HQ 555807: Applicability of subheading 9802.00.50 or 9802.00.80, HTSUS, to fire barrier putty inserted into fireguard units

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 555807

                         March 25, 1991


CLA-2 CO:R:C:S  555807  RA

CATEGORY:  Classification

TARIFF  NOS.: 9802.00.50; 9802.00.80

Mr. Steve Sanders
Milne & Craighead Customs Brokers
P.O. Box 1568
Blaine, Washington  98230

RE:  Applicability of subheading 9802.00.50 or 9802.00.80,
     HTSUS, to fire barrier putty inserted into fireguard units

Dear Mr. Sanders:

     This is in response to your letter of May 21, 1990, 
addressed to the Customs office in Blaine, Washington, and
forwarded to us for reply on the proper tariff classification and
applicability of subheading 9802.00.50 or 9802.00.80, Harmonized
Tariff Schedule of the United States  (HTSUS),  to "3M Fire Barrier
Putty 303" of U.S. origin which is placed in fireguard units in
Canada by your client, F.G.C. Fireguard Corporation of Vancouver,
B.C.   We regret the delay in responding.   However, it has become
necessary to refer that portion of your inquiry concerning the
tariff classification to another office for further review and
preparation of a response.

FACTS:

     You state that your client will export canisters of 3M 
putty made in the U.S. to Canada where it will pumped into a
Canadian-made steel housing of a fire protection device.  After
setting for a short period, the putty becomes rubbery solid and
less volatile.   It is then covered with a paper collar followed
by a gasket.   The process is completed by welding a steel plate
to the bottom of the fireguard unit.   The device is placed around
pipes running through floors or ceilings and in case of a fire 
the 3M putty expands and makes a seal to help prevent spread of the
fire.   You believe that your client is entitled to a partial
exemption for the value of the U.S. origin 3M putty.
                              - 2 -

ISSUE:

     Can the putty be considered a fabricated component 
assembled abroad within the scope of subheading 9802.00.80, 
HTSUS, or a product altered abroad under subheading 9802.00.50,
HTSUS?

LAW AND ANALYSIS:

     Subheading 9802.00.80, HTSUS, provides a partial exemption
from duty for articles assembled abroad in whole or in part of 
U.S.  fabricated components, provided the components  (a)  are
exported in condition ready for assembly without further
fabrication;  (b) do not lose their physical identity by change in
form,  shape or otherwise,  and;  (c)  are not 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 such U.S.  components, upon compliance with
the documentary requirements of section 10.24,  Customs 
Regulations  (19 CFR 10.24).

     Section 10.16(a), Customs Regulations  (19 CFR 10.16(a)),
states that the assembly operations performed abroad may consist
of any method used to join or fit together solid components and 
may be preceded, accompanied, or followed by operations 
incidental to the assembly process.  However, this provision
further states that the combining of liquids, gases,  chemicals,
food ingredients, and amorphous solids with each other or with
solid components is not regarded as an acceptable assembly.

     We are of the opinion that the insertion of the 3M putty in
the device is not a qualified assembly under subheading 
9802.00.80, HTSUS, because the putty is an amorphous chemical
substance which was not intended to receive the benefits of this
tariff provision.

     Subheading 9802.00.50, HTSUS, provides a partial duty
exemption for articles returned to the U.S.  after having been
exported to be advanced in value Or improved in condition by
means of an alteration,  and duty is assessed only on the cost or
value of the alteration abroad.   The application of this 
provision is precluded where the operations abroad result in new
or different articles or are for the purpose of finishing them to
certain specifications.  Thus, intermediate processing operations
which are performed in the preparation of finished articles do
not come within the scope of the term "alterations."
                              - 3 -

     In Dolliff & Company, Inc v. U.S.,  66 CCPA 77, C.A.D. 1225
(1979), the court found that the processing steps performed on
exported greige goods were undertaken to produce the finished
fabric and could not be considered as alterations.   It was
concluded that alterations are made to completed articles and do
not include processing or the manufacture of finished articles.
Congress did not intend to permit uncompleted articles to be
exported and made into finished products in the foreign country 
and when returned to be subject to duties only on the cost of the
so-called alterations.   United States v.J.D. Richardson Co., 36
CCPA 15, C.A.D. 390 (1948).

     It is clear from the holding in the above judicial decisions
that a manufacturing operation which constitutes an intermediate
step in the preparation of the finished product cannot be
characterized as an alteration.   The 3M putty in this case is
processed in Canada by being inserted  into the device.
Accordingly, as the operation is an intermediate step in making a
finished product,  it exceeds the scope of an alteration.

HOLDING:

     For the reasons set forth above, the placing of U.S.-made 
3M putty into a fireguard unit in Canada is not a qualified
assembly under subheading 9802.00.80,  HTSUS,  or an alteration
under subheading 9802.00.50, HTSUS.

                              Sincerely,



                              John Durant, Director
                              Commercial Rulings Division