HQ 555785: Applicability of subheading 9802.00.80, HTSUS, to stator core part of unassembled electric motor; beveling operation on steel lamination components; incidental operation; 19 CFR 10.16(b),(c); 554305; 555216

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 555785

                          March 8, 1991

CLA-2 CO:R:C:S  555785 LS

CATEGORY:  Classification

TARIFF NO.:  9802.00.80

Steven H. Becker, Esq.
Coudert Brothers
200 Park Avenue
New York, New York 10166

RE:  Applicability of subheading 9802.00.80, HTSUS, to stator
     core part of unassembled electric motor; beveling operation
     on steel lamination components; incidental operation;  19
     CFR 10.16(b),(c); 554305; 555216

Dear Mr. Becker:

       This is in response to your letter dated November 14,
1990, amended by your letter of February 14, 1991, requesting a
ruling, on behalf of General Electric Company, regarding the
applicability of subheading 9802.00.80, Harmonized Tariff
Schedule of the United States (HTSUS), to a stator core which is
imported as part of an unassembled electric motor.

FACTS:

       The following facts are based upon your two letters and
several telephone conversations with a member of my staff.

       GE plans to ship various U.S. components to Mexico for
assembly into stator cores.  The stator core will then be one of
several items which are packaged together in Mexico and shipped
to the U.S. to be sold to customers as electric motors in kit
form.  The U.S. customers then must insert the stator core,
together with the other components (such as a rotor, end shields,
and clamp bolts), into a shell that houses the entire motor used
for pumps or other machinery.

       You claim that the stator core is assembled in Mexico by
means of the following operations:

       1.  Inserting slot insulators (into which copper magnet
wire will be wound) into stacked circular steel laminations

       2.  Conducting two to three wire-winding operations

       3.  Injecting the wire into the stator

       4.  Inserting the wedge insulators

       5.  Pressing down the wire windings

       6.  Connecting the leads, which themselves are the product
of a subassembly operation

       7.  Lacing

       8.  Surge testing

       9.  Applying to all parts, except the leads, a varnish
sealant for purposes of waterproofing and preventing rust

       10.  "Trimming" the right angle edge of the bottom of the
stacked laminations of the stator core to achieve a minute bevel
or chamfer

       11.  Further testing, which is more comprehensive than the
surge testing in Step 8.

       12.  Packing the stator core with the other components for
shipment as electric motors in kit form.

       You request that we address the issue of whether the
minute trimming of the edge of the stator core constitutes an
operation incidental to the assembly process within the meaning
of subheading 9802.00.80, HTSUS, so as to entitle the U.S.
components of the stator core to a duty allowance when the
electric motors are imported.

       You state that the circular steel laminations of the
stator core are exported from the U.S. to Mexico already stacked
or pressed together.  Further, the trimming or beveling of the
stacked laminations is performed in Mexico to facilitate the
insertion of the stator core into the shell by GE's customers
after the motor in kit form is imported into the U.S.  You also
state that the customers would not be able to achieve a snug fit
of the stator core in the shell without the bevel because they do
not have the special machinery and expertise possessed by GE.  In
fact, when GE itself completes assembly of the entire motor by
inserting the stator core into the shell in Mexico, it does not
have to perform the beveling operation because it has the ability
to achieve a perfect fit even with the sharp right angle edge of
the stacked laminations.

       You have submitted two samples of the stator core, one
with the beveled edge and the other without.  A "chamfer machine"
uses a blade to cut away the sharp right angle edge along the
circumference of the stator, thus producing the chamfer or
bevel.  A diagram submitted shows the dimensions of the corner to
be beveled as approximately .032 inches on the circumferential
surface of the stator, and approximately .038 inches on the
"insertion end" of the stator.  The sample has a smooth beveled
surface along approximately 3/4 of the circumference.  The total
width of the bevel varies along the circumference, with some
areas being narrower than others.  GE states that some of this
unevenness is due to defects in the steel laminations.

