### Slip Op. 02- 130

UNITED ST ATES COURT OF INTE RNATIONAL T RADE

____________________________________ : DAIML ERCHRYSLER CORPORATION, : : Plaintiff, :

: v. : Court No. 99-03-00178 : UNI TED STATE S, : : Defend ant. : ____________________________________: [Judgment for Defendant.] Dated: October 25, 2002

Barnes, Richardson & Colburn ( Lawrence

M. Friedman , Harvey

Karlovac and Robert F. Seely ), for plaintiff. Robert D. McCallum, Jr. , Assistant Attorney Gene ral, John J. Mahon , Attorney-inCharge , Inte

rnationa l Trade F ield Off

ice, Attorney , Commerc ial Li tigation Branch, Civil Division, United States Department of Justice ( Saul Davi s and Aimee Lee ), Karen P. Binder , Office of Assista

nt Chief Co

unsel, Un ited State s Customs Ser

vice, of counsel, for def

endant. OPINION RESTANI, Judge: This matter is before the court for decision following tria l. The court previously opine d that mate rial fac ts were a t issue as t

o whethe r the pai nting of truck bod

ies afte r assemb ly in Mexico disq

ualified the import

ed Model Y ears 199 3 and 1994 pickup tr ucks fro m a duty exemption for United States manufactured parts pursuant to subheading 9802.00.80 of the Harmonized Tariff Schedule of the United States (“HTSUS”) (c odified at 19 U.S.C. § 1202 (1994)) and 19 C.F.R. § 10.16 (1999). See Daimler Chrysler Corp. v. U nited States , No. 99-03-COURT NO. 99-03-00178 Page 2

1 See , e.g. , General Motors Corp. v. United States , 976 F.2d 716 (Fe d. Cir. 199 2); Chrysler Corp. v. United States , 19 CIT 353 (1995), aff’d , 86 F.3d 1173 (Fed. Cir. 1996) (unpublished). 00178, Slip

Op. No. 00 -124 (Ct. I

nt’l Tra de Sept. 2 9, 2000). Familiar ity w ith that opi

nion is presumed. For ease of refe rence, an appendix is attached containing the two princ ipal provisions of law applicable to this dispute. BACKGROUND As a preliminary ma

tter, defendant requests remand to the United States Customs Service (“Customs”) in order for it to provide a comprehensive interpr etation of its regulations. Given the long history of the

auto painting wars 1 and the existence of the applicable regulation since 1975, see 40 Fed. Reg. 43023 (Sept. 18, 1975), defendant should have requested such relief before trial. F urthermore, the words of th e regu lation itse lf are not unclea r, they are mer ely difficul t to apply to these p articula

r facts. Under HT SUS subhea

ding 190 2.00.80, o

peratio ns “not inc idental to the asse mbly process ” disqual ify

U.S. manuf

acture d parts a ssembled

abroad f rom the otherwise a

pplicabl e duty exemption. The issue before the c ourt is whether, under the applicable reg ulation, the two top paint coats, a base color coat and a clea r coat, are “primarily

intended to enhance the appearance of” or “to impar t distinctive features or characteristics” to the truc k bodies at issue. See 19 C.F.R. § 10.16(c )(3) (p roviding examples o f opera

tions notincidental to assembly). Conversely, “a

pplication of preservative paint or coating” is a n example of an operation incidental to assembly, which maintains the e xemption. See 19 C.F.R. § 10.16(b)(3). The court has determined that it should not resort to the ambiguous genera l introductory lang

uage of 19 C.F.R. § 10.16(c) defining “not incidental” proce sses (“any significant process, operation, orCOURT NO. 99-03-00178 Page 3

