CLA-2 RR:TC:SM 560497 JML
TARIFF NO: 9802.00.80
Mr. Peter J. Fitch, Esq.
Fitch, King and Caffentzis
116 John Street
New York, NY 10038
RE: Eligibility of men's neckties for the partial duty exemption
under subheading 9802.00.80, HTSUS; 19 CFR 10.25; 19 CFR
134.43(e).
Dear Mr. Fitch:
This is in response to your letter of June 4, 1997, in which
you requested a binding ruling regarding the eligibility of men's
neckties assembled in the Dominican Republic, for duty allowances
under subheading 9802.00.80, Harmonized Tariff Schedule of the
United States ("HTSUS"). You have provided our office with
samples of the tie fabric components for review.
FACTS:
Your client, RLF Neckwear, intends to send various
components of men's neckties to the Dominican republic for
assembly. The neckties consist of three different types of
fabric of both United States ("U.S.") and foreign origins. The
different fabrics are used to form the tie body, the interlining
and the tipping. The other components are woven labels, content
labels, thread, and packing materials, all of U.S. origin. Most
significant among the components are the fabrics, which are cut
to shape in the U.S.
The fabric for the body of the ties consists of either 100%
woven silk or 100% woven polyester fabric. We note that as a
general matter, the woven silk fabric is classifiable in chapter
50, HTSUS (silk), and that the woven polyester fabric is
classifiable in chapter 54, HTSUS (man-made filaments). The
fabric is received in the U.S. in rolls of 25 to 50 yards,
ranging in widths of 40" to 60". The fabric is then cut and
split into a pre-engineered block format. A typical roll of
fabric yields about 55 blocks. Each block contains sufficient
fabric to produce two ties, each tie consisting of three pieces.
The blocks are arranged into stacks of 48 or 96 to ensure
uniformity in the fabric pattern. They are then cut into the
three components of the ties, each specifically shaped to form a
tie when assembled. An examination of the samples given
indicates that the cutting operations appear to consist of more
than cutting to length or width, but are shapes apparently
dedicated for use as tie components.
In addition to the fabric used for the body of the ties,
certain fabrics are used to make the "tipping" and the
interlining of the ties. The "tipping" is the piece of fabric
sewn into the bottom portion of the tie to help keep its shape.
It is composed of a woven acetate fabric which is classifiable in
chapter 54, HTSUS (man-made filaments). In a finished tipping,
the fabric is cut into a triangular shape that when folded
resembles the bottom portion of a tie. The interlining serves as
the interlining of the tie around which the other fabrics are
assembled. It is composed of a woven blend fabric predominately
of polyester and acrylic. The interlining is generally
classifiable in chapter 54 as well. A finished interlining is a
knit fabric cut into the shape of a tie.
You state that the tipping is made from either domestic or
foreign origin fabric. Although the interlining is currently
made from U.S. origin fabric, you state that in the future that
component may be produced from fabric imported into the U.S.
Upon completion of the above-stated operations, the cut
components are sent to the Dominican Republic for assembly in
bundles of 48 ties, along with the labels, thread and packing
materials. In the Dominican Republic, the three components which
form the tie body are sewn together. The tipping and interlining
are then sewn to the tie. After the tie is turned and pressed,
the main and content labels are sewn on. All sewing operations
are performed using the U.S. origin thread. The assembled ties
are then prepared for packing by affixing the hook riders, sku
tickets and cardboard insert. After packing with the cardboard
insert and pvc bags, they are placed in the cartons sealed with
the staples and tape.
Customs also notes that the finished ties are classifiable
in heading 6215, HTSUS (ties, bow ties and cravats). In
contending that the finished ties qualify for a duty allowance on
the cost or value of the U.S. components assembled therein, you
assert that both the foreign and domestic fabric components cut
to shape in the U.S. qualify as U.S. fabricated components for
purposes of subheading 9802.00.80, HTSUS. Additionally, you ask
for the applicable the country of origin marking requirements for
the ties.
ISSUES:
1) Whether the imported ties qualify for the partial duty
exemption under subheading 9802.00.80, HTSUS.
2) What are the country of origin marking requirements for
the ties?
LAW AND ANALYSIS:
9802.00.80
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).
