HQ 555646: IA 26/90, concerning door locksets from Mexico.Further fabrication; incidental operation; Mast; Surgikos; polishing; buffing; cleaning; lacquer coating; 19 CFR 10.16(c)(5); 058249; 078204

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 555646

                         March 15, 1991

CLA-2 CO:R:C:S  555646 KCC

CATEGORY:  Classification

TARIFF NO.:  9802.00.80

District Director of Customs
880 Front Street
Suite 5-S-9
San Diego, CA 92188

RE:  IA 26/90, concerning door locksets from Mexico.Further
     fabrication; incidental operation; Mast; Surgikos;
     polishing; buffing; cleaning; lacquer coating; 19 CFR
     10.16(c)(5); 058249; 078204 

Dear Sir:

     This is in response to your memorandum of March 23, 1990,
forwarding the above-referenced request for internal advice,
initiated by Siegal, Mandell & Davidson, P.C. on behalf of
Schlage Lock Company, regarding the applicability of subheading
9802.00.80, Harmonized Tariff Schedule of the United States
(HTSUS), to door locksets from Mexico.  Additional submissions
dated December 12, 1990, and February 6, 1991, submitted by
counsel for Schlage were given consideration in responding to
this request.  Samples of the knobs and roses, before and after
the Mexican operations, were submitted to your office but were
not forwarded to this office.

FACTS:

     Schlage ships U.S.-origin brass knobs and roses to Mexico
for assembly into door locksets.  Before the assembly operations
commence, the knobs and roses are subjected to a
polishing/buffing, cleaning, and lacquer coating process.  The
polishing/buffing operation consists of placing the components
against a polishing/buffing wheel which emits paste.  The paste
is then cleaned off the components and they are dried.  The
components are sprayed with a powder coating which is baked onto
the surface.  The knob and rose components are then assembled
with other components to form the finished locksets which are
individually packaged for retail sale and imported into the U.S.

     Counsel states that the purpose of the polishing/buffing,
cleaning and lacquering operations is to restore a uniform brass
finish and to preserve the metal.       

     
ISSUE:

     Whether the door knobs and roses incorporated into the door
locksets are eligible for the duty exemption available under
subheading 9802.00.80, HTSUS, when imported into the U.S.

LAW AND ANALYSIS:

     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, lubrication, 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 loose 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 HTSUS subheading
9802.00.80 to that component.  See, section 10.16(c), Customs
Regulations (19 CFR 10.16(c)).


     In United States v. Mast Industries, Inc., 515 F. Supp. 43,
1 CIT 188, aff'd, 668 F.2d 501, 69 CCPA 47, (1981), the court, in
examining the legislative history of the meaning of "incidental
to the assembly process," stated that:

     [t]he apparent legislative intent was to not preclude
     operations that provide an "independent utility" or that are
     not essential to the assembly process; rather, Congress
     intended a balancing of all relevant factors to ascertain
     whether an operation of a "minor nature" is incidental to
     the assembly process.

The court then indicated that relevant factors included:

     (1)  whether the relative cost and time of the operation are
          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.

     Polishing/buffing is not considered an acceptable operation
incidental to the assembly process where it imparts significant
new characteristics or qualities to the article affected.  See,
19 CFR 10.16(c)(5).

     We have also held in Headquarters Ruling Letter (HRL) 058249
dated July 21, 1978, that a coating which is applied by spray
painting and baking is not an acceptable assembly operation or
operation incidental to the assembly.  See also, HRL 078204 dated
August 26, 1986 (application of a liquid enamel onto a plate and
then baking the plate to create an enamel finish is not
considered an operation incidental to the assembly process), and
C.S.D. 90-32(3), 24 Cust.Bull.     (1990) (HRL 555506 dated
January 16, 1990) (glazing and firing chinaware after application
of a decal is not an incidental operation).  

     In our opinion the polishing/buffing and lacquer coating
operations enhance the appearance and impart significant, new
characteristics to the knobs and roses. The articles start out in
a cast condition and are finished to a bright brass by the
polishing/buffing and lacquer coating operations.  The knobs and
roses are not ready for assembly, but require further fabrication
whose primary purpose is the completion and physical improvement
of the components.  

     In a letter dated December 12, 1990, counsel for the
importer states that the polishing/buffing and lacquer coating
operations should be considered incidental pursuant to Mast. 
However, we find that an analysis of Mast supports the conclusion
that the polishing/buffing and lacquer coating operations are not
incidental to the assembly.  In applying the Mast criteria, the 
court in Surgikos, Inc. v. United States, 12 CIT    , Slip Op.
88-35 (1988), found that fenestration and finishing folding
operations performed after the assembly operation were not
incidental to the assembly process, as the operations comprised
over one-fourth of the cost and one-third of the time involved to
assembly the article, they were not necessary prerequisites to
the assembly of the article, they were not related directly to
the assembly process, and practical considerations did not
"dictate" that the article be produced in the exact manner
performed.

     The first of the Mast criteria involves a comparison of the
relative cost and time required to perform the operations in
question with the cost and time required to perform the entire
assembly operation.  According to the December 12, 1990,
submission, the cost of all the Mexican operations for the F51
lockset is $0.8218 (and for the B160 lockset is $0.734), whereas
the cost of the polishing/buffing and lacquer coating is $0.265
($0.147).  Thus, the polishing/buffing and lacquer coating
operations constitute approximately 32% (20%) of the entire
Mexican operation.  Schlage also estimates that the time required
to perform the above operations is 32% (20%) of the total foreign
assembly time.  These figures indicate that the polishing/buffing
and lacquer coating operations are not incidental to the
assembly.

     We recognize that the polishing/buffing and lacquer coating
operations must occur before the assembly.  As counsel stated in
their February 6, 1991, submission, the assembly machinery in
Mexico cannot operate with brass components that have not been
subjected to the brass polishing and lacquer coating operation.
Counsel stated that the brass components in this condition are
not of uniform dimensions because they contain surface impurities
and grit attributable to the original manufacturing operations. 
Additionally, oily residues containing toxins can build up on the
brass surface of non-polished and lacquer coated components. 
Counsel stated that if the components are not polished and
coated, the oily residue would build up in the assembly machinery
and the toxic residue may pose an unacceptable health risk to the
employees.  Although you state that these operations could be
performed in the U.S. prior to exportation, the additional
expenses that would result from the need to individually pack
each component makes it commercially preferable to perform the
polishing and coating operations in Mexico.

     While these operations may be necessary to the assembly
process, we do not find that they are so related to the assembly
that they must necessarily be performed in Mexico rather than in
U.S.  Similarly, we are not persuaded from the information
presented that economic or other practical considerations mandate
that the polishing/buffing and lacquer coating operations be
performed in Mexico immediately before the assembly.  Weighing
the above factors, we conclude that the polishing/buffing and
lacquer coating operations are not incidental operations within
the meaning of subheading 9802.00.80, HTSUS, but rather evidence
that the knobs and roses are not exported in condition ready for
assembly without further fabrication.

HOLDING:

     On the basis of the information submitted and prior rulings,
we are of the opinion that the polishing/buffing and lacquer
coating processes are not operations incidental to the assembly,
but rather constitute a further fabrication of the components. 
Therefore, the knobs and roses are not entitled to allowances in
duty under subheading 9802.00.80, HTSUS, when returned to the
U.S. incorporated into the locksets.

                              Sincerely,



                              John Durant, Director
                              Commercial Rulings Division