Applicability of subheading 9802.00.80, HTSUS, to mylar slot insulators folded prior to assembly

HQ 555486 November 24, 1989 CLA-2-CO:R:C 555486 RA CATEGORY: Classification TARIFF NO.: Subheading 9802.00.80, HTSUS Steven H. Becker, Esq. Coudert Brothers 200 Park Avenue New York, New York 10166 RE: Applicability of subheading 9802.00.80, HTSUS, to mylar slot insulators folded prior to assembly Dear Mr. Becker: This is in response to your letter of September 19, 1989, inquiring whether the folding of edges of mylar slot insulators assembled into stator cores can be considered as an operation incidental to assembly under subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS). FACTS: The stator core of small electric motors assembled in Mexico utilizes mylar slot insulators in order to insulate the copper magnet wire wound in the core. The insulators are cut from rolls of mylar 2720 feet in length which are made in the United States. The required length of insulation is folded over along the lengthwise edges of the roll forming a 180` angle which "springs back" to rest at about a 140` angle, cut to length, and then assembled into the slot of the core by bending at a soft angle along a center line perpendicular to the lengthwise folded edges. The purpose of the folding is to insure that the mylar stays in place in the stator core when the wire windings are added. The folding, cutting, and assembly is done automatically by machine at a relative small cost and in a short time. ISSUE: Can an allowance in duty be made under subheading 9802.00.80, HTSUS, for the mylar parts of U.S. origin which are assembled and processed as described above? LAW AND ANALYSIS: Subheading 9802.00.80, HTSUS, provides for articles assembled abroad in whole or in part of fabricated components of U.S. origin with no operations performed thereon except the joining of the components and operations incidental thereto. The components must be exported in condition ready for assembly, cannot lose their physical identity, and cannot be advanced in value or improved in condition except by the assembly or operations incidental thereto. Duty is assessed on the appraised value of the imported merchandise less the cost or value of the U.S.-made components at the time they were exported. Section 10.16(a), Customs Regulations (19 CFR 10.16(a)), states that the assembly operations may consist of any method used to join or fit together solid components and may be preceded, accompanied, or followed by operations incidental to the assembly. However, section 10.16(c), Customs Regulations (19 CFR 10.16(c)), provides that any significant process, operation, or treatment other than assembly whose primary purpose is the fabrication, completion, or physical improvement of a component shall not be regarded as incidental to the assembly and shall preclude the application of the exemption to such article. You state that it would be impractical and uncommercial to bend the edges of the mylar prior to its shipment to Mexico as it would lose its spring back quality. You point out that in a ruling letter dated February 25, 1981 (055899), we determined that the folding of mylar in a similar situation was not incidental to assembly, but that in a ruling letter dated November 5, 1986 (554289), we held that a notched metal strip which was bent at the notched points to form a picture frame was subjected to an operation which was incidental to the assembly of the frame. A more recent judicial interpretation of the bending process which may be considered incidental to assembly appears in Samsonite Corporation v. U.S., Slip. Op. 88-166, 702 F. Supp. 908 CIT (1988). The court held that a bending cannot be considered incidental to assembly where it does more than adjust the article and results in the creation of the component to be assembled. The court concluded that the statute and regulations do not cover a process which is as necessary to the fabrication of the component as it is to the assembly thereof. It did not believe that the magnitude of a process in terms of time and cost was controlling but that the important factor was whether the procedure was "so related" to the assembly that it was "logically performed" with it and necessarily linked to the process of assembly. On this basis, the bending of steel frames for suitcases was not considered incidental to assembly because their fabrication by bending was separate from the assembly process and could have been done in the U.S. prior to exportation. In contrast to the bending operation in the Samsonite case, the folding of the mylar edges in your case is so related to assembly that it would not be feasible to perform it except during assembly. The folding enabled the edges to be inserted and snugly fitted into the grooves of the stator core so they could not slip out. Also, if folded at another time the edges would not "spring back" as required for proper assembly. Accordingly, the folding of the mylar components was less a part of their fabrication than of the assembly of the merchandise to form the stator cores and, therefore, may be considered incidental to the assembly process. Headquarters Ruling Letter 055899 is modified accordingly. HOLDING: The folding of mylar slot insulators assembled into stator cores for electric motors may be considered to be incidental to assembly under subheading 9802.00.80, HTSUS. Sincerely, John Durant, Director Commercial Rulings Division