CLA-2 RR:TC:SM 559675 KR
V. Hanson
Hanson Holdings, Inc.
P.O. Box 163
Plainview, NY 11803
RE: Applicability of subheading
9802.00.80, HTSUS, to materials used to manufacture slippers.
Dear V. Hanson:
This is in reference to your letter dated February 2, 1996,
concerning the applicability of subheading 9802.00.80, Harmonized
Tariff Schedule of the United States (HTSUS), to bulk fabric and
materials made in the U.S. and shipped to Canada where it is cut
to shape and size, and sewn and/or glued into finished slippers
and returned to the U.S.
FACTS:
You state that you intend to export to Canada fabric and
material in sheets and rolls, fiberfill in bulk rolls, and
elastic on spools. You state that all of the fabric, materials,
fiberfill and elastic are products of the U.S. In Canada, the
above bulk components will be cut and sewn into slippers which
will be packaged and shipped to the U.S. You believe that the
finished slippers being imported into the U.S. are eligible for a
partial duty exemption under HTSUS 9802.00.80. You enclosed
correspondence between Hanson Holdings, Inc., and the U.S.
Customs Service, New York, concerning this importation. This
ruling concerns only the issue of 9802.00.80, HTSUS. A separate
ruling is being issued concerning the NAFTA preference issues.
ISSUE:
Whether the returned finished slippers are entitled to the
partial duty exemption under 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 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 subheading 9802.00.80, HTSUS, is subject to
duty upon the full value of the imported assembled article less
the cost or value of the U.S. components, upon compliance with
the documentary requirements of section 10.24, Customs
Regulations (19 CFR 10.24).
Assembly operations for purposes of HTSUS subheading
9802.00.80 are interpreted at section 10.16(a), Customs
Regulations (19 CFR 10.16(a)), which specifically enumerates
sewing and gluing as acceptable means of assembly. Further, this
section provides that assembly operations may be preceded,
accompanied, or followed by operations incidental to the
assembly.
Operations incidental to the assembly process are not
considered further fabrication, as they are of a minor nature and
cannot always be provided for in advance of the assembly
operation. Examples of operations considered incidental to the
assembly process are delineated at section 10.16(b), Customs
Regulations (19 CFR 10.16(b)), which specifically enumerates
cutting to length of finished components exported in continuous
lengths.
However, any significant process, operation, or
treatment whose primary purpose is the fabrication, completion,
or physical or chemical improvement of a component precludes the
application of the exemption under subheading 9802.00.80, HTSUS.
Section 10.16(c) specifically includes, as an example of an
operation not considered incidental to assembly, "[c]utting of
garment parts according to pattern from exported material".
In HQ 088053 (January 30, 1991), Customs found that uncut
textile fabrics exported in bolts and cut abroad according to a
pattern to make wearing apparel components were not regarded as
fabricated components pursuant to 19 CFR 10.14(a). Customs found
that the U.S. origin fabric exported to Haiti uncut in bolts, and
cut there to length and width to form the top and back components
of a comforter shell constituted a fabrication of the components
abroad. Therefore, no allowance in duty was permitted under
subheading 9802.00.80, HTSUS, for the cost or value of the U.S.
origin fabric, when the comforter shells were imported into the
U.S. See also HQ 555625, (August 8, 1990).
In the instant case, the description of the Canadian
operations shows that the finished slippers to be imported will
not be eligible for the partial duty exemption available under
HTSUS subheading 9802.00.80, except for the value of the elastic.
The U.S. materials are sent to Canada in bulk form where they are
cut to size and shape, except for the elastic which is cut only
to length. The bulk materials have no relationship to the
finished slipper prior to the processing occurring in Canada.
The Canadian processing, other than the processing of the
elastic, is a fabrication which changes the nature of the bulk
materials and is clearly an operation not incidental to the
assembly process under 10.16(c).
Therefore, we find that the slippers imported by Hanson
Holdings, Inc., are entitled to an allowance in duty under HTSUS
9802.00.80, only for the value of the elastic, assuming the
elastic is cut only to length and sewn onto the slipper.
HOLDING:
On the basis of the described foreign operations, the bulk
materials, other than the elastic, undergo a fabrication, and
when the finished slippers are imported into the U.S. they will
be eligible for an allowance in duty under HTSUS subheading
9802.00.80, only for the value of the elastic.
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
Tariff Classification Appeals Division