Apple iphone x - Manufacturing defect in the phone

I am a hardcore Apple fan. I used to upgrade my iPhone with every new launch. A couple of days back I went to replace my current iPhone X with new iPhone XS. They verified my iPhone X and told me that it is damaged and defective piece and they cannot give the money. I had proposed to them. I got shocked and looked at their complaint. I saw that in my iPhone X’s rear camera a white round gasket covering the entire camera got powdered inside the camera glass curvature and looks like rusty. Suddenly I approached authorized service centre near to my place and explained to them about the problem. But they told me that it is cosmetic damage and will not cover under warranty.
I approached apple customer care centre and had a chat. They connected me with a phone supervisor and I explained everything in detail to him. But the result was the same and he also rejected my request to replace or repair the same under warranty citing the reason for cosmetic damage. I contacted some other Apple technicians known to me and they told me it is not cosmetic damage and it is a manufacturing /assembly line defect or use of inferior quality material. Hence I contacted Apple chat advisor without telling my complaint and asked them about the purpose of the white gasket around the camera. Please find below the shocking statements revealed by them. My Authorized service centre person was arguing with me that the gasket is built outside and it is only a cosmetic ring to enhance the beauty of the product.
Me
I am asking about a general knowledge question. What is the purpose of that white ring around the camera. Is it built inside or outside?
Bridgette
It appears that it is built on the inside. However, an onsite technician advises of this. I see that you had your device inspected by an Apple authorized provider.
She transferred the same to another person to complete the query.
Rhonda
I see you’re inquiring about a white round ring inside the camera on the iPhone X. Is this correct?
Me
Yes. The person told me it is built inside the glass. But please tell me what is the purpose of it.
Rhonda
That’s a great question. Let's look into this together. Are you referring to the back camera?
Me
Yes please look into the picture I had forwarded. Bregetta told me it is built inside the glass. Could you please tell me the purpose of it?
Rhonda
Let me take a look. That’s the true tone flash.
Me
No, I am referring about the white ring around the whole camera.
Rhonda
I see. It looks like some type of seal. My engineering team didn’t provide any details on what each component is. Then I asked them to connect to Phone advisor to confirm the findings they have revealed to me.
The phone advisor told me that it is a built-in gasket to protect the outer glass and camera. She also told me that if it gets damaged, there is a chance for water seepage and entry of other external hazards like dust powder etc. I have recorded all these conversations but they are still telling me that it a cosmetic issue. A serious problem occurred due to either manufacturing defect/assembly line issue or inferior quality product is treated as a cosmetic issue to reject the warranty claim of the customer. I had purchased this product for **** US$ and now the shop owners are bargaining with me for *** US$ to exchange my *-month-old iPhone X with new iPhone XS. I feel, this as a totally disgusting action from Apple side rejecting a genuine and serious case under cosmetic issue. This kind of actions will certainly damage their goodwill among people like us. Hope they will take necessary actions to resolve my case at the earliest.