CLA-2 RR:CR:SM 560201 CW
TARIFF NOS.: 9802.00.80; 9802.00.90
Thomas Caldecot Chubb III
Associate General Counsel
Oxford Industries, Inc.
222 Piedmont Avenue, N.E.
Atlanta, Georgia 30308
RE: Eligibility of men's suit-type jackets assembled in the
Dominican Republic and Mexico for a
complete or partial duty exemption; trimming; Article 509
Dear Mr. Chubb:
This is in response to your letter dated November 15, 1996,
requesting a ruling regarding the eligibility of certain men's
suit-type jackets assembled in the Dominican Republic and Mexico
for a partial or complete duty exemption under subheading
9802.00.80 or 9802.00.90, Harmonized Tariff Schedule of the
United States (HTSUS). We regret the delay in responding.
FACTS:
Oxford Industries, Inc. is a domestic manufacturer as well
as an importer of various apparel products, including men's suit-type jackets. Oxford produces men's suit-type jackets in the
Dominican Republic, Mexico and certain other countries. In most
cases, the jackets produced in the Dominican Republic and Mexico
are made entirely of fabric components woven and cut to shape in
the U.S. as well as various U.S.-origin trim items, such as
buttons, labels and shoulder pads. However, in limited
situations, the fabric components may be cut to shape in the U.S.
from fabric woven abroad. The fabric components consist of shell
fabric, lining and interlining components. Oxford recognizes
that jackets assembled in Mexico with fabric components cut to
shape in the U.S. from foreign fabric are ineligible for
subheading 9802.00.90, HTSUS, treatment.
All of the lining components and most of the shell fabric
and interlining components are cut to a very precise shape in the
U.S. and, therefore, no trimming is required prior to the foreign
assembly operations. However, a few of the shell fabric and
interlining components are "block cut" in the U.S., which means
that these components are cut to shape but that excess material
is intentionally left on the components. Components which are
block cut must have the excess material removed before the
components are sewn together with others to create the finished
jacket. Block cutting is performed on those shell fabric and
interlining components which are to be fused together with an
adhesive prior to sewing. There are six block cut components--two shell fabric components (one left side and one right side)
and two interlining components (again, one right side and one
left side) that are fused together to create the left and right
coat front panels, and the shell fabric component and interlining
component that are fused together to create the coat collar.
Block cutting is necessary for these components because
perfect alignment of the edges of the fused shell fabric and
interlining components is difficult, if not impossible, when they
have been cut to very precise shape prior to the fusing. By
fusing the block cut components together and then cutting to
precise shape, perfect alignment of the edges of the shell fabric
and interlining components is virtually guaranteed.
Oxford currently performs the block cutting, fusing and
"trimming" operations in the U.S. However, because fusing is an
assembly operation, Oxford believes it would be much more
efficient to perform the fusing operation in sequence with the
other assembly operations at the offshore assembly location.
Therefore, Oxford proposes to continue block cutting these six
components in the U.S. while moving the fusing and "trimming"
operations to the foreign assembly location. The issue presented
for our consideration concerns whether the cutting to be
performed abroad to the fused components is incidental to the
assembly process.
Two samples of block cut components have been submitted for
our examination. One sample is the block cut shell fabric
portion of a coat front panel which has been marked by pencil to
indicate the excess fabric that will be removed after it has been
fused to the interlining layer of the coat front. The other
sample consists of the shell fabric and interlining components
for the coat collar which have been fused together and marked by
pen to indicate the excess material to be removed.
In support of your contention that the cutting operations to
be performed abroad on the block cut and fused components are
incidental to the assembly process, you state that the cost of
cutting all fused components in the Dominican Republic and Mexico
would be approximately 1.75 cents per jacket, while the cost of
assembling a jacket in the Dominican Republic and Mexico ranges
from approximately $6.00 to $7.40 per jacket. In addition, you
advise that the time required to cut all fused components abroad
would be approximately 54 seconds per jacket, while the total
time required to assemble a jacket abroad ranges from 65 to 75
minutes per jacket.
For purposes of this ruling, we are assuming that, aside
from the cutting operations to be performed abroad which will be
discussed below, the operations performed abroad to create the
suit-type jackets qualify as acceptable assembly operations or
operations incidental thereto pursuant to subheading 9802.00.80
or 9802.00.90, HTSUS.
