returned to the U.S.

LAW AND 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 subheading 9802.00.80, HTSUS, 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 10.14(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 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.

     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 operations.  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, HTSUS, to that component.  See, 19 CFR 10.16(c).

                              -4-

     We have consistently held that extensive disassembly
operations performed abroad on an exported article constitute
non-assembly operations.  See, Headquarters Ruling Letters (HRL)
554539 of August 25, 1987 and 544159 of December 16, 1988, where
Customs denied item 807.00, Tariff Schedules of the United
States (the precursor provision to subheading 9802.00.80, HTSUS)
treatment to certain power steering pumps and their constituent
parts exported for remanufacture because the pumps required a
complete disassembly operation before being reassembled with
refurbished parts and new replacement parts of U.S.-origin.  Upon
reconsideraton, Customs determined that the new U.S.-origin
replacement parts were entitled to item 807.00, TSUS, treatment
because those parts complied with the statutory requirements in
that they were (1) exported in condition ready for assembly, (2)
did not lose their physical identity, and (3) were not advanced
in value or improved in condition except by being assembled.
However, in HRL 554808 of August 25, 1989, we ruled that certain
preparatory steps undertaken in connection with the production of
luxury vans, including some disassembly operations, were
considered incidental to assembly, because they were of a minor
nature and were necessary for safety reasons.

     We are of the opinion that the vehicles in this case are not
ready to enter into the assembly process in their condition as
exported without further fabrication.  After the vehicles are
exported to Mexico they are stripped and cut in half, and certain
trim components are cut to allow splicing of added lengths.
These steps are necessary before the midsection can be inserted
and all the other various components can be reinserted and
spliced with extensions to comply with the configurations of
stretch limousines.  The above-described pre-assembly operations
are clearly substantial and significant fabricating processess
which establish that the passenger vehicles are not in condition
ready for assembly without further fabrication when exported.  As
the U.S.-origin vehicles do not meet the requirement of clause
(a) of subheading 9802.00.80, HTSUS, no allowance in duty can be
made for the cost or value of the U.S. vehicles.  However, as we
stated in HRL 544159, allowances in duty may be made under this
tariff provision for the cost or value of any U.S.-origin parts
that may be separately exported to Mexico or Canada and assembled
with the passenger vehicle.

HOLDING:

     On the basis of the information submitted, we conclude that
the extensive disassembly and cutting operations performed in
Mexico on the U.S. vehicles prior to assembly operations to
create stretch limousines are not acceptable assembly operations

                              -5-

or operations incidental to the assembly process, but rather
constitute a further fabrication of the exported vehicles.
Therefore, the stretch limousines will not qualify for the
partial duty exemption available under subheading 9802.00.80,
HTSUS.

                              Sincerely,



                              John Durant, Director
                              Commercial Rulings Division