HQ 556380: Applicability of duty exemption under HTSUS subheading 9802.00.80 to U.S.-origin tubing sent to Mexico to be cut to specific lengths and notched for parts of bicycle frames

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 556380

                          March 3, 1992

CLA-2 CO:R:C:S 556380 RAH

CATEGORY:  Classification

TARIFF NO.:  9802.00.80

Mr. Deral Rackley
Huffy Bicycles
P.O. Box 318
Celina, Ohio  43822

RE:  Applicability of duty exemption under HTSUS subheading
     9802.00.80 to U.S.-origin tubing sent to Mexico to be cut to
     specific lengths and notched for parts of bicycle frames

Dear Mr. Rackley:

     This is in response to Mr. La Rue's letter dated October 23,
1991, concerning the eligibility for a duty exemption under
subheading 9802.00.80, Harmonized Tariff Schedules of the United
States (HTSUS), for U.S.-origin tubing sent to Mexico to be cut
to specific lengths and notched prior to assembly with other
components to create finished bicycles.  

FACTS:

     Huffy Bicycles is a manufacturer of bicycles in the process
of starting an assembly operation in Mexico.  As part of that
operation, U.S.-origin components will be shipped to a plant in
Mexico to be assembled into bicycles.

     More specifically, U.S.-origin tubing will be sent to Mexico
in 20' lengths where it will be cut into top and bottom tubes
that form part of the bicycle frame.  The top tube will be
notched at both ends and the down tube will be notched at only
one end.  This procedure will occur prior to the assembly of the
bicycles in Mexico.

     Mr. La Rue contends that the notching operation performed in
Mexico on the U.S.-origin tubing is incidental to assembly under
the provisions of subheading 9802.00.80, HTSUS.  Moreover, he
states that notching is a critical operation and is necessary for
proper fit-up and alignment of all frame parts and so related to
the assembly that it is logically performed during the assembly. 
Finally, the time and cost of the notching operation






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is slight compared to the total cost and time of the complete
assembly. 

     The estimated cost and time to notch the tubes are as
follows:

COST PER TUBE                               TIME REQUIRED
top tube    .026 cents                      .0044 hours per tube
down tube   .012 cents                      .00186 hours per tube

The total estimated cost of production is $35.00.  The total
estimated time to assemble the bicycle is .9 hours or 54 minutes. 
These figures are based on the average size bicycle and will vary
depending on the dimensions of the bicycle assembled.

ISSUE:

     Whether the U.S.-origin tubing cut and notched in Mexico to
specific lengths for parts of bicycle frames qualifies for a duty
allowance under subheading 9802.00.80, HTSUS, when imported into
the United States as part of finished bicycles.

LAW AND ANALYSIS:

     All articles imported into the U.S. are subject to duty
unless specifically exempted therefrom under the HTSUS.

     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 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,









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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.

     Section 10.16(a), Customs Regulations (19 CFR 10.16(a)),
provides that the assembly operation performed abroad may consist
of any method used to join or fit together solid components, such
as welding, soldering, riveting, force fitting, gluing,
lamination, sewing, or the use of fasteners.

     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).

     In United States v. Mast Industries, Inc. 515 F. Supp 43, 1
CIT 188, aff'd, 69 CCPA 47, 668 F.2d 501 (1988), the court
considered the legislative history of the phrase "incidental to
the assembly process," and found that Congress intended a
balancing of all relevant factors to ascertain whether an
operation of a "minor nature" was incidental to the assembly
process.  The court stated that relevant factors included:

     (1)  whether the relative cost of the operation 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. 

     In the instant case, cutting the tubing to specific lengths
is considered an operation incidental to the assembly process
pursuant to 19 CFR 10.16(b)(6).  Furthermore, in applying the







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Mast criteria to the facts in question, we find that the notching
operation to be performed in Mexico is incidental to the assembly
process.  The cost/time involved to perform the notching is less
than one percent of the overall cost/time required for the
assemblage of the bicycle.  Additionally, we find that the
notching operation is essential to the assembly process in that
it is necessary to facilitate proper fit-up and alignment of the
frame parts.  We further find that the cutting and notching
operation will not cause the tubing to lose its physical
identity.  After the operation, it is merely shorter in length
and slightly angled on the ends.  

     Finally, we find the notching operation in question
analogous to slotting which we have held to be an incidental
operation.  See, Customs Ruling Letter 555450, dated June 28,
1990 (slotting of a plastic relay cover is an incidental
operation).  Moreover, in Rudolph Miles v. U.S., C.A.D. 1202, 65
CCPA 32 (1978), the appellate court held that the burning of
holes and slots in Z-beams prior to their joinder to boxcars, so
that wear and support plates and other components could be
initially attached, did not constitute further fabrication and
was incidental to the assembly process.

     Based on the foregoing, we conclude that the tubing exported
to Mexico for cutting and notching is exported in condition ready
for assembly without further fabrication.  We further find that
the tubing has not lost its physical identity by change in form,
shape, or otherwise.  Finally, we find that the tubing is not
advanced in value or improved in condition in Mexico except by
operations incidental to the assembly process. 

HOLDING:

     The cutting of U.S.-origin tubing to specific lengths in
Mexico and the notching of one or both ends of the cut tubes
prior to assembly with other components to produce finished
bicycles are considered operations incidental to the assembly
process.  Therefore, the cut and notched tubes will be entitled
to a duty allowance under subheading 9802.00.80, HTSUS, when
returned as part of assembled bicycles, upon compliance with the
documentation requirements of 19 CFR 10.24. 

                                   Sincerely,

     
                                   John Durant, Director
                                   Commercial Rulings Division