CLA-2-05 RR:TC:SM 559702 DEC
Mr. Arthur W. Bodek
Siegel, Mandell & Davidson, P.C.
1515 Broadway - 43rd Floor
New York, New York 10036
RE: 19 CFR 10.16; HRL 558819; HRL 555686; HRL 555008; HRL
554939;
HRL 554676; HRL 554232; HRL 554599; HRL 554497; HRL 554582;
United States v. Mast Industries, Inc., 515 F. Supp. 43 (CIT
1981), aff'd
69 CCPA 47, 668 F.2d 501 (1981); General Motors Corp. v.
United States,
976 F.2d 716, 719 (Fed. Cir. 1992); Samsonite Corp. v.
United States, 702
F. Supp. 908, 911 (1988), aff'd, 889 F.2d 1074 (1989); 19
U.S.C. 334;
19 CFR 10.25
Dear Mr. Bodek:
This is in response to your letter dated February 15, 1996,
on behalf of Liz Claiborne, Incorporated (Liz Claiborne) in which
you seek a ruling regarding the eligibility of garments subjected
to an enzyme wash process for the partial duty exemption under
subheading 9802.00.80, Harmonized Tariff Schedule of the United
States (HTSUS).
FACTS:
You indicated in your submission that Liz Claiborne is
contemplating the importation of trousers and/or shorts which are
to be assembled in the Dominican Republic. The fabric from which
the components will be cut to size and shape in the United States
will be of U.S. origin. Alternatively, you requested
telephonically that Customs also address the use of foreign
fabric imported into the U.S. and cut to shape prior to the
assembly operation in the Dominican Republic. The garments will
also be subjected to one of two types of enzyme-washing processes
while abroad.
The first wash process will be used on black denim trousers
or shorts. The second wash process will be used on khaki twill
trousers or shorts. You have submitted samples of both the denim
material and the khaki twill material before and after the wash
process has been conducted.
The first cycle of the wash process of the black denim
garments will involve the washing of the black denim shorts or
trousers in hot water (140 Fø) and 0.25% detergent (the
percentage figures refer to the weight of the substance relative
to the unwashed (dry) garments) for five minutes. You state that
the detergent that will be used is approximately twice the
strength of an ordinary detergent available in a supermarket.
The second cycle will involve the addition of a 2% buffer
solution to the washing machine to maintain a steady pH level
during the washing process. An enzyme softener will be added
(1.0% Collase 225) and the garments will be washed for an
additional 45 to 60 minutes after which the washing machine will
be drained. Subsequently, the washing machine will be refilled
with hot water (100 Fø) and the garments will be washed for two
minutes and the machine will be drained. The washing machine
will be refilled again with hot water (100 Fø) and then a
silicone-based softener (3% Sandoperm ME) will be added to the
hot water as will acetic acid in order to maintain a stable pH
level. The garments will then be washed for 10 minutes, the
washing machine will be drained, and the garments will then be
tumbled dry.
The first cycle of the wash process of the khaki twill
garments will involve the washing of the khaki twill shorts or
trousers in hot water (140 Fø) for five minutes. The second
cycle will involve the addition of a 2% buffer solution to the
washing machine to maintain a steady pH level during the washing
process. After adding 1.5% an enzyme softener (1.5% Collase
225), the garments will be washed for an additional 45 to 60
minutes after which the washing machine will be drained.
Subsequently, the washing machine will be refilled with hot water
(100 Fø) and the garments will be washed for two minutes and the
machine will be drained. The washing machine will be refilled
again with hot water (120 Fø) and then a cationic softener (2%
Ultrasoft LSF), a silicone-based softener (Vicrosoft 342), and
acetic acid will be added. The garments will then be washed for
15 minutes and the washing machine will be drained and the
garments will then be tumbled dry.
You state that the importer estimates that the wash process
applied to the black denim garments or the khaki twill garments
accounts for less than 10% of the total assembler's charge. The
purpose of the wash processes, you state, is to clean and soften
the garments.
ISSUE:
Whether the garments subjected to the wash processes as
described above will qualify for the partial duty exemption
available under subheading 9802.00.80, HTSUS, when returned to
the United States.
LAW AND ANALYSIS:
Subheading 9802.00.80, Harmonized Tariff Schedule of the
United States (HTSUS) provides for 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 United States components assembled
abroad, provided the section 10.24, Customs Regulations (19 CFR
10.24), documentary requirements are satisfied.
