HQ 555885: Protest Nos. 2304-90-000058-60, 78-83, 93-96, 99, 100, 108, 109, 120, 121, 134-137, 139-141, 152, 153, 156-161, contesting tariff classification of vehicles and denial of HTSUS subheading 9802.00.80 treatment to certain U.S.- origin sheet metal components assembled into vehicles abroad and subjected to finish coat painting

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 555885

                            June 17, 1991

CLA-2 CO:R:C:S 555885 GRV/JLV

CATEGORY:       CLASSIFICATION

TARIFF NO.:     8703.24.00; 8704.31.00; 9802.00.80 

District Director of Customs
Lincoln Juarez Bridge, Bldg #2
P.O. Box 3130
Laredo, Texas  78044-3130

     RE:   Protest Nos. 2304-90-000058-60, 78-83, 93-96, 99, 100,
           108, 109, 120, 121, 134-137, 139-141, 152, 153, 156-161,
           contesting tariff classification of vehicles and denial
           of HTSUS subheading 9802.00.80 treatment to certain U.S.-
           origin sheet metal components assembled into vehicles
           abroad and subjected to finish coat painting 

Dear Sir:

     The above-referenced protests contest the classification of
motor vehicles known as the two-door Chrysler Ramcharger, under
subheading 8704.31.00, Harmonized Tariff Schedule of the United
States (HTSUS), and the denial of allowances in duty under HTSUS
subheading 9802.00.80 for certain exterior sheet metal components of
U.S. origin which were assembled into Chrysler vehicles in Mexico
and subjected to finish coat painting operations prior to the
vehicles' return to the U.S.

FACTS:

     Chrysler Motors Corporation exports U.S.-stamped sheet metal
(vehicle body parts) and other components to Chrysler de Mexico for
assembly into various motor vehicles.  Loose body panels are first
spot and resistance welded to form a subassembly, which is then
transferred to the main assembly line where other body panels are
welded onto it through a series of further welding processes.  After
the body of the vehicle is assembled, the unit is sent to the panel
fitting area, where doors, fenders, front end panel and hood are
added, fitted and adjusted for gaps and flushness.  Stud welds are
made for the subsequent attachment of moldings and exterior
ornamentation, which is added after the painting process.

     The assembled vehicle body is then subjected to a painting
process which consists of adding various layers of coatings and
sealers.  Specifically, the process entails (1) washing the complete
body of the vehicle so that all oils and other contaminants are
removed; (2) dipping the body into a phosphate chemical bath at high
temperatures, which prepares (sensitizes) the metal and ensures the
proper adhesion of the primer coat; (3) sealing all joints of the
body to prevent moisture, dirt and noise from entering the interior
of the body; (4) spraying a primer coat over the entire body, inside
and out, which is then baked at high temperatures to cure the
coating; and, (5) spraying a color coat, and, in some cases, an
additional clear coat, over the entire body, inside and out.  Each
of these coats also is baked at high temperatures to cure the
coating.

     The finish painted vehicle body is then moved to the dress-up
line where hardware, windows and other final trim work are installed
and attached by screws, nuts, bolts and clips.  The finished
vehicles imported into the U.S. and subject to these protests
comprise Chrysler Ramchargers, Club Cabs and K-Cars.
     
     The two-door Ramcharger vehicles were entered under HTSUS
subheading 8703.24.00 and protestant claimed entitlement to the
partial duty exemption under HTSUS subheading 9802.00.80 for all
vehicles.  Your office reclassified the Ramchargers under HTSUS
subheading 8704.31.00 and, with respect to all vehicles, dis-
allowed the duty exemption under HTSUS subheading 9802.00.80 for the
sheet metal components subjected to finish coat painting.

     Regarding the reclassification of the Ramchargers under HTSUS
subheading 8704.31.00, your office determined that they constituted
multipurpose vehicles for the transport of goods and persons,
thereby precluding their classification under HTSUS subheading
8703.24.00, which provides for motor vehicles principally designed
for the transport of persons.  Protestant notes that in Headquarters
Ruling Letter (HRL) 806815 dated August 15, 1983, Customs held that,
for purposes of classification under the Tariff Schedules of the
United States (TSUS), the Ramcharger vehicle "is essentially a motor
vehicle for carriage of persons and their personal gear in much the
same manner as a large full-sized station wagon."  According to
protestant, as no notice of the revocation of HRL 806815 was 
provided to Chrysler, as required by section 177.9(d), Customs
Regulations (19 CFR 177.9(d)), the holding in HRL 806815 should be
controlling in this case.  

     Concerning the imported vehicles' eligibility for HTSUS
subheading 9802.00.80 tariff treatment, your denial of the duty
exemption for certain sheet metal components was based on HRL 553640
dated August 9, 1985, which held that the finish painting of
component parts in assembled vehicles is a significant step in the
fabrication of the vehicles and not merely an incidental part of the
assembly. Therefore, we determined that the U.S.-origin body parts
which were finish painted abroad were ineligible for a duty
allowance under item 807.00, TSUS (the precursor provision to HTSUS
subheading 9802.00.80).