2 Suit was timely filed challenging the protest denials, pursuant to 28 U.S.C. § 1581(a) (1994). treatme nt other than assem

bly whose pr imary purpose i s the . . . c ompletion . . . of a component . . . .”) , or even to 19 C.F.R. § 10.16(c)(5) (re lating to processes imparting new char acteristics or qualities) unless it cannot resolve this matter on the basis of 19 C.F.R. § 10.16(b)(3) and § 10.16(c )(3), th e provisi ons of the regula tion addr essing “ paint.” A s Customs pub lished spe cific provisions indicating how painting and coating should be trea ted under the relevant HTSUS subhead ing, thos e specif

ic provis ions contr

ol. Resort

to a more

gener al test ri sks reve

rsion to standards not unlike the discredited “ Mast ” factors. See United States v. Haggar Appar el Co. 526 U.S. 380, 393 (1999) (abrogating test enumer ated in United States v. Mast Indus., I nc. , 668 F.2d 501, 505 (Fed. Cir. 1981), which provided a varie ty of quantitative fac

tors for determining what is a minor process incidental to assembly ). FINDINGS OF FAC T The following facts are uncontested: l. Protest numbers 2304-93-10006, 2304-93-100117, 2304-93-100317 were timely filed. 2. Chrysler Motors Corporation (“ Chrysler”), now DaimlerChrysler Corpor ation, was the importer of record for th e entrie s covere d by the prote sts. 3. On Septem

ber 29, 1 998, Custom s denied t he prote sts in full. 2 4. The merchandise at issue consists of Model Year 1993 and 1994 Chry sler pickup trucks produced by Chry

sler de Mexico. 5. The car

go boxes f

or the ve hicles we re produ ced at th e Pemsa pl ant at Cel ey a, Mexico, in part from U.S.-or

igin sta mped shee

t metal co mponents.COURT NO. 99-03-00178 Page 4

6. The vehicles were produced at L ago Alberto, Mexico, in part from U.S.-origin stamped sheet metal components. 7. The cab and cargo boxes were subjected to a painting process that consisted of the following operati ons: a. cleaning and rinsing b. applic ation of zin

c phospha te c. application of a spray

prime to cab d. application of an electrodeposition primer to carg o box e. application of a color coat f. application of a clear coat 8. The prima

ry purpose o f primer

coat is to p

revent c orrosion

of the she et metal. 9. Each ve

hicle wa s offer

ed to cons

umers in a

pproximate ly 1 0 to 12 color choice s. 10. PPG Industries was the sol e supplie r of prime r and pai nt to the Pe

msa and Lago Alb erto plants fo r applic ation to sh eet meta l body componen

ts. 11. The selection of colors to offer to consumers was made by the Product Desig

n Office at Chrysler World Headqua

rters in Michigan. 12. The Director of the Product Design Off ice is currently

Margaret L . Haackstedde. 13. Chrysler Marke

t Research personnel do not conduct or sponsor resea rch on consumer color pr efere nces. 14. For the vehicles at issue, Chry sler warrantied the sheet metal to be free of rust perforation for 36 months and unlimited mileage for any body sheet metal pane l, and seven ye ars or 100,000 miles, whichever occurs first, for outer-body sheet metal panels for the 1993 and 1994 model years. 15. Chrysler inclu des a gro up kno wn as P aint M ateri als En gineeri ng.COURT NO. 99-03-00178 Page 5

16. Paint Materials Engineering is responsible for the de velopment and enforcement of materia ls standa rds for ma

terials u sed in the

producti on of Chry

sler motor

vehicle s. 17. Thomas J. B

jelica w as a Gra

de A Eng ineer in

1993, the senior e nginee r in 1994, a

nd is currently supe

rvisor in the Paint Materials Engineering Group. 18. During

producti on of the vehicles at issue, Chry sler main

tained a nd enfor ced mate rials standar ds for pr imer coa t, color c oat, and c lear co at. 19. No prime, paint, or clear coat may be employed in production at any plant, including Lago Alber

to, unless that material meets the relevant materials standard. 20. Chrysler requir

ed PPG to perform tests to determine that the materials met the relevant standar ds. 21. All of the

