Application for Further Review of Protest No. 3004-7-000070, concerning denial of item 807.00, TSUS, treatment to steel girders and columns created by welding, trimming, drilling and burning operations in Canada. Assembler’s declaration; liquidation; waiver; Occidental Oil; 19 CFR 10.11; 19 CFR 10.24; 19 CFR 10.112; assembly; incidental operation; 19 CFR 10.16; Mast; 048821; 067389; 555474

HQ W555269 December 20, 1990 CLA-2 CO: R:C: V W555269 KCC CATEGORY: Classification TARIFF NO.: 9802.00.80 - 807.00 District Director of Customs 909 First Avenue, Room 2039 Seattle, Washington 98174 RE: Application for Further Review of Protest No. 3004-7-000070, concerning denial of item 807.00, TSUS, treatment to steel girders and columns created by welding, trimming, drilling and burning operations in Canada. Assembler’s declaration; liquidation; waiver; Occidental Oil; 19 CFR 10.11; 19 CFR 10.24; 19 CFR 10.112; assembly; incidental operation; 19 CFR 10.16; Mast; 048821; 067389; 555474 Dear Sir: The above-referenced protest contests your denial of the partial duty exemption under item 807.00, Tariff Schedules of the United States (TSUS) (the precursor provision to subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS)), claimed by Canron Inc. (herein referred to as the protestant) to steel girders and columns created by welding, trimming, drilling and burning operations in Canada. FACTS: The protestant entered steel columns and beams from Canada through the Blaine, Washington, port of entry from October 1, 1985, through March 19, 1986. The protestant requested the steel girders and columns be entered under items 652.9400 and 609.8400, TSUS, and item 807.00, TSUS. Upon entry, the documents submitted to Customs included the entry summary (Customs Form 7501), invoice, and delivery slips. The necessary assembler's declarations, including the endorsement by the importer, were not submitted to Customs. The entries were liquidated on March 6, 1987, under items 652.9400 and 609.8400, TSUS, and the merchandise was determined to be fully dutiable at the rates of 3% and 5.10% ad valorem, respectively. The protestant's request for the partial duty exemption available under item 807.00, TSUS, was denied. On June 2, 1987, counsel for Canron filed this protest regarding the denial of the classification under item 807.00, TSUS. By letters dated January 7, and 25, 1988, supplemental information was furnished, including a brief description of the work performed in Canada, 12 blue-prints of the steel columns and beams, and a - 2 - breakdown in the percentage of time required to perform the foreign operations. The protestant claimed that the U.S. components were merely assembled by welding and that the operations of trimming, drilling, and burning were so insignificant in time and space that they were clearly 1nc1denta to the assembly. In support of this claim, the protestant cited Headquarters Ruling Letter (HRL) 067389 dated January 28, 1982, and HRL 071491 dated January 30, 1984. On September 22, 1987, your office denied the protest on the basis that the protestant had not supplied information to show which components would be entitled to the duty-free treatment no the necessary documentation to claim item 807.00, TSUS, treatment. The protest was then forwarded to this office for further review. Upon request of this office, counsel for the protestant submitted additional information relative to the assembler's declarations and the foreign operations in letters dated September 26, and October 25, 1990. Counsel stated that the protest­ ant was originally prepared to submit the required assembler's declarations for all of the entries. However, according to the protestant, your office informed the protestant before liquidation that their item 807.00, TSUS, claim would be denied. The protestant states that the initial denial of the item 807.00, TSUS, claim specifically discouraged them from filing the assembler's declarations. The protestant submitted to this office copies of incomplete, handwritten assembler's declarations which it apparently was prepared to file but did not. In addition to the incomplete assembler's declarations, the protestant submitted a sample of a computer printout which was filed with each entry. Counsel contends that these printouts contain the information required to be included in the assembler's declaration. Counsel further states that the computer printouts should be considered an adequate substitute or format revision under section 10.24(b), Customs Regulations (19 CFR 10.24(b)), for the assembler's declarations. However, if the computer printout is not acceptable, counsel states that the protestant should be allowed to submit the assembler's declarations pursuant to section 10.112, Customs Regulations (19 CFR 10.112). Additionally, the protestant submitted a letter dated August 31, 1990, from Robert Weldon, resident manager for the protestant's account at U.S. Steel Corporation during the time period in question. Mr. Weldon states that the steel used in the Canadian operations by the protestant was U.S.