CLA-2 CO:R:C:S 557743 BLS
Ms. Rita Taur
Todd Uniform, Inc.
3668 South Geyer Rd.
St. Louis, Missouri 63127
RE: Applicability of subheading 9802.00.80, HTSUS, to embroidery
operation performed on knit shirts
Dear Ms. Taur:
This is in reference to the letter dated November 15, 1993,
from M.G. Maher & Co., on behalf of Todd Uniform, Inc., regarding
the applicability of subheading 9802.00.80, Harmonized Tariff
Schedule of the United States (HTSUS), to an embroidery operation
performed on knit shirts assembled in Costa Rica. In your letter
of March 15, 1994, you advised that our response should be
addressed to your attention, as M.G. Maher & Co. no longer
represents your company. Samples of the merchandise have been
submitted.
FACTS:
A cut-to-shape pellon, thread, and shirt components, all of
U.S.-origin, will be exported to Costa Rica, where they will be
assembled and embroidered by sewing. The pellon backing for the
embroidery is attached to the pocket of the shirt by embroidery,
and then trimmed. The purpose of the pellon backing is to secure
and stabilize the embroidery.
ISSUE:
Whether embroidering the knit shirt pocket using the pellon
backing constitutes an acceptable assembly operation for purposes
of subheading 9802.00.80, 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
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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 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 value of the imported assembled article, less the cost or
value of the U.S. components assembled therein, provided there has
been compliance with the documentary requirements of 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 subheading 9802.00.80, HTSUS,
to the component. See, 19 CFR 10.16(a).
Since we are addressing the applicability of HTSUS subheading
9802.00.80 to the embroidery operation only, we will assume that
the shirts otherwise qualify for treatment under this tariff
provision. In Headquarters Ruling Letter (HRL) 555625 dated August
8, 1990, U.S.-origin thread, knit fabric, and a pellon backing were
shipped to Mexico for an embroidery operation. The pellon backing
was considered necessary to the embroidery operation because,
without the backing, the thread would become entangled in the
embroidery machine making the embroidery operation impossible. The
pellon backing also prevented the embroidery stitch from
unraveling. After the design was complete, the portion of the
pellon backing not caught between the material and embroidered
thread was removed. Based upon C.S.D. 90-28, 24 Cust. Bull. 346
(1990), which held that an embroidered design which penetrated two
or three layers of fabric was an acceptable assembly operation, the
embroidery operation in HRL 555625 was also found to be acceptable
because the embroidery stitch was used to join the knit fabric and
the pellon backing together. In C.S.D. 90-28, the embroidered
design served as a binding agent, as it penetrated two or three
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layers of slipper vamp and served to keep the center of the vamp
from puckering. See L'Eggs Products v. United States, 704 F. Supp.
1127 (CIT) 1989, which held that thread used as a binding agent to
join material to itself qualified as a component and was eligible
for the duty exemption available under subheading 9802.00.80,
HTSUS. See also HRL 557386 dated August 20, 1993, where we held
that an embroidery operation which joined sweatshirt components and
a pellon backing together was an acceptable assembly operation; and
HRL 557733 dated January 14, 1994, where we found that an
embroidery operation used to join shirt components and a tear-away
pellon was an acceptable assembly operation.
The operations in the above-cited cases must be distinguished
from embroidery operations in which the stitching is performed on
one layer of fabric only. In this type of operation, the thread
used to embroider is used to ornament only and not to join or fit
together solid components, as required by HTSUS subheading
9802.00.80. Thus, the mere embroidery of fabric without the
requisite joining of materials does not constitute an acceptable
assembly operation. See e.g., HRL 555565 dated May 14, 1990
(embroidery of a logo onto beach towels does not constitute
acceptable assembly operation), and HRL 071031 dated November 12,
1982 (embroidery designs on fabrics by needling and tufting yarns
onto the fabric is not an acceptable assembly operation).
In the instant case, the embroidery operation is considered
an acceptable assembly operation under subheading 9802.00.80,
HTSUS, since it will be used to join the shirt components and the
pellon backing. Therefore, the shirt components and the thread
will be eligible for the duty allowance under subheading
9802.00.80, HTSUS. However, the pellon backing is not eligible for
the duty allowance under this tariff provision, because nearly all
of it is removed after the assembly operation. (Section
10.16(b)(4), Customs Regulations, 19 CFR 10.16(b)(4), considers
trimming, filing, or cutting off of small amounts of excess
material to be incidental operations.)
HOLDING:
Based on the information submitted, the embroidery operation
used to join the shirt component and the pellon backing is
considered an acceptable assembly operation. However, the removal
of almost all of the pellon backing is not incidental to the
embroidery operation. Therefore, the knit shirts may be entered
under subheading 9802.00.80, HTSUS, with allowances in duty for the
cost or value of the U.S. components (except the pellon backing),
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provided the documentary requirements of 19 CFR 10.24 are satisfied
and the shirts otherwise qualify for subheading 9802.00.80, HTSUS,
treatment.
Sincerely,
John Durant, Director
Commercial Rulings Division
CC: Chief, NIS Branch 5
New York Seaport