On December 8, 1994, the President signed into law the
Uruguay Round Agreements Act ("URAA") Section 334 of the URAA
(codified at 19 U.S.C. 3592) provides new rules of origin for
textiles and apparel entered, or withdrawn from warehouse, for
consumption, on or after July 1, 1996. On September 5, 1995,
Customs published section 102.21, Customs Regulations (19 CFR
102.21), in the Federal Register, implementing section 334. See
60 FR 46188 Thus, effective July 1, 1996, the country of origin
of a textile or apparel product shall be determined by sequential
application of the general rules set forth in paragraphs (c)(1)
through (5) of section 102.21. Section 102.21(b)(5) provides
that a textile or apparel product is any good classifiable in
Chapters 50 through 63, HTSUS, and other specifically defined
tariff provisions. With regard to the facts of this case,
Customs notes that the foreign origin fabric components cut to
shape in the U.S. -- the body fabric, the tipping fabric and the
lining fabric -- are classifiable in tariff provisions within
those specified by section 102.21(b)(5), chapters 50, 54 and 54
respectively.
Generally, textile components consisting of foreign origin
fabric cut to shape in the U.S. will not be considered a "product
of" the U.S. See URAA In such circumstances, 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 not be available under the section 334 origin
rules.
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.
That is, imported goods entitled to a duty allowance under
section 10.25 are to be entered under subheading 9802.00.80,
HTSUS, and, solely for purposes of calculating the duty allowance
under this subheading, Customs will treat the textile components
cut to shape in the U.S. from foreign fabric as if they were U.S.
fabricated components. For purposes of section 10.25, the term
"textile component" and "fabric" have reference only to those
goods covered by the definition of "textile or apparel product"
set forth in section 102.21(b)(5), Customs Regulations (19 CFR
102.21(b)(5)).
For purposes of this ruling request, we are presuming that
the assembly operations performed in the Dominican Republic on
the tie components -- sewing the three fabric components and
labels together to form the tie -- conform to the requirements
and examples set forth in Section 10.16, Customs Regulations (19
CFR 10.16). The issue left to be resolved is whether the
processing of the foreign origin fabric in the U.S. satisfies the
requirements of section 10.25, so that a reduction in the
dutiable value of the completed ties will include an allowance
for the cost or value of the fabric components.
In Headquarters Ruling Letter ("HRL"), dated September 16,
1996, Customs determined that by operation of section 10.25,
ladies' blazers assembled in a Caribbean country using lining
fabric imported from Lithuania and cut-to-shape in the U.S.
qualified for the partial duty exemption available under
subheading 9802.00.80, HTSUS, when returned to the U.S.
Similarly, in HRL 559702, dated July 12, 1996, the presence of
foreign origin fabric cut to shape in the U.S. did not preclude
the application of subheading 9802.00.80, HTSUS, to trousers and
pants assembled in the Dominican Republic. By contrast, in HRL
560380, dated June 17, 1997, Customs found that in the overseas
assembly of sweat bands, the processing of foreign fabric in the
U.S., which included cutting the fabric only to width, did not
meet the requirements under section 10.25, as that provision
specifically excludes from entitlement to its benefits textile
components which are cut to length, width or both in the U.S.
Upon importation of the completed article, the cost or value of
the foreign origin sweat band liner was not excluded from the
dutiable value of the sweat band.
Based upon the information submitted, Customs is of the
opinion that cutting the foreign fabrics in the U.S. to shapes
(not just length and width) specifically dedicated for the use as
tie components meets the requirements of section 10.25, Customs
Regulations. Accordingly, notwithstanding that the foreign
fabrics cut in the U.S. are not a "product of" the U.S., pursuant
to 19 U.S.C. 3592(b)(4) and section 10.25, Customs Regulations,
the ties made with those components in the Dominican Republic may
qualify for the partial duty exemption provided for in subheading
9802.00.80, HTSUS, for the cost or value of those components, as
well as the U.S. origin thread, labels, hook riders, and sku
tickets.
With respect to the U.S. origin packing materials -- the
cardboard insert, pvc bag, cartons, staples and tape --
subheading 9801.00.10, HTSUS, provides duty-free treatment to
U.S. goods exported and returned without having been advanced in
value or improved in condition abroad 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. While some change in the condition of the product while
it is abroad is permissible, operations which either advance the
value or improve the condition of the exported good render it
ineligible for duty-free treatment upon return to the U.S. See
Border Brokerage Company Co. v. United States, 65 Cust.Ct. 50,
C.D. 4052, 314 F. Supp. 788 (1970), appeal dismissed, 58 CCPA 165
(1970).