coating s used on th e vehicl es at issue met the re levant Chr

ysl er mater

ials standards. 22. No proce ss existed to waive a pplication of the ma

terials s tandard s. 23. Relevant characteristics included in the materials standar ds were, but not limited to: a. Hard ness b. Hiding c. UV tra nsmissivity d. Chip resistance e. Scratch resistance f. Adhes ion to the s

ubstrate g. Gloss h. Dis tinct ness o f Image 24. Hiding is a measure of the ability of the coating at a particular film thickness to hide patterns in the underlying substrate. 25. UV transmissivity is a measure of the ability of the coating

to prevent the transmission ofCOURT NO. 99-03-00178 Page 6

ultraviolet radiation to the substrate. 26. Chip resistance is a measure of the ability of the coating to withstand damage fr om impacts by

small rocks and simil ar objects. 27. Scratch

resistan ce is a me asure of

the abilit y of the coat ing to wit hstand la teral imp acts along a surface. 28. Adhesion

is a measu

re of the ability of the co ating to

remain a ffixed to th e substra

te to which it ha s been ap

plied. The

substrate may be metal, prime, or

base coa t paints. 29. Gloss is a measure of the reflected light fr om the coating surface. 30. Distinctness of image (“DOI ”) is a measure of the quality of the reflected image in a coated surface. 31. Gloss and DOI are c haracteristics relating solely to the appearance of the coate d surface. 32. Hardne ss, UV tra

nsmissivity

, chip re sistance , scratc

h resista nce, and adhesion relate

to the du rabil ity of th e coati ng. 33. Chips and scratches, when present on exposed surfaced, a re visible and, therefore, affec t the appearance of the vehicle

. 34. Hi di ng re la te s b ot h t o a pp ea ra nc e a nd to du ra bi li ty. 35. If un

treated , chips ar

e a likely location for the f ormation o f rust. 36. If un

treated , scratc

hes are a likely location for the f ormation o f rust. 37. The clear coat included UV absorbing chemicals which prevent or limit the transmission of UV to the prime layer. 38. Pigments in the color coat provide the desired color for the vehicle. 39. The pre sence of

clear c oat over

the color and prime

prevent ed deg radatio n of the pr

imeCOURT NO. 99-03-00178 Page 7

and color coats and extended their useful life. 40. The presence of the prime, color coa t, and clear coat over the metal provided for an aesthet ically pleasing appear ance of the body of the ve hicle an d preven ted corr osion in the metal and extended its useful life. 41. Color coat delamination is an undesirable condition in a painted vehicle. 42. Color coat delamination results from a loss of adhesion between the color c oat and the underlying

prime. 43. This loss of adhesion is the result of “chalking” at the prime surfa ce. 44. Chalking results form the exposure of the prime surface to ultraviolet ra diation.

_____ It also appears undisputed that, except for pa inting and coating, the sheet metal components at issue exported from the United States for assembly into the imported trucks are entitled t o duty exemption u

nder HTSU S subhead

ing 9202 .00.80, a s phy sically identifia ble United States products ready for assembly, whic

h are not otherwise advanced in value or improved in condition. Trial Transcript (“Tr.”) at 6. As the court also found at the conclusion of the trial in Chrysler Corp. , 19 CIT at 355, the court finds that the paint process as a whole is primarily for preservation. See Unconte sted Fac ts 7 (steps a . throug

h d. are a dmittedly preser vative) , 8, 23-44 . Moreove r, Dr. Norman R. Roo

bol, defenda nt’s exper t, a prof essor of industria l painting , testifie d that a f ully painted v ehicle w ould be expected to last up to fifteen (15) y ears without corrosion and a vehicle which was tre ated only through the prime

layer would

be expect

ed to rev eal cor

rosion wit

hin eigh teen (18 ) to twenty-four (24) months. Tr. at 176-79. This is consistent with the testimony of Mr. Bjelica , seeCOURT NO. 99-03-00178 Page 8

