CBP Issues Final Rule In Light of 2004 Court Decision Concerning Operations Incidental to Assembly

June 13, 2008

On June 12, 2008, U.S. Customs and Border Protection (CBP) issued a final rule in the Federal Register amending 19 C.F.R. § 10.16 to remove the distinction between preservative and decorative painting for the purpose of a partial duty exemption under subheading 9802.00.80 of the Harmonized Tariff Schedule (HTSUS).  This final rule will take effect on July 14, 2008.

CBP made the changes in order to conform with the 2004 U.S. Court of Appeals for the Federal Circuit’s (CAFC) ruling in DaimlerChrysler v. U.S. holding that HTSUS 9802.00.80 unambiguously provides that painting is an operation incidental to the assembly process.  Prior to the DaimlerChrysler ruling, CBP considered top coats to be decorative in nature because they were intended to enhance the object’s appearance, and thus were ineligible for a partial duty exemption under the subheading.

Additional detail concerning the CAFC's determination in the DaimlerChrysler case is available here.