HQ 559519

September 11, 1996

CLA-2 RR:TC:SM 559519 AT

CATEGORY: Classification

TARIFF NO.: 9802.00.80

Mr. Jim McNamara, General Manager

Rudolf Miles & Sons Incorporated

P.O. Box 1388

McAllen, Texas 78502-1388

RE: Applicability of partial duty exemption under HTSUS

subheading 9802.00.80 to certain electrical motors which are

assembled in Mexico from U.S. origin components;

fabrication; punching; HQ 558813

Dear Mr. McNamara:

This is in response to your letters dated October 20, 1995

and August 26, 1996, on behalf of General Electric (\"GE\")

requesting a ruling on the applicability of the partial duty

exemption of subheading 9802.00.80, Harmonized Tariff Schedule of

the United States (\"HTSUS\") to electrical motors assembled in

Mexico of U.S. components. We regret the delay in responding.

FACTS:

You state that GE intends to import electrical motors into

the U.S. which are assembled in Mexico from U.S. components. The

assembled motor itself will be fully enclosed in a cap (top

section) and can (lower section). You are concerned as to

whether the cap and can components, which are of U.S. origin,

are entitled to allowances in duty under subheading 9802.00.80,

HTSUS, when assembled with the electrical motor. You state that

prior to the assembly, a drain hole is punched in the can and cap

to allow any moisture that might build up inside the enclosure to

drain out. You indicate that the punching is not accomplished to

accommodate the assembly of another component into the punched

hole. You have submitted a diagram (Attachments B and C to your

letter) showing component end locations of the drain holes. You

claim that the punching of the hole is best accomplished

immediately prior to the assembly operation due to the fact that,

based on customer demands, the hole could be punched in one of 12

alternative positions at 15 degree increments along a 180 degree

radius. You contend that the punching of the holes at the

assembly site allows for only four different sizes of caps and

cans to be maintained in inventory at the assembly plant.

Otherwise, if, for example, the holes were punched into all the

caps in the U.S. by the U.S. supplier, then GE would have to

maintain 48 part numbers versus 4 in inventory at the assembly

location (4 cap sizes x 12 potential positions for holes) which

would create a tremendous financial burden on GE. According to

your submission, the time required for the punching operation of

the cap and can is approximately 6 seconds which is 1 percent of

the total time required to assemble the motor and represents

approximately 0.1 percent of the total cost of the finished

motor.

ISSUE:

Are the U.S.-origin caps and cans which are used in the

assembly of electrical motors in Mexico in the manner described

above entitled to allowances in duty under subheading 9802.00.80,

HTSUS, when imported into the U.S. as part of an assembled

electrical motor?

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,

lubrication, 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 value of the imported assembled article, less the

cost or value of such U.S. components, 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,

laminating, sewing, or the use of fasteners.

In this case, although no information was provided detailing

the enclosure operation of the caps and cans to the electrical

motors, we will assume for purposes of this ruling that the

method used in the enclosure operation would be considered an

acceptable assembly operation within the meaning of subheading

9802.00.80, HTSUS and 19 CFR 10.16(a).

The question presented in this case is whether the operation

of punching a hole in the cap and can prior to the assembly of

the electrical motors constitutes \"further fabrication\" of the

caps or is \"incidental to the assembly\" of the motors.

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 HQ 558813 (February 1, 1995), Customs ruled that the

operation of drilling bleed holes in a piston to allow gas or

liquid to flow or drain was a significant operation, and thus was

not considered to be an incidental operation within the meaning

of 9802.00.80, HTSUS. Customs further stated that the drilling

operation appears to be a significant step in the fabrication of

the pistons.

In this case, we are of the opinion that the operation that

entails punching a hole into the U.S. origin caps and cans prior

to the assembly of the electrical motors is a significant process

which constitutes a further fabrication of the caps and cans.

As in HQ 558813, where the pistons could not be used without the

bleed holes, the caps and cans cannot be used to enclose the

electrical motors without the drain hole. These drain holes

protect the enclosed electrical motor from being damaged by

moisture, which in our opinion is a significant characteristic of

a complete cap and can. Thus, in our opinion, the pre-assembly

punching operation is a significant process which constitutes a

finishing step in the fabrication of the components (i.e.,

completed caps and cans). Since the punching operation is

considered to be a further fabrication of the caps and cans,

contrary to condition (a) of the statute, the question as to

whether or not the punching operation is incidental to the

assembly process under condition (c) of the statute, is not

relevant for purposes of subheading 9802.00.80, HTSUS.

Accordingly, a duty allowance may not be granted upon importation

of the electrical motors for the cost or value of the caps and

cans.

HOLDING:

On the basis of the information presented, it is our opinion

that the U.S.-origin caps and cans which are used in the assembly

of electrical motors are not in condition ready for assembly

without further fabrication when exported to Mexico, since a

drain hole must be punched in the caps and cans in Mexico prior

to assembly. Therefore, no allowance in duty may be made for the

cost or value of the caps and cans under subheading 9802.00.80,

HTSUS, upon importation of the electrical motors. Since the

punching operation is considered to be a further fabrication of

the caps and cans, the question as to whether or not the punching

operation is incidental to the assembly process is not relevant

for purposes of subheading 9802.00.80, HTSUS.

A copy of this ruling letter should be attached to the entry

documents filed at the time this merchandise is entered. If the

documents have been filed without a copy, this ruling should be

brought to the attention of the Customs officer handling the

transaction.

Sincerely,

John Durant, Director

Tariff Classification Appeals Division