CLA-2 CO:R:C:S 557364 MLR
Mr. Terry Pilant
Carson Customs Brokers (USA) Inc.
P.O. Box 653
Blaine, Washington 98231
RE: Applicability of partial duty exemption under HTSUS
subheading 9802.00.80 to wearing apparel; sewing; fusing;
pressing; ironing; attaching hang-tags; placing on hangers
Dear Mr. Pilant:
This is in response to your letter of May 18, 1993,
requesting a ruling on behalf of Koret of Canada regarding the
applicability of subheading 9802.00.80, Harmonized Tariff
Schedule of the United States (HTSUS), to wearing apparel from
Canada. A sample of a golf skirt was submitted with your
request. Your question regarding the basis of appraisement of
the wearing apparel between related parties will be addressed in
a separate letter.
FACTS:
Koret of Canada plans to assemble 60,000 golf skirts in
their Vancouver plant in August, September, and October 1993.
The fabric (65 percent dacron polyester, 35 percent) used to
produce the skirts is manufactured and cut into components in the
U.S. The components for each skirt are: four body panels, two
under-pockets, and two pocket welts.
The cut fabric components and U.S.-origin cut pellon (two
cut pellon pieces are needed for each garment to back the pocket
welt components) will be packaged in cardboard cartons and
shipped to the Vancouver plant where the following operations
will be performed: fuse pellon to pocket welts, sew the
components together, sew labels on the garment, attach hang-tags
to garment, press garment and place on hanger, cover each garment
with a plastic bag, and stick a style/size sticker on each bag.
The elastic for the waist, labels (a block label, and a care,
content, and size label), hang-tags, and bag stickers will be
supplied by Koret U.S. Koret Canada will supply the thread,
hangers, plastic bags, elastic bands, and swiftach (used to
attach the hang-tags).
The finished garments will then be shipped in cardboard
cartons (approximately 50 units per carton) to Chico, California.
At this time, their estimates of cost and value added per unit in
Canada are as follows:
U.S.A. Canada
Fabric $3.80 Labor $4.20
Cutting .25 Trimmings & Sundries .21
Trimmings .22 Shipping Cartons .04
Shipping cartons .04
$4.31 $4.45
ISSUE:
Whether the wearing apparel will qualify for the partial
duty exemption available under subheading 9802.00.80, HTSUS, when
returned to 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 lose 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,
lamination, sewing, or the use of fasteners.
Operations incidental to the assembly process are not
considered further fabrication operations, as they are of a minor
nature and cannot always be provided for in advance of the
assembly operations. See 19 CFR 10.16(a). However, any
significant process, operation or treatment whose primary purpose
is the fabrication, completion, physical or chemical improvement
of a component precludes the application of the exemption under
subheading 9802.00.80, HTSUS, to that component. See 19 CFR
10.16(c).
The operations of sewing the pre-cut fabric pieces together,
sewing the elastic to the body panels, and sewing the labels in
place, are considered acceptable assembly operations pursuant to
19 CFR 10.16(a), because in each instance, two solid components
are being joined (i.e., sewn) together. Furthermore, labeling
the skirts and attaching hang-tags, will not preclude tariff
treatment under subheading 9802.00.80, HTSUS. See C.S.D. 79-
314, 13 Cust. Bull. 1468 (1979), which found that "foreign
stamping, markings, coding, or printing, when serving the purpose
of origin marking, trademark, ... or instruction for use", would
not preclude tariff treatment under item 807.00, Tariff Schedules
of the United States (TSUS) (the precursor to subheading
9802.00.80, HTSUS); see also Headquarter Ruling Letter (HRL)
555565 dated May 14, 1990.
The fusing of the pellon backing to the pocket welts is also
an acceptable assembly process. See HRL 555554 dated May 21,
1990, (heat fusing acetate and braided cord in a tipping
operation constituted an acceptable method of assembly). We also
note that from an examination of the sample, it appears that the
pellon backing is also sewn to the pocket welt.
Pressing the garments constitutes an acceptable incidental
operation pursuant to 19 CFR 10.16(b)(7). Trimming the excess
thread off of the fabric, although not specifically mentioned in
your letter, is considered an acceptable operation incidental to
assembly pursuant to 19 CFR 10.16(b)(4), which states that
trimming, filing, or cutting off of small amounts of excess
materials is an acceptable incidental operation.
With respect to the packaging operations, such as placing
the skirts on hangers and covering them with plastic bags, these
are permissible operations under 19 CFR 10.16(f). Those
packaging materials that are of U.S.-origin (i.e., hang-tags,
plastic bag stickers, and shipping cartons), will be entitled to
duty-free treatment under subheading 9801.00.10, HTSUS.
Subheading 9801.00.10, HTSUS, provides for the free entry of
products of the U.S. that have been exported and returned without
having been advanced in value or improved in condition by any
process of manufacture or other means while abroad, provided the
documentary requirements of section 10.1, Customs Regulations (19
CFR 10.1), are met. However, with respect to the packaging
materials that are Canadian-origin (i.e., hangers, plastic bags,
elastic bands, and swiftach), their cost or value will be
included as part of the dutiable value of the golf skirts. See
HRL 556069 dated August 13, 1991.
HOLDING:
On the basis of the information and sample submitted, it is
our opinion that the operations performed abroad to create the
golf skirts are considered proper assembly operations or
operations incidental to the assembly process. Therefore,
allowances in duty may be made under subheading 9802.00.80,
HTSUS, for the cost or value of the U.S. fabricated components
incorporated into the golf skirts when they are returned to the
U.S., provided the documentary requirements of 19 CFR 10.24 are
satisfied.
Sincerely,
John Durant, Director
Commercial Rulings Division
cc: Chief, Wearing Apparel Branch
New York Seaport