HQ 556626: Applicability of gas turbines for a partial duty exemption under subheading 9802.00.80, HTSUSA.

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 556626
                       August 4, 1992

CLA-2 CO:R:C:S 556626 SER

CATEGORY: Classification

TARIFF NO.:  9892.00.80

Robert H. Schor, Esq.
Barnes, Richardson & Colburn
475 Park Avenue South
New York, NY.  10016

RE:  Applicability of gas turbines for a partial duty exemption
     under subheading 9802.00.80, HTSUSA.

Dear Mr. Schor:

     This is in reference to your letter of April 2, 1992, on
behalf of Asea Brown Boveri, Inc., concerning the applicability
of subheading 9802.00.80, Harmonized Tariff Schedule of the
United States Annotated (HTSUSA), to gas turbines manufactured in
Switzerland and assembled, in part, with U.S. components.

FACTS:

     Gas turbine blades, manufactured in the U.S., are exported
to Switzerland for assembly into gas turbines or gas turbine
generator sets, and then returned to the U.S.  Specifically, upon
importation into Switzerland, the U.S. turbine blades will
undergo three main operations prior to their assembly into gas
turbines or turbine generator sets.  First, they will be cleansed
by immersion in a grease dissolvent.  Second, the blades will be
painted or encapsulated in a protective plastic coating.
Finally, the heel portion of the blade will be machined
simultaneously with the raceway in the rotor shaft to create an
interlocking fit.

     In regard to the machining operations, cuts will be
machined in the shaft assembly to match the blade machined cuts.
All this is done to create an interlocking force fit joint
between the blade and the shaft.

ISSUE:

     Whether gas turbines or gas turbine generator sets with the
U.S.-origin blades incorporated therein, will qualify for the
partial duty exemption available under subheading 9802.00.80,
HTSUSA, when imported into the U.S.

                               -2-

LAW AND ANALYSIS:

     Subheading 9802.00.80, HTSUSA, 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,
     lubrication, and painting.

All three requirements of subheading 9802.00.80, HTSUSA, 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 10.16(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 gluing, laminating, welding, soldering, riveting, force
fitting, sewing, or the use of fasteners.  Operations incidental
to the assembly process are not considered further fabrication
operations, as they as of a minor nature and cannot always be
provided for in advance of the assembly operations.  Examples of
operations which are incidental to the assembly process include
trimming, filing, or cutting off of small amounts of excess
materials.  See, section 10.16(b), Customs Regulations (19 CFR
10.16(b)).

     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, HTSUSA, to that
component.  See, section 10.16(c), Customs Regulations (19 CFR
10.16(c)).  Examples of operations not considered incidental to
assembly include:

     machining, polishing, burnishing, peening, plating, ... and
     any other operation, treatment or process which imparts
     significant new characteristics or qualities to the articles
     affected.

See, section 10.16(c)(5).

                               -3-


     It is our position that a duty allowance may not be made for
the U.S.-origin turbine blades since they are not exported in a
condition ready for assembly without further fabrication.
Section 10.16(c)(5) explicitly includes "machining" as an
operation which is not incidental to the assembly process.
Therefore, this operation precludes application of the exemption
to turbine blades.

     Furthermore, the holding in the case, Samsonite Corporation
v. U.S., 702 F.Supp. 908 (CIT 1988), aff'd, 889 F.2d 1074
(Fed.Cir. 1989), supports our conclusion that the U.S.-origin
turbine blades are not exported in a condition ready for
assembly without further fabrication.  In Samsonite, straight
steel strips were sent abroad for bending into a squared "C"
shape and then assembled into luggage.  The plaintiff argued that
the bending of the strips was a mere adjustment in shape required
by the assembly being performed abroad.  The Court of
International Trade stated that without the resultant shape the
final article could not be completed, and, therefore, further
fabrication was necessary.  Similarly, in this case, without the
machining of the blade heels, the assembly of the final article
could not be completed.  In addition, the machining of the blade
heels goes beyond mere adjustments in the shape or form of a
component as the drawing which you submitted of the blade shows
that the cuts required are substantial.  Therefore, no allowance
in duty may be made under subheading 9802.00.80, HTSUSA, for the
cost or value of the turbine blades.

HOLDING:

     The machining of the U.S.-origin turbine blades would
constitute a further fabrication of these components, thereby
precluding a duty allowance under subheading 9802.00.80, HTSUSA.

                                   Sincerely,



                                   John Durant, Director
                                   Commercial Rulings Division