-origin steel purchased from U.S. Steel Corporation. The information submitted by the protestant reveals that the steel girders and columns were imported into the U.S. for us in building two projects--Koll Center and Seattle Trust Tower. For the Koll Center, steel plates and wide flanges were welded - 3 - together to create four types of columns and three types of girders. In addition to the welding operations, the following operations were performed in various combinations to the steel girders and columns (except one type of girder): trimming for field welding; drilling holes to facilitate field assembly or field welding; burning holes for field installation of grout (concrete); and burning slots to facilitate shop welding (the slots will be closed after the necessary welding is complete). For the Seattle Trust Tower, steel plates and wide flanges were welded together to create five types of columns. In addition to the welding operation, the following operations were performed in various combinations to all the columns: trimming for field welding; and drilling holes to facilitate field assembly or field welding. ISSUE: Whether the steel girders and columns are entitled to the partial duty exemption available under item 807.00, TSUS. LAW AND ANALYSIS: Item 807.00, TSUS, 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 item 807.00, TSUS, 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 19 CFR 10.24. - 4 - Section 10.ll(b), Customs Regulations (19 CFR 10.ll(b)), provides, in part, that the "(a]llowance of an importer's claim is dependent upon meeting the statutory requirements for the exemption under item 807.00 and his complying with the documentary requirements set forth in section 10.24.11 According to 19 CFR 10.24, an assembler's declaration shall be filed for articles claimed to be subject to the exemption under item 807.00, TSUS. However, the district director may revise the format of either of the documents specified in paragraph (a) of this section and may make such changes as conditions warrant, provided the data and information required to be supplied in these documents are presented. See, 19 CFR 10.24(b). Additionally, pursuant to 19 CFR 10.24(e): [w]hen the district director is satisfied that unusual circumstances make the production of either or both of documents specified in paragraph (a) of this section, or of any of the information set forth therein, impractical and is further satisfied that the requirements of item 807.00, ...and related headnotes have been met, he may waive the production of such document(s) or information. The computer printouts which counsel for the protestant asks that we accept as a substitute for the assembler's declarations do not, in fact, contain all the information and data required to be included in the assembler's declaration. The description of the component (other than the piece marking), the name and address of the manufacturer, a description of the operations performed abroad, and the importer's endorsement are missing from the printouts. Additionally, it is clear from the regulations that the decision to grant a revision or a waiver rests solely with the district director and that no revision or waiver has been granted respecting the entries subject to this protest. However, 19 CFR 10.112 states that: [w]henever a free entry or a reduced duty document, form, or statement required to be filed in connection with the entry is not filed at the time of the entry or within the period for which a bond was filed for its production but failure to file it was not due to willful negligence or fraudulent intent, such document, form or statement may be filed at any time prior to liquidation of the entry or, if the entry was liquidated, before the liquidation becomes final. A liquidation becomes final 90 days after the date of liquidation unless a timely protest is filed. See, 19 U.S.C. 1514(a) and section 159.9{c)(iii), customs Regulations (19 CFR - 5 - 159.9(c)(iil)). The courts have accepted documentation establishing free or reduced duty entry only in cases where the liquidation was timely protested. See, Occidental Oil & Gas Co. v. United States, Slip op. 89-40, 13 CIT__ (1989). This protest was filed within the required 90-day period. Additionally, it appears that the protestant's failure to file the assembler's declarations was not due to willful negligence o fraudulent intent. Therefore, we believe that the protestant should be given the opportunity to submit to your office complete assembler's declarations for the entries covered by this protest pursuant to 19 CFR 10.24(a). If the protestant complies with the documentation requirement of 19 CFR 10.24(a) to your office's satisfaction, we are of the opinion that only the steel plates and wide flanges subjected to welding, trimming to length, and slot burning will qualify for the duty exemption available under item 807.00, TSUS, when returned to the U.S. An 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, laminating, sewing, or the use of fasteners. See, section 10.16(a), Customs Regulations (19 CFR 10.16(a)). 