If Liz Claiborne uses U.S.-origin fabric that will be cut to
shape in the U.S. and then exported to be assembled into either
the black denim or the khaki twill garments, the exported garment
pieces will be products of the U.S. Should Liz Claiborne use
foreign-origin fabric that is cut to shape in the U.S., the
exported pieces will not be considered products of the U.S. (See
Uruguay Round Agreements Act ("URAA"), Pub. L. No. 103-465, 108
Stat. 4809. Subtitle D of Title III of URAA deals with textiles
and includes section 334 (codified at 19 U.S.C. 3592, which
concerns rules of origin for textile and apparel products).
Customs published a final rule on September 5, 1995, in the
Federal Register (60 Fed. Reg. 46188) setting forth the final
amendments to implement the provisions of section 334 of the URAA
relating to the country of origin of textile and apparel
products. These amendments became effective on July 1, 1996, and
are set forth in section 102.21, Customs Regulations (19 CFR
102.21)). In promulgating section 10.25, Customs Regulations (19
CFR 10.25), which implements the duty allowance provided under
section 334(b)(4)(A) for textile components cut in the U.S. from
foreign fabric, Customs stated:
Under 334(b)(4)(A), where goods are assembled abroad
from
components cut in the United States from foreign fabric
(even
though under 334 rules the cut components are not
products
of the United States and the assembling country is the
country
of origin), the assembled goods, when imported into the
United
States, will continue to receive the same duty
treatment presently
accorded to such goods under subheading 9802.00.80,
HTSUS. ...
334(b)(4) serves to preserve a tariff treatment that
otherwise
would no longer be available under 334 origin
rules....
Section 10.25 incorporates by reference the same
operational, valuation, and documentation requirements applicable
to goods entered under subheading 9802.00.80, HTSUS.
Accordingly, Customs already has expressed its intent to continue
to allow entry of these goods under subheading 9802.00.80, HTSUS,
on and after July 1, 1996. Thus, Customs will allow entry of
goods assembled abroad from textile components cut to shape from
foreign fabric in the U.S. to be made under subheading
9802.00.8065, HTSUS, and, solely for purposes of calculating the
duty allowance under this subheading, Customs will treat these
textile components as if they were "U.S. fabricated components."
It is important to note, however, that Customs allowance of
entry under subheading 9802.00.80, HTSUS, in order to implement
the duty allowance provided under section 334(b)(4), should not
be interpreted as a determination of the country of origin of
these cut components. The determination of the country of origin
of textile components cut in the U.S. from foreign fabric will be
made under a general application of the section 334 rules of
origin.
In regard to the issue of whether the wash process described
above qualifies as an operation incidental to the assembly,
section 10.14(a), Customs Regulations (19 CFR 10.14(a)), states,
in part, that
The components must be in condition ready for assembly
without further
fabrication at the time of their exportation from the
United States to
qualify for the exemption. Components will not lose
their entitlement to
the exemption by being subjected to operations
incidental to the
assembly either before, during, or after their assembly
with other
components.
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 that
component. See 19 CFR 10.16(c). According
to 19 CFR 10.16(c)(4), the chemical treatment of components or
assembled articles to impart new characteristics, such as
shower-proofing, permapressing, sanforizing, dying or bleaching
of textiles, is not considered incidental to the assembly
process, although 19 CFR 10.16(b)(1) states that cleaning is an
example of an operation which is incidental to assembly.
Consistent with the above regulation, Customs has held that
operations such as stone-washing, acid-washing and ovenbaking are
not incidental to the assembly process and preclude subheading
9802.00.80, HTSUS, treatment to the U.S. components subjected to
such an operation. See, Headquarters Ruling Letter (HRL) 555686,
dated July 23, 1990; HRL 555008, dated March 24, 1990; and HRL
554939, dated November 15, 1988.
In HRL 554676, dated November 23, 1987, dyed denim fabric
was assembled into wearing apparel articles in the Dominican
Republic, and then washed in a washing machine. It was stated
that the washing not only cleaned the newly assembled garments of
dust and dirt but also of the excess dye, which would prevent the
dye from running and staining other garments during the first
washing. The detergents used in the foreign washing cycle were
either plain high strength detergent or high strength detergent
containing about 10 percent bleach substance. It was held that
washing the textile articles with high strength detergent was a
process analogous to cleaning, and considered incidental to
assembly; however, washing with a high strength detergent
containing a 10 percent bleach was regarded as too substantial to
be treated as merely
incidental. The bleaching changed the color of the exported
fabric, similar to dyeing fabric, and was not considered an
incidental operation. In HRL 554232, dated August 25, 1986,
bleaching and softening exported fabric was also regarded as too
substantial to be treated as merely incidental because there was
not only a change in color, but a change in texture as well.
