CLA-2 RR:TC:SM 560380 BLS
Daniel Cavazos, Esq.
Cacheaux, Cavazos, Newton, Martin & Cukjati, L.L.P.
1300 10th Street
McAllen, Texas 78501
RE: Applicability of subheading 9802.00.80, HTSUS, to fabric
sweatbands;
substantial transformation; subheading 6307.90; 19 U.S.C.
3592(b)(4)
19 CFR 10.25
Dear Mr. Cavazos:
This is in reference to your letter dated March 25, 1997, on
behalf of Western Textile Products Company, requesting a ruling
that certain fabric sweatbands imported from Mexico will be
entitled to the partial duty exemption under subheading
9802.00.80, Harmonized Tariff Schedule of the United States
(HTSUS), upon return from Mexico.
FACTS:
You state that the sweatband is comprised of the following
components:
1. U.S.-origin non-woven fabrics slit to specific
width and wound into 100
yard rolls;
2. U.S.-origin polyfilm slit to specific width and
wound into 100 yard rolls.
3. U.S.-origin thread.
4. A bias formed sweat band liner.
The sweat band liner is produced in the U.S. in the
following manner:
a. Greige woven cotton fabric of Pakistani or Chinese
origin is sent to
- 2 -
finishers where it is prepared for dyeing and finishing
by desizing or bleaching to remove
impurities.
b. The bleached fabrics are dyed.
c. The dyed fabrics are sent through a finishing
process which consists of heat setting and
chemical treatment if required.
d. The dyed and finished fabrics are then sewn into a
tubular form.
e. The tubular sewn fabric is then re-opened on a
bias-cutting machine.
f. The bias-formed fabric is slit to specific widths
and wound into 100 yard
rolls ready for export.
The rolls of the sweat band liner and other fabrics will be
exported to Mexico for processing. In Mexico, the components
will be unwound from the rolls in which they are exported. The
liner will be assembled with the other components by folding and
sewing the seams of the liner and trimming when necessary. The
sewn articles will then be inspected, rewound into 100 yard
rolls, and packed for return to the U.S.
ISSUES:
1. Whether the sweat band liner is considered a fabricated
component of the U.S. for purposes of determining whether it is
eligible for the duty allowance under subheading 9802.00.80,
HTSUS.
21. Whether the completed sweat bands will be entitled to
the partial duty exemption under subheading 9802.00.80, HTSUS,
upon importation into the U.S.
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
- 3 -
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 value of the assembled article, less the cost or
value of such U.S. components, upon compliance with the
documentary requirements of section 10.24, Customs Regulations
(19 CFR 10.24).
Section 10.14(a), Customs Regulations (19 CFR 10.14(a)),
provides in part that:
[t]he 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.
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 that component. See, 19 CFR 10.16(c).
Trimming, filing, or cutting off of small amounts of excess
materials is considered an operation incidental to assembly. See
19 CFR 10.16(b)(4).
Non-Woven Fabrics, Polyfilm, Thread
We find that under the facts presented, all three
requirements of subheading 9802.00.80, HTSUS, will be satisfied
with respect to the U.S.-origin non-woven fabrics, U.S.-origin
polyfilm, and U.S.-origin thread. The foreign operations that
entail sewing together the polyfilm and non-woven fabrics, and
trimming excess material, are acceptable assembly operations, or
operations incidental to assembly. See Headquarters Ruling
Letter (HRL) 557364 (July 19, 1993) and HRL 559341 (dated
November 21, 1995). Rewinding the sewn articles onto rolls is
also
- 4 -
considered an acceptable assembly operation. See General
Instrument Corporation v. United States, 61 CCPA 86, C.A.D. 1128,
499 F.2d 1318 (1974), rev'g, 70 Cust.Ct. 151, C.D. 4421, 359 F.
Supp. 1390 (1973), which held that winding of wire around a core
is considered an acceptable assembly operation.
Sweat Band Liner
On December 8, 1994, the President signed into law the
Uruguay Round Agreements Act. Section 334 of that Act (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 (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(c)(1) (19 CFR 102.21(c)(1)) provides that
"The 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." As the subject
merchandise is not wholly obtained or produced in a single
country, territory or insular possession, paragraph (c)(1) of
section 102.21 is inapplicable.
Section 102.21(c)(2) (19 CFR 102.21(c)(2)) provides that
"Where 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 the 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 subject sweat band liner is classifiable under
subheading 6307.90, HTSUS,
"Other made up articles, including dress patterns:...Other."
Section 102.21(e) (19 CFR 102.21(e)) provides that "The following
rules shall apply for purposes of determining the country of
origin of a textile or apparel product under paragraph (c)(2) of
this section:"
6307.90 The country of
origin of a good classifiable under
subheading
6307.90 is the country, territory, or
insular
possession in which the fabric comprising
the good was
formed by a fabric-making process.
- 5 -
As the fabric-making process for the sweat band liner occurs
in a single country, it is considered a product of either
Pakistan or China, where such fabric-making process takes place.
Section 334(b)(4)(A) of the Act (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 no longer be available under the section 334
origin rules since cutting fabric in the U.S. will no longer
result in the cut fabric being considered a "product of" the U.S.
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.
Therefore, imported goods entitled to a duty allowance under 19
CFR 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."
The issue we must now resolve is whether the processing of
the foreign-origin sweat band liner in the U.S. satisfies the
requirements of 19 CFR 10.25, so that a reduction in the dutiable
value of the completed sweat band will include an allowance for
the cost or value of the sweat band liner. In this regard, as
described above, the operations in the U.S. on the foreign-origin
fabric used to produce the liner include sewing the fabric into a
tubular form, re-opening the fabric on a bias-cutting machine,
slitting to width, and winding the liner onto rolls.
We find that the processing of the foreign fabric in the
U.S., which includes cutting the fabric only to width, does not
meet the requirements under 19 CFR 10.25, as this provision
specifically excludes from entitlement to its benefits textile
components which are cut to length, width or both in the U.S.
Accordingly, upon importation of the completed article, the cost
or value of the foreign-origin sweat band liner will not be
excluded from the dutiable value of the sweat band.
- 6 -
HOLDING:
Based on the information presented, fabric sweat bands
imported from Mexico will be entitled to the partial duty
exemption under subheading 9802.00.80, HTSUS, with an allowance
in duty for the cost or value of the U.S.-origin non-woven
fabrics, polyfilm, and thread, upon compliance with the
documentation requirements of 19 CFR 10.24. An allowance in duty
will not be permitted for the Chinese or Pakistani origin sweat
band liner, as this textile component does not satisfy the cut to
shape requirements under 19 CFR 10.25.
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