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HQ 555665


March 11, 1991

CLA-2 CO:R:C:S 555665 DSN

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Mr. Fernando Canto
President, FC Industries, Inc.
Box 30358
65th Inf. Station
Rio Piedras, Puerto Rico 00929

RE: Tariff treatment of denim garments from the Dominican Republic. Stonewashing; zippers, buttons, tickets, thread, incidental assembly 19 CFR 10.16(a), (c)(4); 554939; 555008; 555686

Dear Mr. Canto:

This is in response to your letter dated May 8, 1990, requesting a ruling concerning whether denim garments will be eligible for a duty exemption under subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), when returned to the U.S. from the Dominican Republic. Samples were submitted with your request. We regret the delay in responding.

FACTS:

FC Industries, Inc. intends to manufacture denim wearing apparel which is produced from U.S.-origin cotton. The fabric is cut in the U.S. and is then sent, along with elastic, buttons, zippers, labels, thread, size tickets and other items needed for the assembly process, to the Dominican Republic. In the Dominican Republic, the fabric components, elastic, zippers, and labels, are assembled by sewing, after which the garments are stonewashed. The buttons and size tickets are then attached.

ISSUE:

Whether the denim garments will be eligible for a partial duty exemption under subheading 9802.00.80, HTSUS when returned to 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 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 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 U.S. components assembled therein, upon compliance with the documentary requirements of section 10.24, Customs Regulations (19 CFR 10.24).

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 HTSUS subheading 9802.00.80 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.

Consistent with the above regulation, we have held that operations such as stone-washing, acid-washing and ovenbaking are not incidental to the assembly process and preclude HTSUS subheading 9802.00.80 treatment to U.S. components subjected to such an operation. See, Headquarters Ruling Letters 555686 of July 23, 1990, 555008 of March 24, 1990, and 554939 of November 15, 1988. Therefore, the denim fabric components of the garments in the instant case would be ineligible for a duty allowance under subheading 9802.00.80, HTSUS. However, the various other components such as the buttons, zippers, tickets and thread are not impacted by the stonewashing process and would be eligible for the duty exemption. The stonewashing process is merely incidental to their assembly and has no effect on their intended function.

We do note that our position with respect to stonewashing is subject to review by this agency pending the outcome of General Motors v. United States, No 87-03-00471. In that case, the Court of International Trade is reviewing Customs denial of item 807.00, Tariff Schedules of the United States (TSUS), (the precursor provision to subheading 9802.00.80, HTSUS) classification for a painting operation claimed to be "incidental" to the assembly of certain trucks in Mexico. Customs determined that the operation, which consisted of applying several coats of enamel finish paint to the completed trucks, was neither "minor" nor "incidental" to the assembly of the vehicles. The case puts before the court the question of whether a quantitative or qualitative test should be used in determining whether an operation "of a minor nature" is "incidental to assembly," for purposes of this tariff provision. Until a final disposition of this case, our position remains that stonewashing is not considered an incidental operation pursuant to 19 CFR 10.16(c)(4).

HOLDING:

Based on the information submitted, we are of the opinion that stonewashing is not an incidental assembly operation. Therefore, no allowances in duty under subheading 9802.00.80, HTSUS, is available for the cost or value of the U.S.-origin fabric subjected to stonewashing. However, allowances may be made under subheading 9802.00.80, HTSUS, for the cost or value of the U.S.-origin buttons, zippers, labels, tickets and thread, which are properly assembled into the denim garments, upon compliance with the documentary requirements of 19 CFR 10.24.

Sincerely,

John Durant, Director
Commercial Rulings Division

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