CLA-2 CO:R:C:S 556010 KCC

Mr. J. F. Fritz
Norman Krieger, Inc.
P.O. Box 92599
Los Angeles, California 90009

RE: Textile-covered collapsible cardboard box; further fabrication; assembly; cutting; sewing; 19 CFR 10.14(a); 19 CFR 10.16(a); 19 CFR 10.16(c)(2)

Dear Mr. Fritz:

This is in response to your letter of March 27, 1991, to the Area Director, New York Seaport, on behalf of Barth and Dreyfuss, requesting a ruling on the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to textile-covered collapsible cardboard boxes to be imported from China. In DD 860986 dated March 21, 1991, Customs responded to your request for classification of the same boxes when created entirely from Chinese-origin materials. Your letter and sample of the box were forwarded to this office for a reply. As requested, your sample will be returned under separate cover.

FACTS:

Barth and Dreyfuss intends to create textile-covered collapsible cardboard boxes in China. U.S.-origin 50% polyester and 50% cotton blend fabric will be shipped to China in one of two conditions: in bolt or cut into rectangular pieces. All other components will be of Chinese-origin. In China, the assembly operation will consist of the following:

1. cutting the U.S.-origin bolt fabric into rectangular pieces (if necessary); 2. sewing the rectangular fabric pieces over the cardboard; 3. sewing the ribbon into the fabric seams; and 4. packaging the boxes in a flat condition.

Upon completion of the foreign operations, the boxes will be imported into the U.S.

ISSUE:

Whether the textile-covered collapsible cardboard boxes qualify for the partial duty exemption available under subheading 9802.00.80, HTSUS, when imported into the U.S.

LAW AND ANALYSIS:

Subheading 9802.00.80, HTSUS, provides a partial duty exemption for:

[a]rticles assembled abroad in whole or in part of fabricated components, the product of the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape, or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process, such as cleaning, lubricating, and painting.

All three requirements of subheading 9802.00.80, HTSUS, must be satisfied before a component may receive a duty allowance. An article entered under this tariff provision is subject to duty upon the full cost or value of the imported assembled article, less the cost or value of the U.S. components assembled therein, upon compliance with the documentary requirements of section 10.24, Customs Regulations (19 CFR 10.24).

Section 10.14(a), Customs Regulations (19 CFR 10.14(a)), states in part that:

[t]he components must be in condition ready for assembly without further fabrication at the time of their exportation from the United States to qualify for the exemption. Components will not loose their entitlement to the exemption by being subjected to operations incidental to the assembly either before, during, or after their assembly with other components.

Section 10.16(a), Customs Regulations (19 CFR 10.16(a)), provides that the assembly operation performed abroad may consist of any method used to join or fit together solid components, such as welding, soldering, riveting, force fitting, gluing, laminating, sewing, or the use of fasteners.

We are of the opinion that the U.S.-origin fabric cut into rectangular pieces in China will not be eligible for the duty allowance available under subheading 9802.00.80, HTSUS. Cutting the U.S.-origin bolt fabric into rectangular pieces in China is not an acceptable assembly operation or operation incidental to assembly, but is a further fabrication of the fabric. The cutting operation is not simply cutting a component to length, but is similar to cutting fabric into a specific pattern shape. See, 19 CFR 10.14, example 4 (uncut textile fabrics exported in bolts from which wearing apparel components will be cut according to a pattern are not regarded as fabricated components) and 19 CFR 10.16(c)(2).

However, the U.S.-origin fabric cut into rectangular pieces in the U.S. prior to assembly in China is eligible for the duty allowance under this tariff provision. Sewing two or more pieces of cut fabric together, thereby enclosing the cardboard inside the fabric, and sewing the ribbon into the fabric seams are considered acceptable assembly operations pursuant to 19 CFR 10.16(a). Foreign packaging of the completed collapsed boxes is permissible under 19 CFR 10.16(f).

HOLDING:

From the information and sample presented, it is our opinion that the imported textile-covered collapsible cardboard boxes may be entered under subheading 9802.00.80, HTSUS, with an allowance in duty for the U.S.-origin fabric cut to rectangular pieces in the U.S., upon compliance with the documentary requirements of 19 CFR 10.24.

The textile-covered collapsible cardboard boxes assembled from U.S.-origin bolt fabric cut into rectangular pieces in China are ineligible for the partial duty exemption available under subheading 9802.00.80, HTSUS, and, therefore, are dutiable on their full value.

Sincerely,

John Durant, Director
Commercial Rulings Division

cc: Asst Area Dir NIS
NY 861978