3 It is clear that these proc esses affect appearanc e. The link between delamination and corrosion was somewhat muddied, but the testimony combined with unconte sted facts reveal that chips, scratches, and delamination are all linked to corrosion. See Tr. at 62-66, 87-92 and Uncontested Facts 32, 35-36, 42-44. Tr. at 53, and that of plaintiff’s expert, Dr. Clifford K. Schoff, an expert in automotive coating s. See Tr. at 112-13 (explaining that the primary purpose of the whole paint sy stem is to preserve the vehicle). It is a lso clea r that pre vention of

corrosi on of meta

l parts is w

hat pres ervativ e paintin

g is intended to do here. It does not matter w hether the corrosion prevented would be unsig htly or not, minor

or struc tural. I f the pro cess is int ended to a

nd does pr

event corrosion it

is preser vative, a t least in p art. Thus , the cour t reject s defend

ant’s vie w that pre vention of

serious, perhaps only pe

rforation, corrosion is what is meant by preservative. Defendant’s arg ument that intermediate effects such as chipping, sc ratching, and delamination are irre levant fails. Its view that bec ause all

or some of

these conditions ma

y be corrected, they

do not cau se corr

osion, is untenable. 3 A manufacturer cannot assume that vehicle ow ners will perform detailed paint inspections for the first signs of deterioration. Vehicle finishes a re expected to last for y

ears without extraordinary intervention. See Tr. at 43. On the other hand, the court rejects plaintiff’s view that pre servation of the paint layers themselves or preservation of aesthetic appea rance alone is sufficient. The assembled par ts at issue are metal parts. It is their pre servation in an uncorroded state which is key . If the court were to consider the paint sy stem as one operation, plaintiff would prevail because the pa int system as a whole is intended to pre vent corrosion of the metal parts, and thus 19 C.F.R. § 10.16(b)(3) would be satisfied. On this point, Dr. Schoff was clear a nd persuasive. The n extCOURT NO. 99-03-00178 Page 9

4 In connection with Chrysler Corp. , the court had the opportunity to view the entire assembly and painting

process on site at DaimlerChry sler’s Mexican plants. 19 CIT at 354 n.2. The parties are in agree

ment that the process the court observed and the one a t issue here are essentially the same. B oth parties originally asked the court to decide this case on the basis of the first trial. issue, how ever, is

whether for ana lyti cal purp oses the c ourt shoul d subdivide the paint process and consider the last two coats, the base color coat a nd clear coat, separately

. See Uncontested Fact 7 (steps e. and f.). While there may be one

paint process, it is composed of several operations. The regulation speaks in terms of “operations,” whic h is consistent with the statutory langua ge. Although it is not clear what constitutes a separate opera tion, a baking process separates the prime coat from the top coats, as the court noted in Chrysler Corp. , 19 CIT at 354, and Daimler Chrysler , Slip Op. No. 00-124 at 11. 4 This sufficiently separ ates the top coats from the remainder of the paint process, so that, at least, toge ther they ar

e a separate operation. Accordingly , if any such sepa rate painting step is primarily for purposes other than preservation, it will disqualify the article from tre atment under the tariff exemption. The colo r and cle ar coat s obviously provide s ome pres ervativ e featu re, prima rily because of the ultr aviolet ( “UV”) protection provide d by these top layers, whic

h ultimate ly prevents degradation of the primer. See Tr. at 89-90, 102, 167, 170 and Uncontested Facts 37, 39-44. The primer both preserves the underly ing metal and provides a good surfac e for top coat adhesion. See Tr. at 97- 101; Defendant’s Exhibit (“Def.’s Ex.”) L ( McBane treatise) at 12-13; Uncontested Facts 8, 28, 40, 42. Moreover, the top coats must meet paint eng ineering standards, rega rdless of their appearance. See Tr. at 41-43 ; Pla inti ff’s Ex hibi ts (“P l.’s E x.”) 11-15 (regard ing wea theri ng, engineering, and mater

ial standards); Uncontested Fact 19. All paint must work. I t must beCOURT NO. 99-03-00178 Page 10