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 item 807.00, TSUS, to that component. See, 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: whether the relative cost and time of the operation are such that the operation may be considered minor; whether the operation is necessary to the assembly process; - 6 - whether the operation is so related to the assembly that it is logically performed during assembly; and whether economic or other practical considerations dictate that the operation be performed concurrently with assembly. Welding is an acceptable assembly operation pursuant to 19 CFR 10.16(a). Merely cutting/trimming the steel plates or wide flanges to length is deemed an acceptable operation incidental t the assembly. See, 19 CFR 10.16(b)(6) and HRL 048821 dated January 17, 1977 (trimming 2 to 2 1/2 inches off of steel plates is an acceptable incidental operation). However, if the cutting/trimming operation is more extensive than merely cutting the steel to a shorter length (i.e., shaving off corners, trimming edges, or cutting to a distinctive shape), it is too significant to be considered an incidental operation. See, 19 CFR 10.16(c)(5) and HRL 067389 dated January 28, 1982 (trimming and shaping steel plates into different shapes is not an acceptable incidental operation). In analyzing the Mast criteria, we are of the opinion that burning slots into the steel columns is an acceptable incidental operation. A comparison of the relative time required to perform the slot burning with the time required to perform the entire assembly reveals that a minor amount of time was necessary to perform the burning process. The burning operation was necessary and sufficiently related to the assembly that it was logically performed concurrently with the assembly. The steel plate and wide flange were welded together to form a hollow box for the columns. Inside each column a stiffener was welded to take up the stress of the column. The slots were burned in the outside of the column to establish an access to weld the stiffener in place. After the stiffener was welded, the slots were completely filled with weld material to seal the slot. Therefore, burning the slots into the columns does not preclude an allowance for the cost or value of the steel plate and wide flange under item 807.00, TSUS. However, drilling and burning holes are not considered assembly operations or operations incidental to the assembly under the circumstances of this case. The drilled and burned holes served no purpose in the foreign assembly operations, but rather were used to facilitate the subsequent assembly and incorporation of the girders and columns into the buildings in the U.S. The drilling and burning operations are significant processes whose primary purpose was the fabrication of the girders and columns to prepare them for use in the subsequent building construction. See, HRL 554920 dated January 3, 1989 (punching a hole in one end of a fabric vane for receipt of a removable plastic hanger insert was not incidental to assembly as the attachment of the hanger did not constitute an assembly operation), and HRL 555474 dated September 5, 1990 (drilling of - 7 - holes into a plastic sheet was not related to the foreign assembly operation, but rather fabricated the sheet component to be later assembled into the water mattress and, therefore, is no considered an operation incidental to the assembly). Moreover, an analysis of the criteria supports the conclusion that the drilling and burning of holes in this case were not operations incidental to the assembly. Although we recognize that the time necessary to perform these operations was minor compared to the total time necessary for the foreign operations, the drilling and burning of holes are, nevertheless, significant steps in the manufacture of the girders and columns. Drilling and burning the holes clearly were not necessary to the foreign assembly, and the operations were not directly related to the foreign assembly process. The drilling and burning operations were necessary only for the subsequent U.S. construction operations. Weighing these factors, we conclude that the drilling and burning of holes are not incidental operations within the meaning of item 807.00, TSUS. HOLDING: On the basis of the record presented, it is our opinion that the protestant should be given a reasonable period of time to submit the required assembler's declarations to your office pursuant to 19 CFR 10.112. Should the protestant fail to submit completed assembler's declarations, including the importer's endorsement, this protest should be denied in full. If the protestant satisfactorily complies with the documentation requirements of 19 CFR 10.24, we are of the opinion that only the steel plates and wide flanges subjected to welding, slot burning and/or trimming to length operations qualify for the allowances in duty available under item 807.00, TSUS. Accordingly, you are directed to dispose of the protest in accordance with this decision. A copy of this decision should be attached to the Form 19, to be sent to the protestant. Sincerely, John Durant, Director Commercial Rulings Division