HQ 555425
October 17,1989
CLA-2-CO:R:C 555425 RA
TARIFF NOS.: 9802.00.80 and 9802.00.50, HTSUS
James A. Geraghty, Esq.
Donohue and Donohue
26 Broadway, Suite 1111
New York, New York 10004
RE: Allowance in duty for ribbon bows assembled in China from
United States-made materials under subheading 9802.00.80
or 9802.00.50, HTSUS
Dear Mr. Geraghty:
This is in response to your letters of June 12, and
September 6, 1989 (your file 1228-01), requesting a ruling on a
partial exemption from duty for so-called "quick bows" made in
China from ribbons exported from the U.S.
FACTS:
The ribbon made of acetate material in this country is
processed in the Chinese factory by cutting to length, die
trimming, and assembling with drawstrings and clips. The
trimming consists of cutting notches by machine in the ribbon at
precise intervals. A drawstring runs lengthwise through the
center of the notched ribbon and a bow is formed in one motion
when the ribbon is pushed downward on the drawstring.
ISSUE:
Can the processing in the foreign country be considered a
valid assembly operation under the provision in subheading
9802.00.80, HTSUS, or an alteration under subheading 9802.00.50,
HTSUS?
LAW AND ANALYSIS:
Subheading 9802.00.80, HTSUS, provides for an allowance in
duty for the cost or value of U.S.-made components assembled
abroad by the attachment of the various components to form the
imported merchandise. The assembly abroad may consist of a
joinder of two or more components and include operations
incidental thereto.
Section 10.16(a), Customs Regulations (19 CFR 10.16(a)),
states that the assembly operations may consist of any method
used to join or fit together solid components and may be
preceded, accompanied, or followed by operations incidental to
the assembly. However, section 10.16(c), Customs Regulations (19
CFR 10.16(c)), provides that any significant process, operation,
or treatment other than assembly whose primary purpose is the
fabrication, completion, or physical improvement of a component
shall not be regarded as incidental to the assembly and shall
preclude the application of the exemption to such article.
A process cannot be considered incidental to assembly where
it does more than adjust the article and results in the creation
of the component to be assembled, the essence of which is its
configuration. Samsonite Corporation v. U.S., Slip. Op. 88-166,
702 F. Supp. 908 CIT (1988). The court in that case concluded
that the statute and regulations do not cover a process which was
as necessary to the fabrication of the component as it was to
subsequent assembly thereof. Applying this principle to the
instant case, it is clear that the notching of the exported
ribbon to a narrow width where the plastic clip and drawstring
are attached constitutes the creation of a component prior to its
assembly. The assembly cannot take place until the ribbon
material has been cut to width into an hour glass configuration.
This operation is more than a trimming of excess material.
You compare the cutting operation on the ribbon to that
which was allowed in the cases of Rudolph Miles v. U.S. 65 CCPA
32, C.A.D. 1202, 567 F. 2d 979 (1978), and U.S. v. Mast
Industries Inc., 99 CCPA 47, 668 F.2d 501 (1981). However, in
those cases, the components to be assembled were complete and
nothing new had to be created before assembly could be completed.
Unlike the tipping operation performed on the gloves in Zwicker
Knitting Mills v. U.S., 67 CCPA 87, C.A.D. 1240 (1980), the
cutting was not necessary to enable the components to enter the
assembly process and they were ready to be joined without further
fabrication. In your case, the ribbon must be notched or cut to
shape before any assembly with the clip and drawstring can take
place. This cutting amounts to a further fabrication, as it
results in the creation of a the component, and exceeds an
operation incidental to assembly. Therefore, no allowance can be
made for the exported ribbon material under subheading
9802.00.80, HTSUS.
Subheading 9802.00.50, HTSUS, provides for a partial duty
exemption for articles returned after having been exported for
alterations. The articles must be completely finished when
exported from the U.S. and not undergo any intermediate
processing operations to finish them while abroad. This
provision allows the duty to be assessed only on the cost of the
foreign processing. However, its application is precluded where
the processing results in completing the manufacture which began
in the U.S. Dolliff & Company, Inc. v. U.S., 66 CCPA 77, C.A.D.
1225, 599 F.2d 1015 (1979). The ribbon material exported from
the U.S. is not a finished article and must be cut and assembled
before it becomes a complete ribbon bow. The ribbon involved in
the October 1, 1985 (553843) ruling cited by you was already
notched when exported from the U.S. and only had to be cut to
length abroad. Therefore, we held in that case that the foreign
cutting operation did not exceed an alteration. We are of the
opinion that the cutting of your ribbon material abroad and
subsequent assembly are essential to finish the end product and,
therefore, the foreign processing exceeds an alteration under
the provisions of subheading 9802.00.50, HTSUS.
HOLDING:
The notching or cutting to shape of exported ribbon material
in order to produce ribbon bows constitutes a further fabrication
of the ribbon component, thereby precluding an allowance in duty
for the ribbon under subheading 9802.00.80, HTSUS. Moreover, as
the cutting and assembly of the ribbon material are essential to
make it into the imported bows, this foreign processing exceeds
an alteration under subheading 9802.00.50, HTSUS.
Sincerely,
John Durant, Director
Commercial Rulings Division