Applicability of partial duty exemption under HTSUSA subheading 9802.00.80 to aluminum louvers; cutting-to- length; notching; punching; painting.

HQ 557033 April 1, 1993 CLA-2 CO:R:C:S 557033 MLR CATEGORY: Classification TARIFF NO.: 9802.00.80 Ms. Helen Sugar The Buffalo Customhouse Brokerage Co., Inc. Peace Bridge Plaza Warehouse Suite 211 Buffalo, New York, 14213 RE: Applicability of partial duty exemption under HTSUSA subheading 9802.00.80 to aluminum louvers; cutting-to- length; notching; punching; painting. Dear Ms. Sugar: This is in response to your letter of October 29, 1992, forwarded to us by the District Director, Buffalo, New York, requesting a ruling on behalf of Construction Specialties Limited, regarding the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), to aluminum louvers. FACTS: According to your letter and information received by telephone from a Construction Specialties Limited employee, Construction Specialties purchases various aluminum extrusions, identified as louver blades, jamb mullions, top frame heads, and bottom frame sills, from Wells Aluminum Corporation in Belton, South Carolina, and exports them to Canada, where they are made into aluminum louvers. Each louver consists of one top frame head, one bottom frame sill, two jambs, and 21 blades. The process of making a louver involves cutting the aluminum extrusions into various lengths to meet the dimensions of the louver, punching holes into the extrusions and notching them so that they may be joined together, and screwing the pieces together. Next, the louvers are painted. This involves cleaning them by a process called "pre-finishing" which strips the aluminum of impurities, and applying a primer coat and color coat. Pursuant to the Construction Specialties employee, the color coat is applied to improve the appearance of the aluminum louvers and to prevent corrosion. Lastly, a bird screen is mounted on the back side of the louver. The U.S. purchase price of the exported aluminum extrusions is $68.00 per louver. The importer will sell the finished product to their U.S. customer at a unit price of $270.00. The importer is requesting a duty exemption on the $68.00 value of the U.S. material shipped to Canada. ISSUE: Whether the aluminum louvers will qualify for the partial duty exemption available under subheading 9802.00.80, HTSUSA, when returned to the United States. 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, lubricating 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 10.14(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, HTSUSA, to that component. See 19 CFR 10.16(c). Headquarters Ruling Letter (HRL) 555185 dated July 31, 1989, involved virtually the same set of facts as this case, in that, aluminum louvers were manufactured by Construction Specialties, Inc. in Mexico. In HRL 555185, the aluminum parts were cut to length, holes were punched or drilled, the components were screwed together, the louvers were cleaned in a chemical bath to remove oil, and a chemical conversion coating and a color coating were applied which allegedly imparted long-term corrosion resistant properties to the aluminum louvers and conformed them to the American Architectural Manufacturers Association's Voluntary Specification for High Performance Organic Coatings on Architectural Extrusions and Panels. It was held that cutting the finished components to length was an acceptable incidental operation explicitly enumerated at 19 CFR 10.16(b)(6). The punching or drilling operation also qualified as an operation incidental to the assembly process. See also 061429 dated March 28, 1980, published as C.S.D. 81-52. Fitting the component parts together with screws was determined to be an acceptable means of assembly. See also HRL 555671 dated March 15, 1991, which held that operations performed to create wooden venetian blinds were also considered proper assembly operations or operations incidental to the assembly process. Turning to the case before us, we conclude that as in HRL 555185 and HRL 555671, cutting the aluminum extrusions to length, and punching holes into them are operations incidental to the assembly of the aluminum louvers. We also consider the notching operation to be incidental, because it is analogous to the punching operation. Joining the extrusions together with screws is a proper assembly operation as well. With regard to the post-assembly operations performed in this case, HRL 555671 is not relevant because it only involved painting the small portions of the wood exposed from the cutting and punching operations. However, HRL 555185 stated that the chemical cleaning of the assembled louvers to remove oil constituted an acceptable incidental operation. The chemical conversion coating operation was also held to be an incidental operation pursuant to 19 CFR 10.16(c)(3) which provides that the application of preservative paint or coatings, including preservative metallic coatings, lubricants, or protective encapsulation, constitutes an incidental operation to assembly. As to the color coat application, 19 CFR 10.16(c)(3) provides that painting primarily intended to enhance the appearance of an article or to impart distinctive features or characteristics is a significant operation, not incidental to the assembly process. However, in light of General Motors Corp. v. United States, 976 F.2d 716 (Fed. Cir. 1992), rev'd, 770 F. Supp. 641 (CIT 1991), then before the Court of International Trade, HRL 555185 deferred the decision whether the color coat application constituted an incidental operation. In General Motors, the U.S. Court of Appeals for the Federal Circuit ruled in favor of the U.S. Government, holding that preservative coating operations together with a topcoat painting operation were not incidental to the assembly of certain automobiles and, therefore, precluded eligibility under item 807.00, Tariff Schedules of the United States (TSUS) (now 9802.00.80, HTSUSA). Id. Because General Motors did not broaden the application of item 807.00, TSUS, we continue to follow the current Customs Regulations with regard to any 9802.00.80, HTSUSA, issue, unless it specifically involves the painting of an automobile or circumstances similar to those involved in the General Motors case. Therefore, we consider the "pre-finishing" cleaning and the application of the primer coat in this case to be incidental operations (as discussed above); however, pursuant to 19 CFR 10.16(c)(3), we find that the application of the color coat to the entire aluminum louver, although it may help to prevent corrosion, is not an incidental operation. Consequently, despite the fact that the other operations performed constitute acceptable assembly operations and operations incidental to assembly, because the aluminum louvers are subjected to an operation outside the scope of an acceptable assembly operation or incidental operation, the louvers would be subject to the payment of duty on their total value in accordance with the appropriate tariff provision. HOLDING: On the basis of the information submitted, it is our opinion that the application of a color coat to the entire surface of the aluminum louvers is more than a mere incidental operation to assembly; accordingly, subheading 9802.00.80, HTSUSA, is precluded and the aluminum louvers would be subject to the payment of duty on their total value in accordance with the appropriate tariff provision when returned to the U.S. Sincerely, John Durant, Director Commercial Rulings Division cc: Chief, National Import Specialist Division Branch 1 New York Seaport