As with all imported merchandise, the General Rules of
Interpretation ("GRIs") govern classification of goods in the
HTSUS. Specifically, GRI 5(b) states that, "packing materials
and containers entered with the goods therein shall be classified
with the goods if they are of a kind normally used for packing
such goods. However, this provision does not apply when such
packing materials or packing containers are clearly suitable for
repetitive use." Thus, the value of non-reusable containers or
packing materials normally used for packaging goods is considered
a part of the value of its contents. However, Customs has held
that upon submission of satisfactory proof that packing materials
are of U.S. origin and that they are returned without having been
advanced in value or improved in condition while abroad, they
entitled to duty-free treatment under subheading 9801.00.10,
HTSUS. See Headquarters Ruling Letter ("HRL") 731806, dated
November 18, 1988 Further, the act of being filled with its
contents is not considered to constitute an advancement in value
or improvement in condition. Id. In HRL 555144, dated April 9,
1990, Customs held that filling U.S.-origin polyethylene bags
abroad with their contents and stapling or heat sealing them
closed was not considered an advancement in value or improvement
in condition for purposes of entitlement to duty-free treatment
under subheading 9801.00. 10, HTSUS. Consistent with the above,
the carton, pvc bag, cardboard insert, tape and staples will be
entitled to duty treatment under subheading 9801.00.10, HTSUS,
upon entry into the U.S., assuming compliance with the
documentary requirements of section 10.1, Customs Regulations.
MARKING
The marking statute, section 304, Tariff Act of 1930, as
amended (19 U.S.C. 1304), provides that unless excepted, every
article of foreign origin imported in the U.S. shall be marked in
a conspicuous place as legibly, indelibly, and permanently as the
nature of the article (or its container) will permit, in such a
manner as to indicate to the ultimate purchaser in the U.S. the
English name of the country of origin of the article.
For textile articles, such as the ties in question, the
general rules set forth in paragraphs (c)(1) through (5) of
section 102.21, Customs Regulations, which implement section 334
of the Uruguay Round Agreements Act, will be used to determine
the country of origin for marking purposes. See 60 FR 46188
(September 5, 1995). Section 102.21(c)(1), Customs Regulations
(19 CFR 102.21(c)(1)) provides that "[t]he country of origin of a
textile or apparel product is the single country, territory, or
insular possession in which the good was wholly obtained or
produced." Because the ties in this case are assembled in the
Dominican Republic from components of U.S. and foreign origin,
they are not wholly obtained or produced in a single country,
territory, or insular possession. Thus, section 102.21(c)(1) is
not applicable.
Section 102.21(c)(2), Customs Regulations (19 CFR
102.21(c)(2)), provides:
[w]here the country of origin of a textile or
apparel product cannot be determined under
paragraph (c)(1) of this section, the country
of origin of the good is the single country,
territory, or insular possession in which
each foreign material incorporated in that
good underwent an applicable change in tariff
classification, and/or met any other
requirement, specified for the good in
paragraph (e) of this section.
The applicable rule under 102.21(e), Customs Regulations (19
CFR 102.21(e)), for the imported ties classifiable under heading
6215 is:
6215-6217 (1) If the good consists of two or
more component
parts, a
change to
an
assembled good
of heading
6215
through
6217 from unassembled
components, provided
that the change is
the result
of being
wholly
assembled in a
single
country,
territory
or insular
possession.
Because the ties are wholly assembled in the Dominican
Republic from two or more component parts, the terms of the rule
are satisfied. Accordingly, the country of origin of the
finished ties is the Dominican Republic.
In that regard, section 134.43(e), Customs Regulations (19
CFR 134.43(e)), provides that:
[w]here an article is produced as a result of
an assembly operation and the country of
origin of such article is determined under
this chapter to be the country in which the
article was finally assembled, such article
may be marked, as appropriate, in a manner
such as the following:
(1) Assembled in (country of final assembly);
(2) Assembled in (country of final assembly) from
components of (name of country or countries of
origin of all
components); or
(3) Made in, or product of, (country of final
assembly).
See 61 FR 28936 and 28957. Therefore, since the ties will be
produced as a result of an assembly operation and their country
of origin is determined under section 102.21 to be the Dominican
Republic, the ties may be marked in any manner consistent with
section 134.43(e). Please note, however, any fabric cut to shape
in the U.S. will not be considered a U.S. component, and cannot
be identified as such in any labels or marking on the imported
ties
HOLDING:
Based upon the information submitted, the men's neckties
assembled in the Dominican Republic using foreign fabric
components cut to shape in the U.S. are eligible for a duty
exemption under subheading 9802.00.80, HTSUS. The packing
materials are eligible for duty free treatment under subheading
9801.00.10, HTSUS, assuming compliance with the documentary
requirements of section 10.1, Customs Regulations. To the extent
they are wholly assembled in the Dominican Republic, the ties may
be marked with their country of origin in any manner consistent
with section 134.43(e), Customs Regulations.
A copy of this ruling letter should be attached to the entry
documents filed at the time this merchandise is 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