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HQ 555612


September 13, 1990

CLA-2 CO:R:C:V 555612 GRV

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Leslie Alan Glick, Esq.
Porter, Wright, Morris & Arthur
1233 20th Street, N.W., 4th Floor
Washington, D.C. 20036-2395

RE: Partial Reconsideration of Customs Headquarters Ruling Letter 555214 (December 26, 1989)

Dear Mr. Glick:

This is in response to your letter of March 15, 1990, on behalf of Tyrone Art, Inc., requesting partial reconsideration of Headquarters Ruling Letter (HRL) 555214 (December 26, 1989). That ruling held, in relevant part, that while wood and aluminum picture frame materials, exported in continuous lengths and cut- to-length abroad, would be eligible for the duty allowance available under subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), the plastic border material, exported in a straight, pre-notched condition and hand-wrapped around the 3-part picture print sandwich, would not be eligible for the duty exemption under this tariff provision. You request that we reconsider that portion of the ruling which found the plastic border material ineligible for the duty exemption under HTSUS subheading 9802.00.80. Additional samples of the plastic border material were submitted for examination.

FACTS:

In HRL 555214, we considered, in part, whether three U.S. component materials--wood, aluminum and plastic--used to create picture frames would qualify for HTSUS subheading 9802.00.80 tariff treatment. Although all three materials would be exported in straight or continuous lengths, we found that only the miter cut-to-length wood and aluminum moldings would qualify for the duty exemption, as the cutting operation was considered incidental to the assembly process rather than further fabrication. However, we found that the hand-wrapping, i.e., bending, of the pre-notched, "one piece [plastic] wrap" around the 3-part sandwich of common components created the component to be assembled, and constituted further fabrication, citing Samsonite Corporation v. United States, Slip Op. 88-166, 12 CIT ___, 702 F.Supp. 908 (1988) (aff'd, 8 Fed.Cir. ___, 889 F.2d 1074 (1989), reh'g denied In Banc, (January 25, 1990)). Accordingly, we held that the plastic border material would not be eligible for the duty exemption under HTSUS subheading 9802.00.80. We also indicated that HRL 815445 dated November 5, 1986, which allowed the duty exemption for straight brass strips that were bent abroad to form a photo frame, no longer reflected the position of the Customs Service on the issue of bending, in view of the court's holding in the Samsonite decision.

In your letter of March 15, 1990, you state that "this denial was erroneous" because the hand-wrapping of the plastic border material around the picture print sandwich is a minor operation incidental to the assembly process that cannot be performed in the U.S. prior to exportation. You add that another reason the plastic border material is exported as straight pieces of plastic "is due to economies for shipping purposes." You also state that this hand-wrapping process is distinguishable from the automated four-step process to which the steel strips were subjected in Samsonite, wherein "the strips were bent by machine ...." (Your emphasis). Again, you reference HRL 815445, as allowing the bending operation in the case of pre-notched brass picture frames, and, lastly, you suggest that the process of bending the frame to fit around the glass and picture is, in itself, a separate assembly operation.

ISSUE:

Whether the U.S. plastic border material, exported in a straight, pre-notched condition to be hand-wrapped, i.e., bent, around a picture print sandwich to create the picture frame, is eligible for the partial duty exemption under HTSUS subheading 9802.00.80.

LAW AND ANALYSIS:

HTSUS subheading 9802.00.80 provides a partial duty exemp- tion for:

[a]rticles assembled abroad in whole or in part of fab- ricated 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 HTSUS subheading 9802.00.80 must be satisfied before a component may receive a duty allowance. 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 19 CFR 10.24.

Fabricated components subject to the exemption are provided for at 19 CFR 10.14(a), which provides, in part, that:

[t]he components must be in condition ready for assembly without further fabrication at the time of their exporta- tion from the United States to qualify for the exemption. .... Materials undefined in final dimensions and shapes, which are cut into specific shapes or patterns abroad are not considered fabricated components.