5 Dr. Roobo l’s testimony on this point, which pla intiff re quests be

stricken as bey ond his expertise, is merely cumulative. F urthermore, the court found both experts well-qualified, even in collateral areas such as this, and finds them both credible. I n fact, all of the witnesses were knowledgeable and remarka bly candid. I

t is the inferences that one draws from the testimony that differ. appliable, it must stick, it must hide sublayers or surfac es, it must last, and it must meet other norms. Tr. at 45-46, Pl.’s Ex. 13-15 and Uncontested Fact 23. This does not determine whether it is primarily decorative or preservative. These paints, however, are highly engineered to give distinctive appe arances to the vehicles. The UV protection afforded by the top coats is also intended to protect the paint itself. See Tr. at 90, 166-69. It is also clear tha t the industry considers these c oats primarily decor ative and not primarily prese

rvative. See Tr. at 76-77 (Testimony of T. Bjelica); Def.’s Ex. G (Connolly Depo.) and Ex. 3 thereto (me morandum to Chrysler dea lers at 1); Pl.’s Ex. 12. A tremen dous amoun

t of effort goes

into color

decision s and some

colors a re extremely expensive. See Tr. at 14-28 (Testimony of M. Hackstedde) and Tr. at 160 (Testimony of N. Roobol (stating that some colors can cost in excess of $100/gallon). The pig ments are much more finely g

round than those for primer paint. Tr. at 159-60. What the market requires is a choice of colors, very high gloss (“wet look”), and reflection, otherwise known as distinctness of image ( “DOI”). 5 See Def.’s Ex. G at Ex. 3; Tr. at 17-20, 25-27, 52; Uncontested Facts 29-31. Gloss and DOI relate solely to a

ppearance. Uncontested Fact 31. Gloss and DOI are provided by

the clear coat. Tr. at 165-66. Although the clear c oat does provide so me prote ction to un derly ing lay ers, it is n ot neces sary

to a fullCOURT NO. 99-03-00178 Page 11

6 There was agree

ment among the experts that the ty pe of primer used on the truck box was more susceptible to UV degradation and tha t the UV absorber in the clear coat wa s not as important for preservation of the more stable primer used on the other parts of the truck body

. Tr. at 96-100, 170-71.

7 Because 19 C.F.R. § 10.16(b)(3) does not say use the word “primarily

” in describing preservative paint and § 10.16(c)(3) re fers to “primarily ” appearance enhanc ing painting, plaintiff argues that paint with two equal functions would qualify for the exemption. The court does not read the regulation that way . Preservative painting is not expressly qualified in § 10.16(b)(3), but the structure of the regulation sugg ests that a paint must be primarily pre servative to satisfy the regulation. This potential ambiguity need not be resolved definitively as plaintiff did not prove eq ua l f un ct io na li ty. preservative sy stem. See Tr. at 103, 164-167; Def.’s Ex. L at 32-33. 6 Further, corrosion may

be prevented by

using different kinds of primers, different coatings on the steel, or different materia ls for the sheet metal components. See Tr. at 184-85. Finally , the cour t finds it sig

nifican t that Dr. Schoff, p laintiff ’s prec ise and a

uthoritat ive exper t,

never c learly

stated tha

t the top c oats wer

e primar ily i ntended t o be pres ervativ e, or eve

n equally preser vativ e and ap pearan ce enha ncing. 7 The court perceived from the structure of the testimony and the demeanor of the witness that Dr. Schoff’s testimony was tailored to avoid such conclusions and that no “expert” would opine that the top coats were essentially “preservative.” Given the metals an

d primer c

hosen, the se top coa

ts must prov

ide some preserv ation fun ctions, but they are the way they are pri marily for appe arance

reasons . CONCLUSIONS OF LAW The general lega

l framework is fully se

t forth in the court’s earlier opinion in this matter. See Daimler Chrysler Corp. , Slip Op. No. 00-124. As the court has found as a matter of fact that the top co at opera

