HQ 556363: Application for Further Review of Protest No. xxxx-xx- xxxxxx; Denial of partial duty exemption under HTSUS subheading 9802.00.80 to multiple outlet strips; 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 556363

                        February 16, 1993

CLA-2 CO:R:C:S 556363 MLR

CATEGORY: Classification

TARIFF NO.: 9802.00.80

District Director
U.S. Customs Service 
International & Terrace Sts.
Nogales, Arizona  85621

RE:  Application for Further Review of Protest No. xxxx-xx-
     xxxxxx; Denial of partial duty exemption under HTSUS
     subheading 9802.00.80 to multiple outlet strips; painting

Dear Mr. Lawrence:

     This is in reference to a protest and application for
further review filed by S.L. Waber contesting the denial of the
partial duty exemption under subheading 9802.00.80, Harmonized
Tariff Schedule of the United States (HTSUS), to certain multiple
outlet strips.

FACTS: 

     S.L. Waber imports multiple outlet strips from Mexico, which
consist of a can, a back, and various other subassemblies (i.e.,
circuit breakers, wires, switches, etc.).  Your office denied the
partial duty exemption under subheading 9802.00.80, HTSUS,
because the cans and backs were painted in Mexico.  Furthermore,
it was determined that some of the cans and backs were formed in
Mexico from U.S.-origin metal sheets; however, we have been
informed that the entries covered by this protest only involve
cans and backs that were formed in the U.S.

     S.L. Waber has provided additional information on the
painting operation performed in Mexico.  The cans and backs are
received in bulk from U.S. suppliers.  The cans and backs contain
a coat of die oils which is a remnant of the punch press and die
manufacturing process and which prevents the formation of rust. 
These die oils are removed by the paint department by placing the
cans and backs on a chain conveyor that carries them through a
spray wash and dry system.  It is stated that the washed cans and
backs will exhibit rust in a few days if they are not painted
immediately; consequently, they are loaded on tree racks (five
backs or five cans per rack) and placed on a progressive paint
conveyor.  

     The first stage of the conveyor is a final dry stage.  The
second stage is the paint booth where the rack spins and all five
cans or backs are painted by an electrostatic spray gun with one
coat of paint.  The hanging method and tree rack design causes
each can to receive more paint on the outside than the inside. 
The third stage of the conveyor carries the parts into a propane
fired drying oven for final paint drying.  The conveyor exits the
oven to stage four where the parts are unloaded onto pallets. 
The cans and backs are stored until they are ready to be
assembled with the other raw materials into multiple outlet
strips. 

     The time and costs for washing and painting a set (can/back)
is as follows:

Item          Cost     Paint Labor   Paint Overhead   Total

Can       $.485/each   $.00744/each  $.04464/each     $.53708
Back       .115/each    .00558/each   .03348/each      .15406
Paint      .086/set      0             0               .086  
Total     $.686/set    $.01302/set   $.07812/set      $.77714/set

The total assembly value of a multiple outlet strip is stated to
be $5.42028. 

ISSUE:

     Whether the multiple outlet strips qualify for the partial
duty exemption available under subheading 9802.00.80, HTSUS, when
returned to the United States.

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,
     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,
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.  See 19 CFR 10.16(a).  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 C.S.D. 90-79 (HRL 555580 dated April 2, 1990), we
considered the assembly of guide shoes used in oil well cementing
equipment.  It was held that degreasing a premachined metal
cylinder with a soap and water mixture and spray painting the
resulting guide shoe with waterbase red paint, to protect it
against rust, were operations incidental to the assembly process
pursuant to 19 CFR 10.16(b).  We have also held in HRL 555569
dated August 1, 1990, that painting centralizers in Mexico,
solely for rust protection purposes, was an operation incidental
to assembly process pursuant to 19 CFR 10.16(b)(3).  Therefore,
we conclude that painting the cans and backs in this instance to
prevent rust is an operation incidental to the assembly of the
multiple outlet strips.

     We also note that with respect to the cans and backs which
may be manufactured both in Mexico and the U.S. (i.e., "dual-
sourced" parts), only the cans and backs of U.S. origin may
receive the benefits of subheading 9802.00.80, HTSUS.  Although 
it has been indicated that the entries covered by this protest
involve cans and backs manufactured in the United States, we have
consistently taken the position that under section 10.24, Customs
Regulations (19 CFR 10.24), a subheading 9802.00.80, HTSUS,
allowance may be granted only if the importer can demonstrate,
for each and every entry for which the allowance is claimed, that
those components claimed to be products of the U.S. are, in fact,
products of the U.S.  Section 10.24, however, further provides
that the entry-by-entry documentary requirements may be waived by
the District Director if the district is satisfied that the
importer and assembler have established reliable controls,
including the strict physical segregation of U.S. and foreign
components and the maintenance of any other records pertaining to
the U.S. components so that the District Director can identify by
audit, if necessary, the specific components of U.S. origin in
particular shipments for which a subheading 9802.00.80, HTSUS,
allowance is claimed.  See also HRL 555505 dated December 28,
1989.  Therefore, it is incumbent upon the importer to establish
to the satisfaction of the your office the precise quantity and
identity of the U.S. components involved in the entries subject
to this protest. 

HOLDING: 

     On the basis of the information provided, it is our opinion
that the operations performed to the cans and backs are
considered proper assembly steps or operations incidental to the
assembly process.  Therefore, the imported multiple outlet strips
may be entered under subheading 9802.00.80, HTSUS, with
allowances in duty for the cost or value of the U.S. components
incorporated therein.  With respect to components sourced both in
the U.S. or abroad, reliable controls must be established to
ensure that the precise quantity and identity of the U.S.
components can be determined on an entry-by-entry basis. 
Accordingly, provided you are satisfied that the cans and backs
involved in the protest are of U.S. origin, the protest should be
granted.  A copy of this decision should be attached to Customs
Form 19, Notice of Action, to be sent to the protestant.

                              Sincerely,




                              John Durant, Director