When is painting not painting? The answer, according to the U.S. Bureau of Customs and Border Protection, is when the painting is decorative.  Customs’ long-standing policy, however, has recently been overturned.  As a result, maquiladora operations have new freedom to fully assemble goods, including the application of attractive finish-coat paints.  "When is painting not painting? The answer, according to the U.S. Bureau of Customs and Border Protection, is when the painting is decorative.  Customs’ long-standing policy, however, has recently been overturned.  As a result, maquiladora operations have new freedom to fully assemble goods, including the application of attractive finish-coat paints."

      In an important decision, the U.S. Court of Appeals for the Federal Circuit has issued an opinion that a Customs’ regulation restricting a duty preference for U.S.-origin materials that have been decorated with paint as part of assembly in Mexico is invalid.  The decision in DaimlerChrysler v. United States can be found at http://fedcir.gov/opinions/03-1192e.doc. The decision corrects Customs’ previous practice of denying a duty exemption for essentially all U.S.-origin components that are painted during assembly in Mexico and re-imported in the United States as part of a finished good.

Decoration not permitted "Decoration not permitted"

      For many years, a company wishing to export U.S.-origin components for assembly abroad and re-import the finished product into the United States has paid duty only on the value of the finished product, excluding the value of U.S.-origin components.  The authority for this partial duty exemption is item 9802.00.80 of the Harmonized Tariff Schedule of the United States (HTSUS).  This tariff item allows the partial duty exemption provided the U.S.-origin component was exported in condition ready for assembly without further fabrication, has not lost its physical identity, and was not advanced in value or improved in condition other than by assembly and “operations incidental to assembly such as cleaning, lubricating, and painting.”  This provision has helped both U.S. industry and Mexico industry: it encouraged the use of U.S.-origin components and it enabled more operations to be performed in Mexico than would otherwise be the case.

      Customs had limited 9802.00.80 by passing a regulation stating that only painting that is preservative in nature and is not primarily decorative is “incidental to assembly.”  Painting abroad that was decorative, as is most painting, would cause the importer to lose...

...Continued in the pages of Twin Plant News, Subscribe Today!