     Protestant maintains that the finish coat painting of exterior
sheet metal components is incidental to the assembly process and
should not preclude granting the duty exemption under this tariff
provision for these components. ISSUES:

I.   Does a ruling letter, issued under the TSUS on the tariff
     classification of a Ramcharger motor vehicle, control
     classification under the HTSUS until revoked or modified in
     writing?

II.  Under the HTSUS, is the two-door Ramcharger classified as a
     motor vehicle principally designed for the transport of
     persons, in subheading 8703.24.00, HTSUS?

III. Whether the finish painting of sheet metal components is an
     operation incidental to vehicle assembly operations for
     purposes of HTSUS subheading 9802.00.80 eligibility. 

LAW AND ANALYSIS:

I.   TSUS Ruling Letter

     In HRL 086448 dated March 6, 1990, we held that the classifi-
cation of a two-door Toyota 4Runner under the HTSUS was not
controlled by a ruling letter issued in 1983 under the former tariff
nomenclature, even though the ruling had never been revoked or
modified in writing.  The law and analysis expressed in that ruling
applies to the facts in this case.

II.  HTSUS Classification

     Motor vehicles falling in heading 8703, HTSUS, must be
"principally designed" for the transport of persons.  The two-door
Ramcharger is a motor vehicle within the class of multi- purpose
vehicles that are based on structural features designed for carrying
goods.  These vehicles typically have engine and transmission
performance characteristics that suit them for towing or hauling
heavy loads, suspension and chassis designs that provide strength,
coach or body designs that provide interior volume, and flat floors
which facilitate the loading, transport, and unloading of goods. 
These structural features are indicative of a motor vehicle designed
for the transport of  goods, even if, as in this case, a rear seat
is added.  See HRLs 083081 dated May 4, 1989, and 086448 dated March
6, 1990.

     The design of the two-door Ramcharger incorporates the features
described above.  The protestant has not submitted any factual
information which would indicate a significant addition or change to
these structural features.  Therefore, we conclude that the two-
door Ramcharger is not a motor vehicle principally designed for the
transport of persons, and is properly classified in HTSUS subheading
8704.31.00.

III. Applicability of HTSUS subheading 9802.00.80 to vehicle
     components subjected to finish coat painting abroad

     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 this tariff provision is subject to a duty
upon the full value of the imported assembled article, less the cost
or value of the U.S. components assembled therein, provided there
has been compliance with the documentation requirements of section
10.24, Customs Regulations (19 CFR 10.24).

     Fabricated components subject to the exemption are provided for
at section 10.14(a), Customs Regulations (19 CFR 10.14(a)), which
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.

     Operations incidental to the assembly process are not consid-
ered further fabrication, as they are of a minor nature and cannot
always be provided for in advance of the assembly operation,
although they may precede, accompany or follow the actual 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)), which specifically enumerates the
application of a preservative paint or coating.  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.  See, 19 CFR 10.16(c)(3) (painting primarily
intended to enhance the appearance of an article or to impart
distinctive features or characteristics is not considered incidental
to assembly).

     As protestant notes, the issue under consideration here is
presently before the Court of International Trade in General Motors
Corp. v. United States, No. 87-03-00471.  In that case, the court is
reviewing Customs denial of classification under item 807.00, TSUS,
for a painting operation claimed to be incidental to the assembly of
certain trucks in Mexico.  As part of this assembly operation, GM
requested TSUS item 807.00 treatment for the application of several
coats of enamel finish paint to the assembly trucks.  We held that
such an operation was neither minor nor incidental to the assembly
of the vehicles.

     Pending the issuance of a decision in the General Motors case,
we continue to believe that our position on this issue, as reflected
in the Customs Regulations and our rulings (e.g., HRL  553340 dated
December 14, 1984), is consistent with the statute and numerous
court decisions interpreting this tariff provision.  Therefore, in
regard to the facts of the instant case, we find that the sheet
metal components of U.S. origin which are subjected to the finish
coat painting process in Mexico are not entitled to the duty
exemption under HTSUS subheading 9802.00.80.

HOLDING:

     On the basis of the record in this matter, it is our opinion
that the two-door Ramcharger is not a motor vehicle principally
designed for the transport of persons.  Therefore, these vehicles
are classified at HTSUS subheading 8704.31.00.

     The finish painting operations performed on the assembled
vehicle body parts are not minor operations incidental to the
assembly process, but rather are significant operations, which
preclude the application of HTSUS subheading 9802.00.80 tariff
treatment to those components subjected to such operations.

     Accordingly, these protests should be denied in full.  A copy
of this decision should be attached to the Form 19 to be sent to the
protestant.

                                Sincerely,


                                John Durant, Director