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HQ 555734


March 20, 1991

CLA-2 CO:R:C:S 555734 KCC

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

F. Gordon Lee, Esq.
O'Connor & Hannan
1919 Pennsylvania Avenue, N.W.
Suite 800
Washington, D.C. 20006-3483

RE: Quilted bedspreads created by sewing fabric pieces together with various types of stitches.Assembly; incidental operations; cutting to length; Mast; L'Eggs; substantial transformation

Dear Mr. Lee:

This is in response to your letters dated August 20, and October 31, 1990, on behalf of Max Kahn Curtain Corporation, requesting a ruling on the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to quilted bedspreads from Haiti.

FACTS:

Max Kahn intends to ship U.S.-origin material to Haiti for assembly into quilted bedspreads. However, you state that Max Kahn may on occasion use foreign fabric on bolts in varying widths imported into the U.S. In the U.S., Max Kahn will dye or print the fabric and then slit the bolts to a required width. This fabric will then be shipped to Haiti where it will be incorporated into the quilted bedspread. The operations performed in Haiti are:

1. layering and sewing together spreads of 100% polyester tricot backing, 100% polyester fiberfill and 100% polyester or polyester/cotton blend fabric (now known as quilted fabric);
2. cutting to length quilted fabric;
3. a. sewing an overedge safety chain or overlocking stitch onto one edge of two different quilted fabrics to prevent unraveling; and b. sewing these two pieces of quilted fabric together to form desired size bedspread (only when necessary);

4. sewing an overedge safety chain or overlocking stitch onto all four edges of the quilted fabric to prevent unraveling;
5. sewing a finishing stitch or handkerchief hem onto the single ply top layer of fabric imported on bolts to prevent unraveling;
6. sewing the single ply fabric onto three sides of the quilted fabric;
7. cutting to length single ply fabric in between each bedspread;
8. folding and hemming the one side of single ply fabric which has not been attached to the quilted fabric (care and law labels are sewn into the hem);
9. folding the bedspread;
10. inserting the bedspread and a printed insert into a polyethelene bag; and
11. folding, tape sealing, and packaging each bag into cartons.

Upon completion of the foreign operations, the quilted bedspreads will be imported into the U.S.

ISSUE:

Whether the quilted bedspreads will qualify for the partial duty exemption available 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, lubrication, 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).

In United States v. Mast Industries, Inc., 515 F.Supp. 43, 1 CIT 188, 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 of the operation are such that the operation may be considered minor; (2) whether the operation is necessary to the assembly process;
(3) whether the operation is so related to the assembly that it is logically performed during assembly; and (4) whether economic or other practical considerations dictate that the operation be performed concurrently with assembly.

According to section 10.14(b), Customs Regulations (19 CFR 10.14(b)), foreign-made articles or materials may become products of the U.S for purposes of subheading 9802.00.80, HTSUS, if they undergo a process of manufacture in the U.S. which results in their substantial transformation. This provision further states that a substantial transformation occurs when, as a result of manufacturing processes, a new and different article emerges, having a distinctive name, character, or use which is different from that originally possessed by the article or material. See also, Anheuser-Busch Association v. United States, 207 U.S. 556, (1908), and 19 CFR 10.14(b).

Section 12.130(e)(2)(ii) and (v), Customs Regulations (19 CFR 12.130(e)(2)(ii) and (v)), provides that a textile article or material usually will not be considered to be a product of a particular country by virtue of merely having undergone either "cutting to length or width and hemming or overlocking fabrics which are readily identifiable as being intended for a particular commercial use," and "dyeing and/or printing of fabrics or yarn." In this case, the foreign fabric imported into the U.S. is dyed or printed and then merely slit to a required width. It is clear that 19 CFR 12.130(e)(2)(ii) and (v) disqualify the foreign fabric from consideration as products of the U.S.

The foreign operations that entail sewing fabric onto itself using any type of stitch, including a "close out"/finishing stitch, tucking, shirring, crimping, and hemming are considered acceptable assembly operations. See, L'Eggs Products, Inc. v. United States, Slip Op. 89-5, 13 CIT , 704 F.Supp. 1127 (CIT 1989). Sewing two or more pieces of fabric together, and sewing in care and marking labels are also considered an acceptable assembly operations pursuant to 19 CFR 10.16(a).

Pursuant to 19 CFR 10.16(b)(6), cutting the fabric to length is an appropriate operation incidental to the assembly. Folding the curtains after assembly is also considered an operation incidental to the assembly process pursuant to 19 CFR 10.16(b)(7), which states that final folding operations are incidental to the assembly process.

Sewing the closing out/finishing stitches onto the edges of single ply fabric either before or after the fabric pieces enter into assembly is not an acceptable assembly operation. The thread used in sewing the closing out/finishing stitches onto the edge of single ply fabric does not serve as a binding agent, but is merely used to prevent the unraveling of the fabric. See, L'Eggs, Slip Op. 89-5. However, upon reviewing the Mast criteria, we find that sewing the closing out/finishing stitches is an operation incidental to the assembly process. According to your October 31, 1990 letter, a comparison of the relative cost and time required to perform the operation in question with the cost and time required to perform the entire assembly reveals that 16.8% of the cost and a 16.7% of time are necessary to sew on the closing out/finishing stitches (the time and cost percentages are an overall average calculated from assembling each of the different sizes of bedspreads--twin, full, queen or king). Although the closing out/finishing stitches may not be necessary to the assembly process, we believe that the operation is sufficiently related to the assembly so that it logically is performed concurrently with the assembly. This operation can take place either before, after or contemporaneous with a sewing operation. However, in any case, sewing the closing out/finishing stitches is an acceptable incidental operation which will not preclude the U.S. fabric pieces from receiving the duty exemption available under HTSUS subheading 9802.00.80.

Foreign packaging of the curtain is permissible under 19 CFR 10.16(f).

HOLDING:

From the information presented, it is our opinion that the foreign operations performed on the U.S.-origin materials are considered proper assembly operations or operations incidental to the assembly process. Therefore, the imported quilted bedspreads may be entered under subheading 9802.00.80, HTSUS, with allowances in duty for the cost or value of the U.S.-origin materials incorporated therein, upon compliance with the documentary requirements of 19 CFR 10.24.

The printing or dyeing and cutting to width do not result in the substantial transformation of the foreign fabric into a product of the U.S. for purposes of this tariff provision. Therefore, the foreign fabric used in the Haitian assembly operation will not receive a duty allowance when returned to the U.S. incorporated in the quilted bedspread.

Sincerely,

John Durant, Director
Commercial Rulings Division

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