ISSUE:
Whether removing excess fabric from the block cut and fused
shell fabric and interlining components abroad, as described
above, is incidental to the foreign assembly of the suit-type
jackets for purposes of subheadings 9802.00.80 and 9802.00.90,
HTSUS.
LAW AND ANALYSIS:
9802.00.80
The analysis set forth below concerning the applicability
of subheading 9802.00.80, HTSUS, relates to the suit-type jackets
assembled in the Dominican Republic as well as those jackets
assembled in Mexico which do not qualify for subheading
9802.00.90, HTSUS, treatment because all fabric components were
not wholly formed and cut in the U.S.
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 appraised value of the imported assembled article,
less the cost or value of the U.S. components assembled therein,
upon compliance with the documentation requirements of section
10.24, Customs Regulations (19 CFR 10.24).
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).
Those fabric components used in the assembly of the jackets
abroad which were cut to shape in the U.S. from fabric woven in
the U.S. qualify as "products of the United States" pursuant to
the rules of origin for textile and apparel articles set forth in
section 334 of the Uruguay Round Agreements Act (URAA) (codified
at 19 U.S.C. 3592) and implemented by regulations set forth in
section 102.21, Customs Regulations (19 CFR 102.21). However,
those fabric components used in the foreign assembly operation
which were cut to shape in the U.S. from foreign fabric are not
considered "products of" the U.S. for purposes of subheading
9802.00.80, HTSUS. In this regard, section 334(b)(4)(A) of the
URAA (codified at 19 U.S.C. 3592(b)(4), provides that:
[t]he value of a component that is cut to shape (but not to
length, width, or both) in the United States from foreign
fabric and exported to another country, territory, or
insular possession for assembly into an article that is then
returned to the United States --
(I) shall not be included in the dutiable value of such
article.
The effect of 19 U.S.C. 3592(b)(4) is to preserve the tariff
treatment afforded by subheading 9802.00.80, HTSUS, that
otherwise would no longer be available under the section 334
origin rules since cutting foreign fabric to shape in the U.S. no
longer results in the cut fabric being considered a "product of"
the U.S.
Section 10.25, Customs Regulations (19 CFR 10.25),
implements 19 U.S.C. 3592(b)(4), and incorporates by reference
the same operational, valuation and documentation requirements
applicable to goods entered under subheading 9802.00.80, HTSUS.
Therefore, imported goods entitled to a duty allowance under 19
CFR 10.25 are to be entered under subheading 9802.00.8065, HTSUS,
and, solely for purposes of calculating the duty allowance under
this subheading, Customs treats the textile components cut to
shape in the U.S. from foreign fabric as if they were "U.S.
fabricated components."
In regard to the issue of whether removing excess fabric
from the block cut and fused components abroad is an operation
incidental to the assembly of the jackets, 19 CFR 10.16(b)(4)
states that "[t]rimming, filing or cutting off of small amounts
of excess materials" is an example of an operation considered
incidental to the assembly process. However, 19 CFR 10.16(c)(2)
provides that "[c]utting of garment parts according to pattern
from exported material" is not considered incidental to assembly.
The two samples which you have submitted are marked by pen
or pencil to indicate the extent of the excess fabric that is to
be removed from the left and right coat front panels and the coat
collar. The sample of the shell fabric portion of a coat front
panel is irregularly shaped and measures approximately 31 inches
long by 12 inches wide. The pencil mark extends along
approximately 50% of the outer periphery of the component and
between 1/4 to 3/4 inch from the edges. The sample of the fused
coat collar component is also irregularly shaped and measures
approximately 27 inches long by 6 inches wide. The pen mark on
this component only roughly parallels its outer shape and extends
completely around the component, 4 inches from certain edges and
1« inches or less from other edges.
In Headquarters Ruling Letter (HRL) 557503 dated November
24, 1993, U.S. origin pre-cut components comprising extra-large
size garments were sent abroad where they were die-cut into
smaller sizes (referred to as "downsizing") and then assembled
into finished garments. Customs held that as "downsizing" is an
operation in which garment components are cut to pattern and
shape, this operation is not incidental to the assembly process,
but rather is a further fabrication of the components which
precludes a duty allowance under subheading 9802.00.80, HTSUS,
for the cost of the "downsized" components. Similarly, we held
in HRL 560648 dated October 27, 1997, that "trimming" one long
edge of an awning fabric to create a decorative edge is more akin
to cutting to a specific pattern than removing a small amount of
excess fabric. As a result, we stated that this cutting
operation constituted a further fabrication of the fabric
component.