tions are designe d primari ly to

enhanc e the app earanc e of the vehicle a nd to impart to i

t distinctiv e featu

res or charact

eristics , such as c olor, gl oss, and D OI, t he dutyCOURT NO. 99-03-00178 Page 12

exemption at issue does not apply. See HTSUS subheading 9802.00.80; 19 C.F.R. 10.16(c)(3). Furthermore, the DaimlerChry sler employee

witnesses and documents made it quite clear that the top coats are not commonly vie wed as “preservative” paints or coa tings. They a

re known as decorative coats, distinguishing them from prese rvative coatings. The cour t does not i gnore

plaintiff ’s arg ument tha t Congre ss intende d an easi ly administr able bri ght line

test, and painting is painting

is painting . This is a s

uperfic ially appealing argument, and it is the one a dopted by the dissent in General Motors Corp. , 976 F.2d at 722-23 , but the c ourt conc ludes tha t there is no brigh t line and what is “p ainting ” incide ntal to assembly is not alwa

ys e asily determined. For

example, there see

ms to be ag

reemen t that a replica of the Sistine Chapel ceiling on the hood of a vehicle, thoug h “painting,” is not what was meant by Congr

ess as an operation incidental to assembly , or what was meant by the regulation drafte rs. L ess fac etiously

, plaintif f itself a ttached to its brie f a repr

esentat ion of a ve

hicle wit h flame decorations as an example of excluded painting. Suppose the painting is not of flames but the vehicle is painted in two tones or three tones? Perhaps one could establish a standard that any painting

that takes an assembled article out of the norm for that article is disqualifying. That of cours e, is not a

bright l ine test. One would s till debat e the par ameters of the nor

m. After tw o trials a

nd revie w of nume

rous exhibi

ts, the co urt does n ot find this

an easy classification decision. The top coat painting at issue is clearly a part of a broader painting process and a part of the assembly process as well, and part of its function is to preserve the underly ing pre servativ e lay

ers and t he metal s

ubstrate . Moreove

r, there seems to b e little purpose t o disquali fy

ing the p arts from duty

exemption u

nder the pre-NA FTA sch eme appl icable to the veh icle. I t certai nly would not h ave help ed to enc ourag e use of U nited State s made pa

rts,COURT NO. 99-03-00178 Page 13

which appears to be a purpose of the statute. None theless, Congress may

draft the exemption for U.S. parts assembled abroad as narrowly as it wishes and the court is bound to apply the la w, which includes the regulation and the extant teaching s of the Federal Circuit on this matter. As the top coats are primarily intended to enhance the appearanc e of the trucks, the duty exemption does not apply. Because the preservative ve rsus appearance-enhanc ing distinction is so difficult to draw in this case, the court alternatively determines that if the court could not apply either 19 C.F.R. § 10.16(b)(3) or (c)(3), and if it were called upon to decide if the top coat operations were other than “minor,” see General Motors Corp. , 976 F. 2d at 719, or whether they “impart[ed] significant new character

istics or qualities” to the vehicles for purposes of 19 C.F.R. § 10.16(c)(5), it would so conclude based upon the facts found. A ll of the evidence demonstrates that the top-coating processes are hig hly eng ineered, expensive, and primarily intended to make the vehicles eye-catching. Color, gloss, and DOI are distinctive. Plaintiff’s view that “distinct iveness” must take t

he vehic les out of

the norm f

or the pr oduct has no basis. Ju dg me nt sh al l e nt er ac co rd in gl y.

________________________ Jane A. Restani JUDGE

Dated: New York, New York. This 25th day of October , 2002.

### APPEND IX

HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES (19 U.S.C. § 1202) Subheading Description 9802.00.80 Articles assembled abroad in whole or in part of fabr icated components, the product of the United States, which (a) were e xported in condition ready for assembly without fu

rther fa brication, (b) ha

ve not lost

their phy sical ide ntity in such articles by c

hange in form, shape or otherwise, a nd (c) have not been advanced in value or improved in condition abroad except by being assembled and ex cept b y operati ons i ncide ntal t o the a ssemb ly proces s such as clea ning, lubricating and painting...........

