CLA-2 CO:R:C:G 082012 CMR
Assistant District Director
Commercial Operations
Laredo, Texas 78044-3130
RE: Internal Advice Request concerning reclassification of
certain adult diapers, style 2810, medium, and style 2811,
large
Dear Sir:
This request for Internal Advice was initiated by Don P. Newton,
of Border Opportunity Saver Systems (B.O.S.S.), Del Rio, Texas.
FACTS:
B.O.S.S., in conjunction with Johnson & Johnson Products, Inc.,
of New Brunswick, N.J., has submitted redesigned adult diapers--style
2810, medium, and style 2811, large--in order to achieve reclassifi-
cation of these styles as paper products, instead of as articles of
textile. Reclassification is sought for the redesigned diapers
imported prior to January 1, 1989.
Since these articles are not provided for eo nomine, they are
classified according to the component material of chief value.
B.O.S.S. has submitted cost breakdowns for the processing of both
styles for 1986, as a textile product, and 1987, as a paper product.
Samples of B.O.S.S.'s diaper products were submitted for our
review, as well as a video presentation of the assembly process. A
Customs import specialist from the Laredo, Texas office visited the
B.O.S.S. plant in Del Rio, Texas, in July 1987, and supplied us with
a very clear written breakdown of the assembly process.
The diapers are made of processed wood pulp formed into panels
and laminated between a textile facing and an outer cover of
polyvinyl film. Three strands of rubber are laminated between the
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facing and outer cover at the center of the sides for the leg
openings. The diaper panels are shipped from Texas to Acuna, Mexico,
where textile fabric belts with adhesive tabs are hot glued to the
tops and bottoms of the panels.
The changes made in the production of the adult diapers to
achieve reclassification as products of paper include a reduction in
the sizes of the textile belts, an increase of approximately 15
percent in the amount of wood pulp in the product, and an increase in
the cost of the wood pulp component.
Importations of the redesigned diapers began in late March 1987.
B.O.S.S. is requesting reclassification of all entries after April 1,
1987.
On October 6, 1988, Customs attorneys met with representatives
of B.O.S.S., Johnson & Johnson, and their counsel, to discuss the
request for reclassification. Part of the discussion focused on the
point of final assembly in the production process for the purpose of
determining the component material of chief value. While disagreeing
on where the point of final assembly occurs, the representatives of
B.O.S.S. and Johnson & Johnson agreed to submit cost breakdowns which
did not include the costs of the lamination process. The new figures
would include the cost of drying the pulp which had not been included
in the original cost breakdowns, and would not include the costs of
the hampene and perfume. Additionally, waste would be taken into
account since the submitted component costs figures were based on the
amounts of the component materials found in the finished product.
Customs received the new breakdowns in December 1988. These break-
downs included information for styles 2810 and 2811 for the last
three quarters of 1987, and style 2809 which was introduced in the
third quarter of 1987.
ISSUE:
Are styles 2810 and 2811 reclassifiable as products of paper?
LAW AND ANALYSIS:
When determining the component material of chief value, the
fundamental question is establishing the point in the production
process at which the component materials have reached a state where
nothing further needs to be done to them other than to put them
together. United States v. Jovita Perez, 44 CCPA 35, 39, C.A.D. 633
(1957). This stage in the production process has often been referred
to as the point of final assembly. The cost of processing a compo-
nent into a usable form for manufacture into the final product is
added to the value of the component. Swiss Manufactures Association,
Inc. et al. v. United States, 39 Cust. Ct. 227, 233, C.D. 1933
(1957), appeal dismissed, 45 CCPA 129 (1958). Additionally, assembly
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costs which are incurred prior to the point of final assembly are
apportioned between the component materials involved in the assembly.
This apportionment is generally made on the basis of the weight of
the materials.
Customs believes the point of final assembly in the diaper
production process for the purpose of assessing the component
materials of chief value occurs at the lamination stage of the
process. B.O.S.S. and Johnson & Johnson believe the point of final
assembly occurs at the belting stage. However, since the figures
submitted after the October 1988 meeting are based on component
material values prior to lamination and clearly show the diapers to
be in chief value of paper, this disagreement on where the point of
final assembly occurs for assessing component material values is
immaterial.
HOLDING:
Based on the revised figures submitted to Customs on the values
of the component materials of the diapers at issue, all entries of
diaper styles 2809, 2810, and 2811, entered after April 1, 1987, are
reclassified as being in chief value of pulp in item 256.7000, TSUSA.
Articles in this item are duty free.
Sincerely,
John Durant, Director
Commercial Rulings Division
6cc: Area Director, New York Seaport
1cc: CITA
1cc: Legal Reference Section
1cc: Phil Robins
2cc: Chief, C.I.E.
1cc: Regulatory Trade Programs Division
1cc: Southwest Regional Commissioner