In the instant case, the mark on the submitted sample of the
front panel component indicates that a very small amount of
excess fabric (between 1/4 to 3/4 inch) will be removed from
approximately 50% of the outer edges of the component. We find
that this constitutes "trimming...or cutting off of small amounts
of excess materials," as set forth in 19 CFR 10.16(b)(4), and
therefore is an operation incidental to the foreign assembly
process. However, in regard to the coat collar component, the
mark on the submitted sample indicates that a significant portion
of the fabric comprising the component will be removed abroad as
"excess". Moreover, the cutting is to a specific pattern shape
which is necessary to the creation of the finished coat collar
component. Under these circumstances, we find that the cutting
of the collar component abroad constitutes a further fabrication
of the exported fabric, thereby precluding a duty allowance under
subheading 9802.00.80, HTSUS, for the cost or value of this
component.
Our conclusion regarding the nature of this cutting
operation is not affected by information you have provided
indicating that the cost and time involved in cutting the collar
component is minimal in comparison to the cost and time required
to perform the entire assembly operation. In rejecting a similar
argument in Samsonite Corp. v. United States, 12 CIT 1146, 702
F.Supp. 908 (1988), aff'd, 898 F.2d 1074 (1989), the trial court
stated that "[t]he magnitude of a particular process in terms of
time and cost does not make that process any less one of
fabrication, nor does it make the result thereof any less
significant." The appellate court emphasized that the critical
inquiry in determining whether a further fabrication rather than
an operation incidental to assembly took place for purposes of
the precursor provision to subheading 9802.00.80, HTSUS, "is not
the amount of processing that occurred..., but its nature."
9802.00.90
Subheading 9802.00.90, HTSUS, provides for the duty-free treatment 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 that 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.
This discussion of the applicability of subheading
9802.00.90, HTSUS, relates only to those suit-type jackets
produced by Oxford in Mexico in which all fabric components were
wholly formed and cut in the U.S.
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, are instructive
in determining whether the operations performed in Mexico qualify
as acceptable assembly operations or operations incidental
thereto for purposes of subheading 9802.00.90, HTSUS. Consistent
with the discussion above concerning the eligibility of the
jackets for subheading 9802.00.80, HTSUS, treatment, we find
that, with respect to jackets assembled in Mexico in which all
fabric components were wholly formed and cut in the U.S., the
additional cutting of the coat collar component in Mexico
constitutes a further fabrication of that fabric component for
purposes of subheading 9802.00.90, HTSUS.
However, it is noted that, as distinguished from subheading
9802.00.80, HTSUS, subheading 9802.00.90, HTSUS, requires only
that the "fabric components, in whole or in part" (emphasis
added) satisfy the three conditions identified in this provision
under (a), (b), and (c). See Presidential Proclamation 6821
dated September 13, 1995 (60 FR 47663). Therefore, the further
fabrication of this single component will not preclude the
jackets, which otherwise satisfy the conditions and requirements
of subheading 9802.00.90, HTSUS, from receiving the benefits
of this tariff provision. See HRLs 559780 dated May 19, 1997,
and 560458 dated March 6, 1998.
HOLDING:
Based on the information and samples submitted, cutting off
small amounts of excess fabric from the left and right coat front
panels abroad prior to the assembly of these components with
others to create the suit-type jackets qualifies as an operation
incidental to the assembly process pursuant to 19 CFR
10.16(b)(4). However, the extensive cutting required to create
the coat collar component abroad constitutes a further
fabrication of that component. Therefore, with respect to those
jackets entered under subheading 9802.00.80, HTSUS, no duty
allowance may be made for the cost or value of the coat collar
component. The further fabrication of this component, however,
will not preclude those jackets which otherwise satisfy the
conditions and requirements of subheading 9802.00.90, HTSUS, from
receiving the benefits of this tariff provision.
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
Commercial Rulings Division