19 C.F.R. § 10.16 Assembly abroad. (a) Assembly

operation

s. The assembly oper

ations 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 oper

ations incidental to the assembly as illustrated in par agraph (b) of this section. The mixing or combining of liquids, gases, chemicals, food ing redients, and amorphous solids wi th ea ch ot he r o r w it h s ol id co mp on en ts is no t r eg ar de d a s a n a ss em bl y. (b) Operation s incidenta l to the asse

mbly proce

ss. Operatio ns incidenta l to the as sembly process whether performed before, during, or after assembly, do not constitute further fabrication, and shall not preclude the application of the exemption. The follow ing are example s of operat

ions which are

incidental

to the ass embly pr ocess: (1) Cl eanin g; (2) Re moval of rus t, greas e, pai nt, o r othe r prese rvati ve coat ing; (3) Application of preservative paint or coating, including preservative metallic coating, lubricants , or prot ective encapsulat

ion; (4) Trimm

ing, fil ing, or c

utting of f of small amounts of

excess ma

terials; (5) Adjus tments in th e shape or form of a compone

nt to the e xtent requ

ired by the asse mbly being performed abroad; (6) Cutting to length of wire, thread, tape, f oil, and similar products exported in continuous length; separation by

cutting of finished components, such as prestamped integ rated circuit lead frames exported in multiple unit strips; and (7) Fina l calibra tion, testi ng, mar king, so rting, pressing , and fold ing of a ssembled

article s. (c) Operation s not incide ntal to the as

sembly proc

ess. Any significa nt proce ss, opera tion, or trea tment other tha n assemb ly whose prim ary purpose is the fabric ation, com

pletion,physical or chemic al impro vemen t of a component, or which is not related to the assembly process, whether or

not it effec

ts a substant

ial transfor mation o f the artic le, shall not

be regarded as incidental to the assembly and shall preclude the application of the exemption to such ar

ticle. The

following are

example s of operat

ions not con sidered incidental to the assembl y as provide d under subhea ding 9802.00 .80, Harm onized Tar iff Schedule of t he United States (19 U.S.C. 1202): (1) Melti

ng of e xported ing ots and pou ring of the metal into molds to

produce cast meta

l parts; (2) Cuttin

g of g arment p arts ac cording to patter n from exported mate

rial; ( 3) Painting primarily intended to enhance the appearance of an article or to impart distinctiv e feature s or char acteri stics; (4) Chemical treatment of components or assembled articles to impart ne w characteristics, such as showe r-proof ing, pe rmapre ssing, sa

nforizing , dy

ing or bl eaching

of textiles ; (5) Machining, polishing, burnishin g, peening, plating (other than plating incidental to the assembly), embossing, pressing, stamping, extruding, drawing, annealing, tempering, case har dening, and any other ope ration, t reatm ent or pr ocess which impart s significant new characteristi cs or qualit ies to the article affected. (d) Joining of

America n-made a nd foreign -made c omponent s. An assembly opera

tion may involve the use of American-made components and for eign-made components. The various requirements for establishing entitlement to the exemption apply only to the American- made co mp on en ts of

th e a ss em bl y. (e) Subassembly. As assembly opera tion may involve the joining or fitting of American-made components into a part or subassembly of an article, followed by the installation of the part or subassembly into the complete ar ticle. (f) Packing. The packing abroad of merc handise into containers does not in itself qualify either the conta iners or their co ntents fo r the exemption. Howe ver, ass embled a

rticles w hich othe rwise qualify for the e

xemption and which are packaged abroa d following their assembly will not be disqualif ied from t he exemption by

reason o f their ha

ving be en so packaged , whethe r for re tail sale or for bulk shipment. The tariff status of the packing materials or containers will be determined in accordance with Gene ral Rule of Interpre

tation 5, HTSUS (19 U.S.C. 1202). (Examples omitted and emphasis added.)