The foregoing rulings are distinguished from HRL 554599,
dated June 8, 1987, which held that washing garments in a fabric
softener and pressing them were operations incidental to
assembly, because the inclusion of a softener in the wash cycle
was considered a part of the cleaning process. The softener was
also comparable to commercial softeners available to retail
consumers. Furthermore, in HRL 554695, dated June 16, 1989, it
was held that washing garments, which were assembled in the
Dominican Republic or Costa Rica, with a detergent and softener
in hot water without any bleach constituted a minor procedure
with minimal change in color. It was stated that the washing
process removed sizing and excess pigment from the fabric and
merely constituted a cleaning operation. The same conclusion was
reached in HRL 554497, dated March 18, 1987, which involved
washing assembled garments in a commercial laundry using a
standard detergent and softener, and tumble drying and lightly
pressing them, and in HRL 554582, dated March 12, 1987, which
involved garments washed in an industrial machine utilizing an
alkaline detergent and fabric softener.
In HRL 558819, dated March 29, 1995, Customs determined that
a visual inspection of the sample garment after being subjected
to a "pigment wash" process clearly indicated that prominent
fading had occurred. In applying the standards for permissible
subheading 9802.00.80, HTSUS, operations that are incidental to
assembly, Customs concluded that the "pigment wash" imparted a
significant new characteristic to the garment at issue, e.g. a
very prominent fading and acid-wash appearance. Notwithstanding
the importer's claims that no bleaching agents, oxidants, or
perborates were used in the "pigment wash" process or that the
fabric was specially treated, it was clear that as a result of
the pigment wash, the garment possessed a significant new
characteristic. HRL 558819 also addressed a "silk wash" process.
Unlike the "pigment wash" which produced an inconsistent fading
and streaking in the garment, the "silk wash" yielded a garment
that was uniformly and mildly faded from the pre-wash garment and
that was only slightly softer to the touch. We were satisfied
that the "silk wash" was incidental to the assembly process and
did not impart a significant new characteristic to the garment.
In United States v. Mast Industries, Inc., 515 F. Supp. 43,
(CIT 1981), aff'd, 69 CCPA 47, 668 F.2d 501 (1981), the court, in
examining the legislative history of the meaning of "incidental
to the assembly process," stated that
[t]he apparent legislative intent was to not preclude
operations that
provide an "independent utility" or that are not
essential to the
assembly process; rather, Congress intended a balancing
of all
relevant factors to ascertain whether an operation of a
"minor nature"
is incidental to the assembly process.
The court then indicated that relevant factors included: (1)
whether the relative cost and time required by the operation are
such that the operation may be considered
minor; (2) whether the operation is necessary to the assembly
process; and (3) whether the operation is so related to the
assembly that it is logically performed during assembly. The
Court of Appeals for the Federal Circuit noted in General Motors
Corp. v. United States, 976 F.2d 716, 719 (Fed. Cir. 1992), that
the Mast decision is not to be interpreted "as announcing factors
that must invariably be used to the exclusion of all others, or
that all such factors are pertinent in every case involving
[subheading 9802.00.80, HTSUS]."
With regard to the relative cost and time of an operation,
the trial court in Samsonite Corp. v. United States, 702 F. Supp.
908, 911 (1988), aff'd, 889 F.2d 1074 (1989), 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." On appeal, the
court stated "[t]he critical inquiry in determining whether
fabrication rather than mere assembly took place . . ., is not
the amount of processing that occurred . . ., but its nature."
While the enzyme wash processes in this case produce slight
fading to both the black denim and khaki twill fabric, it is our
opinion that the processing described above serves chiefly as a
cleaning and fabric softening process. Unlike the "pigment
wash," discussed above, which produced an inconsistent pattern of
fading and streaking in the garment that was disallowed as an
operation incidental to assembly in HRL 558819, the wash
processes applied to the black denim and khaki twill fabrics
yield garments that are uniformly and only mildly faded from the
pre-wash garments and which are slightly softer to the touch.
Based on the cost information provided and our conclusion that
the washing processes do not impart a significant new
characteristic to the garments, we are satisfied that these
processes are minor operations incidental to the assembly
process.
HOLDING:
The wash enzyme processes of the black denim and khaki twill
fabric described above are operations incidental to an assembly
operation and will not preclude the application of the subheading
9802.00.80, HTSUS, exemption to the fabric components cut to
shape in the United States, assuming compliance with the
documentary requirements of 19 CFR 10.24.
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