## Facts

- DaimlerChrysler assembled 1993–1994 model-year trucks in Mexico using U.S.-origin fabricated components, including sheet-metal parts exported from the United States in condition ready for assembly.
- The cargo boxes were assembled at a facility in Celaya, Mexico, and complete trucks were assembled at a facility in Lago Alberto, Mexico.
- As part of the assembly process, DaimlerChrysler applied a multi-step paint and coating procedure to truck cabs and cargo boxes.
- The painting process included primer coats intended to prevent corrosion and related damage, which were baked to set, followed by a color coat and a clear coat to complete the finish.
- Upon importation of the completed trucks into the United States, DaimlerChrysler claimed a partial duty exemption under HTSUS subheading 9802.00.80 for articles assembled abroad from U.S.-origin components, provided the components were not advanced in value or improved in condition abroad except by assembly and “operations incidental to the assembly process such as cleaning, lubricating, and painting.”
- U.S. Customs denied the exemption, applying a regulation that treated only preservative/protective painting as incidental to assembly and excluded decorative/finishing painting.
- The Court of International Trade upheld Customs’ denial, and DaimlerChrysler appealed.

## Issues

1. Whether “painting” in HTSUS subheading 9802.00.80 unambiguously includes both protective and decorative/finishing painting performed as part of assembly abroad.
2. Whether, under the interpretive framework for Customs regulations, Customs may rely on a regulation distinguishing preservative from decorative painting to deny a 9802.00.80 partial duty exemption when the statutory text expressly includes “painting.”

## Decision

- The Federal Circuit reversed the Court of International Trade.
- The court held that the statutory term “painting,” as used in HTSUS 9802.00.80’s examples of operations incidental to assembly, unambiguously covers DaimlerChrysler’s painting process, including primer, color, and clear coats.
- Because the statute was unambiguous, Customs’ regulation could not narrow “painting” to only preservative/protective painting to deny the exemption.
- DaimlerChrysler’s trucks qualified for the partial duty exemption under HTSUS subheading 9802.00.80.

## Legal Principles

- When statutory text is unambiguous, the statute controls and an agency may not narrow or contradict the statute by regulation.
- Under HTSUS subheading 9802.00.80, U.S.-origin components assembled abroad may receive a partial duty exemption if they are not advanced in value or improved in condition abroad except by assembly and operations incidental to assembly, including “painting.”
- The presence of an express statutory example (“painting”) supports applying the ordinary meaning of the term, absent limiting language.
- Deference to Customs’ interpretive regulations depends on statutory ambiguity; where no ambiguity exists, there is no gap for the agency to fill.

## Conclusion

The Federal Circuit held that “painting” in HTSUS 9802.00.80 includes both protective and finishing paint applications performed as part of assembly abroad, and Customs could not deny the partial duty exemption by applying a regulation that restricts incidental painting to preservative coats when the statutory language is clear.


DaimlerChrysler Corp. v. United States, 361 F.3d 1378 (Fed. Cir. 2004)