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HQ 555128


January 9, 1989

CLA-2 CO:R:C:V 555128 GRV

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80, HTSUS (formerly 807.00, TSUS)

Mr. Doug Coath, Jr.
Frank W. Winne & Son, Inc.
44 North Front Street
Philadelphia, Penn. 19106

RE: Applicability of partial duty exemption under HTSUS sub- heading 9802.00.80 to 3-strand twisted and 8-strand braided rope to be imported from South Korea.553593;554531;553953; classification;dutiability;subchapter II, Chapter 98, HTSUS.

Dear Mr. Coath:

This is in response to your letters of September 14, 1988, requesting rulings on the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS) (formerly item 807.00, Tariff Schedules of the United States (TSUS)), to 3-strand twisted and 8-strand braided rope to be imported from South Korea after processing. A sample of the 3-ply nylon yarn to be exported was submitted for examination. You also request information concerning the manner in which Customs duties would be calculated, assuming that HTSUS sub-heading 9802.00.80 applies.

FACTS:

You state that 3-ply nylon rope yarn of U.S. manufacture will be exported to South Korea in 15 pound tubes (each tube contains 9,000 continuous feet of yarn). In South Korea, 30 of these tubes of yarn will be connected to a rope machine which will first twist the 30 yarn fibers into 3 strands of 10 yarn fibers each and then twist the 3 strands into a 3-strand twisted rope. The 3-strand twisted rope will then be cut into lengths of 600 feet and wound onto spools for return to the U.S.

You also state that 3-ply nylon rope yarn will be plaited (braided) into 8-strand nylon rope.

ISSUE:

Whether the 3-strand twisted rope and/or the 8-strand braided rope will be eligible for the partial duty exemption provided for under subheading 9802.00.80 (Harmonized Tariff Schedule of the United States (HTSUS)) when returned to the U.S.

LAW AND ANALYSIS:

As you may know, the HTSUS replaced the TSUS, effective January 1, 1989. TSUS item 807.00 was carried over into the HTSUS without change as subheading 9802.00.80. This tariff provision provides a partial duty exemption for articles:

[a]ssembled 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.

An article entered under HTSUS subheading 9802.00.80 is subject to duty upon the full value of the imported assembled article less the cost or value of such U.S. components, upon compliance with the documentary requirements of section 10.24 of the Customs Regulations (19 CFR 10.24).

Section 10.16(a), Customs Regulations (19 CFR 10.16(a)), provides, in part, that:

The assembly operations 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....

We have previously held that the mere twisting of exported yarn into twine or rope represented a combining or joining of components in an acceptable assembly operation for purposes of TSUS item 807.00. See, Headquarters Ruling Letters (HRL) dated May 16, 1985 (HQ 553593) and May 29, 1987 (HQ 554531). However, we stated that passing yarn through braiding machines to produce braided rope and cordage is analagous to weaving fabrics from spun yarn and, therefore, is considered a manufacturing process that is not within the contemplation of TSUS item 807.00.

In the instant case, the 3-ply nylon rope yarn to be exported will first be twisted into strands of 10 yarn fibers each and then three of those strands will be twisted together to form 3-strand twisted rope. Consistent with our prior rulings on this subject, we are of the opinion that the twisting of the 3-ply yarn into 3-strand twisted rope constitutes an acceptable assembly operation for purposes of HTSUS subheading 9802.00.80. Moreover, cutting the rope to individual lengths is considered
an operation which is incidental to the assembly process. See, 19 CFR 10.16(b)(6).

However, braiding the 3-ply nylon rope yarn into 8-strand plaited rope does not constitute an acceptable assembly operation as we previously advised you in HRL dated December 23, 1985 (HQ 553953).

In regard to your inquiry concerning the manner in which duty would be calculated for the returned rope, you state that it is your understanding that the duty rate on twisted nylon rope is 12 1/2 cents per pound plus 15 percent ad valorem. You estimate that the cost of the yarn will be $1.00 per pound FOB U.S. port of exportation, ocean freight costs from the U.S. to South Korea will be $.10 per pound, the processing in Korea will cost $.20 per pound, and the return ocean freight costs will be $.10 per pound.

Under the HTSUS, twisted nylon rope is classifiable under subheading 5607.50.20, with duty at the rate of 27.6 cents per kilogram plus 15 percent ad valorem, and braided nylon rope is classifiable under subheading 5607.50.40, with duty at the rate of 7.2 percent ad valorem. As we stated earlier, merchandise entitled to HTSUS subheading 9802.00.80 treatment is subject to duty upon the full value of the imported article less the cost or value of components of U.S. origin. U.S. Note 4(b), subchapter II, Chapter 98, HTSUS, provides in regard to HTSUS subheading 9802.00.80 that if the imported assembled article is subject to a specific or compound rate of duty, the total duties shall be reduced in such proportion as the cost or value of the U.S. components bears to the full value of the imported article.

Therefore, it is necessary first to determine the "full" or appraised value of the imported assembled article. Under the circumstances of this case, if we assume that the twisted nylon rope will be appraised on the basis of transaction value (19 U.S.C. 1401a(b)), the appraised value would equal the cost of the assembly operation, plus the value (as an assist) of the nylon rope yarn to be provided to the Korean assembler. The value of the assist would include the cost of transporting the rope yarn to the production facility in South Korea. The appraised value of the imported rope would not include charges incurred in connection with the international shipment of the rope from South Korea to the U.S.

Once the appraised value of the imported twisted nylon rope is determined, the "total" duties applicable to the imported rope would be calculated pursuant to HTSUS subheading 5607.00.20 (27.6 cents per kilogram plus 15 percent ad valorem). Pursuant to HTSUS subheading 9802.00.80 and U.S. Note 4(b), subchapter II,

Chapter 98, HTSUS, these duties would be reduced in such proportion as the cost or value of the U.S. nylon rope yarn bears to the full appraised value of the imported rope. This results in the actual duty liability for the imported rope.

HOLDING:

On the basis of the described assembly operation, it is our opinion that the 3-strand twisted rope to be imported will be entitled to the partial duty exemption under HTSUS subheading 9802.00.80, upon compliance with the requirements of 19 CFR 10.24. Allowances in duty may be made under this tariff provision for the cost or value of the nylon rope yarn of U.S. origin to be exported to South Korea. However, the 8-strand plaited rope will not qualify for the partial duty exemption under HTSUS subheading 9802.00.80, as plaiting (braiding) is considered a manufacturing process. Thus, the 8-strand plaited rope will be dutiable on its full value.

Sincerely,


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