The correct starting point for the application of HTSUS sub- heading 9802.00.80 is the components as "exported," in the condi- tion in which they leave the U.S. See, E. Dillingham, Inc., v. United States, C.D. 4278, 67 Cust.Ct. 226, (1971), modified, C.A.D. 1078, 60 CCPA 39, 470 F.2d 629 (1972). This judicial approach to the applicability of HTSUS subheading 9802.00.80, suggests a sequential framework of analysis, wherein clause (a) looks to the condition of the component at the time of export, whereas clauses (b) and (c) look exclusively to the nature of the operation(s) performed abroad on the finished U.S. components. Therefore, the first hurdle to clear in qualifying an article for HTSUS subheading 9802.00.80 treatment is to determine whether the U.S. components are finished components, ready for assembly at the time of their export from the U.S. See also, Zwicker Knitting Mills v. United States, C.D. 4786, 82 Cust.Ct. 34, 469 F.Supp. 727 (1979), aff'd, C.A.D. 1240, 67 CCPA 37, 613 F.2d 295 (1980).

As there is no one, all-embracing definition of what steps or processes constitute "further fabrication" within the meaning of this statutory provision, whether a particular foreign pro- cess constitutes a "further fabrication" depends upon the facts of the particular case. See, Zwicker Knitting Mills. For textile cases in general, the courts have observed that sewing and knitting operations constitute a further fabrication only if they create the basic article, and, in making this determination, the courts look not only at the condition of the exported compo- nent, but at the nature of the foreign operation involved. See, E. Dillingham, and, L'Eggs Products, Inc., v. United States, 13 CIT ____, 704 F.Supp. 1127 (1989).
In Samsonite the court considered whether steel strips that were exported for incorporation into luggage were exported in condition ready for assembly without further fabrication. The strips were exported in a straight condition. Once abroad, the strips were bent by machine into a form analogous to a square- sided letter C and subjected to other operations prior to becoming the bottom plates of completed "frame assemblies." As the straight strips of steel could not be placed immediately into the assembly of the luggage bags without the bending operation, the court found that the strips were not exported in condition ready for assembly. In considering whether the mere bending of the strips was an incidental operation, the court found that the bending process did more than "adjust" (19 CFR 10.16(b)(5)) the article, but rather created the component to be assembled, the essence of which was its configuration. Address- ing plaintiff's attempt to equate "incidental" with "insignifi- cant" and thereby argue that the bending process was a minor one allowable under item 807.00, Tariff Schedules of the United States (TSUS) (the precursor provision to HTSUS subheading 9802.00.80), the court stated that:

[t]he magnitude of a particular process in terms of time and cost, however, does not make that process any less one of fabrication, nor does it make the result thereof any less significant.

Accordingly, the court upheld Customs denial of the duty deduc- tion under TSUS item 807.00 for the value of the steel strips.

On appeal, the appellate court affirmed the trial court's determination and added, at page 1077, that:

[t]he critical inquiry in determining whether fabrica- tion rather than mere assembly took place here, is not the amount of processing that occurred..., but its nature. (Emphasis supplied).

The nature of the processing that occurred in Samsonite was the bending of straight steel strips into a special configura- tion, which was found to constitute a further fabrication of the U.S. component exported. The nature of the operation performed in this case is the same--bending the straight, pre-notched plastic strip into a special configuration suitable for picture frames. Accordingly, we continue to believe that our previous ruling, adopting the Samsonite bending process rationale to the plastic border material in this case, was correct and adhere to it. As to the difference in the method of bending between the Samsonite case and this case, i.e., machine-bending versus hand- wrapping, we do not consider this difference to be material, as the thrust of Samsonite spoke to a bending process which created the component to be assembled.

HOLDING:

For the reasons set forth above, we remain of the opinion that the U.S. plastic border material, exported in a straight, pre-notched condition to be hand-wrapped, i.e., bent, around a picture print sandwich to create the picture frame, is not exported in condition ready for assembly without further fabri- cation, as required by clause (a) of HTSUS subheading 9802.00.80. Therefore, no allowance in duty may be made under this tariff provision for the cost or value of the plastic border material. HRL 555214 is affirmed.

Sincerely,


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