CLA 02 RR:TC:SM 559691 KKV

Ms. Terry Polino
Sandler, Travis & Rosenberg, P.A.
1341 G Street, N.W.
Washington, D.C. 20005-3105

RE: Applicability of manufacturing process involving transfer of separate, solid, inked decals, to garment panels by means of heat and pressure; Assembly; HRL 553423; HRL 078580/554470; HRL 555175; 19 CFR 10.14; 19 CFR 10.16; NAFTA

Dear Ms. Polino:

This is in response to your letter dated February 12, 1996, on behalf of Sara Lee Knit Products (hereafter "SLKP"), which requests a ruling concerning a proposed process involving the application of certain decorative decals or heat transfers to garment panels in a location outside the United States. Specifically, you inquire whether this "heat transfer" process constitutes an acceptable assembly operation for purposes of subheading 9802.00.80 and subheading 9802.00.90, Harmonized Tariff Schedule of the United States (HTSUS). Samples of the decals or heat transfers at various stages of application have been submitted for our consideration.

FACTS:

We are informed that SLKP uses two types of heat transfers, known as "Polystretch" and "Transweave," which are manufactured in the United States by Polymark Corporation. These decals consist of strips of paper upon which special inks and colors have been superimposed. Polystretch heat transfers, used primarily upon high-stretch garments, are plastic-like transfers that imitate the appearance of "screen-print" type images but without screen printing. Transweave heat transfers, suitable for use upon vinyl, leather and all textiles, imitate the appearance of an embroidery-type image.

The two types of decals will be exported to various countries, such as Mexico and Honduras, where they will be applied onto garment panels by means of a heat press machine. The Polystretch heat transfers must be pressed at a minimum heat of 320 to 390 degrees at a pressure of 15 to 25 pounds per square inch for seven to nine seconds. The Transweave decals must pressed at a minimum heat of 250 to 390 degrees at a pressure of 10 to 25 pounds per square inch for two to seven seconds. We are informed that the finished garments upon which the decals are applied will be assembled abroad entirely of U.S. fabric components.

ISSUE:

Whether the heat transfer of the inked decals to garment panels constitutes an acceptable assembly operation for purposes of subheading 9802.00.80 and subheading 9802.00.90, Harmonized Tariff Schedule of the United States (HTSUS).

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, lubrication, and painting.

All three requirements of HTSUS subheading 9802.00.80 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).

Annex 300-B of the North American Free Trade Agreement ("NAFTA") is applicable to textile and apparel goods. Appendix 2.4 of Annex 300-B provides that:

On January 1, 1994, the U.S. shall eliminate customs duties on textiles and apparel goods that are assembled in Mexico from fabrics wholly formed and cut in the United States and exported from and reimported into the United States under (a) U.S. tariff item 9802.00.80.10; or

(b) Chapter 61, 62, or 63 if, after such assembly, those goods that would have qualified for treatment under 9802.00.80.10 have been subject to bleaching, garment dyeing, stone-washing, acid-washing or perma-pressing.

Thereafter, the U.S. shall not adopt or maintain any customs duty on textile or apparel goods of Mexico that satisfy the requirements of subparagraph (a) or (b) or the requirements of any successor provision to U.S. tariff item 9802.00.80.10.

Consequently, subheading 9802.00.90, HTSUS, was created to provide for the duty-free entry of:

Textile and apparel goods, assembled in Mexico in which all fabric components were wholly formed and cut in the United States, provided that such fabric components, in whole or in part, (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; provided the goods classifiable in chapters 61, 62, or 63 may have been subject to bleaching, garment dyeing, stone-washing, acid-washing or perma-pressing after assembly as provided for herein.

Because subheading 9802.00.90, HTSUS, was intended as a successor provision to subheading 9802.00.80, HTSUS, with respect to certain textile and apparel goods assembled in Mexico, the regulations under subheading 9802.00.80, HTSUS, may be instructive in determining whether an assembly process would render an article eligible for the beneficial duty treatment accorded by subheading 9802.00.90, HTSUS. (In this regard, however, as distinguished from subheading 9802.00.80, HTSUS, it is noted that

the new statute requires only that all fabric components be formed and cut in the U.S., and that only such components, in whole or in part, need be exported from the U.S. in condition ready for assembly without further fabrication.)

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, laminating, 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. 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 HTSUS subheading 9802.00.80 to that component. See, 19 CFR 10.16(c).

Customs has previously considered heat transfer operations similar to the process under consideration. In Headquarters Ruling Letter (HRL) 553423, dated February 15, 1985, Customs considered whether the application of a plastic decal or "polymark" to the front leg panels of men's running shorts was an acceptable assembly operation for purposes of item 807.00, Tariff Schedule of the United States (TSUS), the precursor to subheading 9802.00.80, HTSUS. In that case, the decal was applied through heat and permitted to cool. Subsequently, the paper backing was removed, leaving the entire polymark permanently attached to the fabric. In reviewing the application process, Customs distinguished between an operation which involves the mere transfer of an ink design through the use of heat, and one which results in the transfer of the entire decal. In holding that the latter operation constitutes an acceptable assembly process for purposes of item 807, TSUS, Customs stated:

[w]e have ruled that where decal designs were merely transferred by means of heat to a garment, there was no acceptable assembly of solid components for item 807.00, TSUS, purposes. However, ...in the instant case the entire

decal, not just its design, will be transferred to the fabric. We believe that there is a significant distinction between the two processes. In one case, only the ink design of the decal is transferred as a result of the heat process. In the other case the entire plastic decal is transferred with the heat acting as an adhesive substitute. In the latter case there would [be] a joining of the two solid components in an acceptable assembly. Accordingly, if the entire solid decal is fastened to the fabric as a separate component by means of a heat process, this would be regarded as an acceptable assembly.

Additionally, in HRL 078580, dated April 20, 1987, Customs ruled that the application of a textile flower applique to an infant crawler by means of heat and pressure was an acceptable assembly for purposes of item 807.00, TSUS. Likewise, in HRL 555175, dated March 13, 1989, Customs held that an oven-cured, inked logotype constitutes a solid, whose application to ladies' sleepwear by means of heat and pressure constitutes an acceptable assembly operation for purposes of subheading 9802,00.80, HTSUS.

Upon examination, we note that, similar to the facts contained in the applicable precedence set forth above, the subject decals are separate, solid components which are permanently affixed in their entirety, by means of heat and pressure, to other separate solid components -- the garment panels. On the basis of the described assembly operation and, upon examination of the samples provided, it is our determination that the heat transfer operation by which separate, solid, inked decals are permanently affixed, in their entirety, to garment panels, qualifies as an acceptable assembly operation for purposes of subheading 9802.00.80 and subheading 9802.00.90, HTSUS, provided that, where entry is made under subheading 9802.00.90, the finished articles have been assembled wholly of U.S.formed and cut fabric components

HOLDING:

Based upon the information provided, the heat transfer operation by which separate, solid, inked decals are permanently affixed, in their entirety, to garment panels, qualifies as an assembly operation or operation incidental to assembly for purposes of subheading 9802.00.80 and subheading 9802.00.90, HTSUS.

A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

John Durant, Director
Tariff Classification
Appeals Division