       You claim that the trimming operation cannot be performed
in the U.S. prior to exporting the stacked steel laminations to
Mexico because of a certain ordered progression of the Mexican
operations.  First, the beveling has to follow application of
the varnish/sealant.  If the beveling is done before the
varnishing, deposits of the varnish/sealant would build up along
the chamfer, thus defeating the chamfer's purpose of facilitating
insertion of the stator into the shell.  Second, application of
the varnish must occur after the performance of Steps 1-8 in
Mexico because the varnish acts as a sealant and insulates the
wires in the stator core from water damage.  Also, the surge
testing has to be done before application of the varnish.

       You also contend that it would be highly impractical and
uneconomical for GE's U.S. customers to trim the corners of the
stator after the motor kit is returned to the U.S.  First, the
customer is neither equipped to perform such an operation, nor
willing to accept the financial consequences of doing so.  The
customer also cannot practically do its own final testing or
rectify any problems detected thereby.

       As to the impracticality of GE doing the trimming
operation in the U.S. following the importation of the motor
kits, you state that the packaged kits are sold directly to GE's
customers after their arrival at a GE warehouse.  This warehouse
is not equipped to do the final testing, which must follow the
beveling and is presently done in Mexico.  Even if GE were to
become equipped to do the beveling and testing in the U.S., the
performance of such operations in its warehouse would be
impractical and uneconomical.  Upon the detection of defects
after the final testing, the affected stators would have to be
returned to Mexico to rectify the problems, thus resulting in
unnecessary and wasteful packing and shipping expenses.  You also
claim that packing and repacking can cause further defects.  In
addition, even without the return of defective stators, the
performance of the beveling and final testing in the U.S. would
lead to delay, as well as added labor, administrative, and
packing costs.

       You contend that beveling or "trimming" the edge of the
stator constitutes an operation incidental to the assembly
process for three reasons.  First, trimming small amounts of
excess materials is specifically listed in section 10.16(b)(4),
Customs Regulations (19 CFR 10.16(b)(4)) as an example of an
operation incidental to assembly.  You assert that because only a
minute amount of material is removed from the edge of the stator,
this operation falls within the parameters of 19 CFR 10.16(b)(4).
Alternatively, you claim that the trimming constitutes an
"[a]djustment in the shape or form of a component to the extent
required by the assembly being performed abroad," pursuant to
19 CFR 10.16(b)(5), even though the assembly to which it is
related is performed by GE's customer in the U.S.

       Second, you contend that all of the four criteria set
forth in United States v. Mast Industries, Inc., 515 F. Supp. 43,
1 CIT 188, aff'd, 668 F. 2d 501, 69 CCPA 47 (1981), are present
here and that they lead to a conclusion that the trimming
operation is incidental to the assembly process.  With regard to
the first Mast factor, you state that because the beveling
operation comprises about 5.6% of the time involved to assemble
the stator, and 0.26% of the cost of the stator, it is considered
to be "minor" in nature.  You further state that this is evident
because only 0.01768% to 0.04126% of the material of the stator
is trimmed off.

       Lastly, after citing to several Headquarters Ruling
Letters (HRLs) to support your position, you conclude that the
miniscule chamfer, or bevel, that results from the trimming does
not impart to the stator any significant new characteristics or
properties.

ISSUE:

       Whether the operation of beveling the edge of the stator
core constitutes an operation incidental to the assembly process
within the meaning of subheading 9802.00.80, HTSUS.

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 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 subheading 9802.00.80, HTSUS, is subject to
duty upon the full value of the imported assembled article less
the cost or value of the U.S. components, 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 in part:

       The assembly operations performed abroad may consist of
       any method used to join or fit together solid components,
       such as welding, soldering, riveting, force fitting,
       gluing, laminating, sewing, or the use of fasteners, and
       may be preceded, accompanied, or followed by operations
       incidental to the assembly as illustrated in paragraph (b)
       of this section.

       For purposes of this discussion, which focuses on the
issue of whether beveling the edge of the stator core constitutes
an operation incidental to the assembly process, we assume that
at least some of the foreign operations outlined in the facts,
as steps 1-4, and 6, constitute assembly operations.  You have
neither requested a ruling as to these operations nor provided
sufficient information to make such determinations.  We note that
certain wire winding operations have been found to constitute
assembly operations.  See General Instrument Corp. v. United
States, C.A.D. 1128, 61 CCPA 86, 499 F.2d 1318 (1974).

       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 operation.  See 19 CFR 10.16(a).  Examples of operations
considered incidental to the assembly process are delineated at
19 CFR 10.16(b).  However, any significant process, operation, or
treatment whose primary purpose is the fabrication, completion,
or physical or chemical improvement of a component, or which is
not related to the assembly process, is not regarded as
incidental to the assembly and precludes the application of the
exemption under subheading 9802.00.80, HTSUS.  See 19 CFR
10.16(c).

       We first consider whether beveling the stator core edge
falls within one of the examples of incidental operations set
forth in 19 CFR 10.16(b).  We do not believe that 19 CFR
10.16(b)(4), which refers to "trimming, filing, or cutting off of
small amounts of excess materials," was intended to cover the
beveling operation performed on the stator cores because the
sharp right angle edge of the stacked laminations cannot be
considered "excess material."  Cf. HRL 555216 dated June 8, 1989
(grinding and sanding operations to remove excess material and
smooth out imperfections caused by welding are incidental to



that assembly).  This is supported by the fact that when GE
itself inserts the stator core into the shell in Mexico the
beveling operation is not necessary.

       We also find that 19 CFR 10.16(b)(5) is not directly
applicable because the adjustment in shape achieved by the
beveling operation is not required by the assembly operation
performed abroad.  Instead, the beveling is performed for
purposes of facilitating the insertion of the stator core into
the shell of a motor after the core is imported into the U.S. as
part of a kit.

       Next, we consider the applicability of 19 CFR 10.16(c).
In many instances, we have held that when an operation is not
related to the foreign assembly, but to a subsequent assembly
performed after the component is returned to the U.S., it is not
considered to be incidental to assembly.  See HRL 554305 dated
October 28, 1986.  However, in Mast, 69 CCPA at 52, 668 F.2d at
505, the court stated the relation of the operation to the
assembly performed abroad is just one relevant factor to
consider in determining whether the operation is incidental to
the assembly process.

       In a situation, like the instant one, where the beveling
results in a change in shape which is not substantial, we find
that it does not constitute a fabrication of the stator core.
The beveling operation does not fit within any of the examples of
operations set forth in 19 CFR 10.16(c).  Although the beveling
may be considered a machining operation, it does not meet the
other factor in 19 CFR 10.16(c)(5), i.e., that it impart
significant new characteristics or qualities to the article
affected.

       In Mast, 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.

       Applying the relevant factors discussed in Mast to the
facts of this case, we find that two of them are present.
First, the beveling operation comprises about 5.6% of the time
involved to assemble the stator, and 0.26% of the cost of the
stator.  These cost and time comparisons indicate that the
beveling operation is of a minor nature.  The fourth criterion
mentioned in Mast is also present here.  The numerous economic
and practical reasons for performing the beveling operation in
Mexico as the last step prior to the final testing are outlined
in this ruling.  These considerations also indicate that the
beveling operation is incidental to the assembly of the stator
core.

       Considering these factors, and the fact that the beveling
operation results in a small adjustment in shape to the edge of
the stator core, we conclude that this operation is relatively
minor in nature and is thus considered to be incidental to the
assembly processes performed in Mexico.

HOLDING:

        For the foregoing reasons, the beveling operation
performed in Mexico on the stator core of the unassembled
electric motor kit is an operation incidental to the assembly
process.

                               Sincerely,



                               John Durant, Director
                               Commercial Rulings Division