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HQ 555798


March 25, 1991

CLA-2 CO:R:C:S 555798 WAW

CATEGORY: CLASSIFICATION

TARIFF NO: 6307.90.8710, 9802.00.80

Ms. Linda A. DiPietro
Price Waterhouse
Arco Center
200 Oceangate
Suite 600
Long Beach, CA 90802

RE: Classification and applicability of the duty exemption under subheading 9802.00.80, HTSUSA, to surgical towels; country of origin requirements; 087470; 555565.

Dear Ms. DiPietro:

This is in reference to your letter of November 29, 1990, on behalf of your client, EnviroMed International, Inc., concerning the classification, country of origin requirements, and the applicability of the duty exemption under subheading 9802.00.80, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), of surgical towels to be imported from Haiti. A sample towel was submitted for examination.

FACTS:

Bolts of highly absorbent huck weave cotton fabric specially manufactured in the U.S. for use in making surgical towels will be exported to Haiti where the fabric will undergo the following operations: (1) the fabric will be cut to width and length to form a rectangular shape of 30 inches by 17 inches; (2) all four sides of the cut fabric will be sewn; (3) the cut and sewn fabric which now looks like a surgical towel will be laundered and folded; and (4) the towels will be wrapped in a surgical inner wrap and sent to the U.S. for final packaging and sterilization.

ISSUES:

(1) What is the tariff classification of U.S. made fabric manufactured into surgical towels in Haiti?

(2) Whether the surgical towels will be entitled to the partial duty exemption available under subheading 9802.00.80, HTSUSA, when returned to the U.S.

(3) What is the country of origin applicable to the imported surgical towels?

LAW AND ANALYSIS:

I. Tariff Classification of Surgical Towels

We have previously decided that surgical towels are properly classified as other made up articles in heading 6307, HTSUSA. See Headquarters Rulings Letter (HRL) 087470 dated February 1, 1991, in which Customs held that surgical towels which consist of 100% huck weave cotton are classifiable in subheading 6307.90.8710, HTSUSA. The surgical towels at issue are made of 100% huck weave fabric, and based on HRL 087470, should be classified under subheading 6307.90.8710, HTSUSA, which provides for other made up articles including dress patterns: other: other: surgical towels; cotton towels of pile or tufted construction: surgical towels, dutiable at the rate of 7% ad valorem.

II. Applicability of Subheading 9802.00.80, HTSUSA

HTSUSA subheading 9802.00.80 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 HTSUSA 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 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, Customs Regulations (19 CFR 10.24).

Section 10.14(a), Customs Regulations (19 CFR 10.14(a)), states in pertinent 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, although they may precede, accompany or follow the actual assembly operation. See 19 CFR 10.16(a). Examples of operations incidental to the assembly process are delineated at 19 CFR 10.16(b). 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, HTSUSA, to that component. See 19 CFR 10.16(c).

The issue that we are asked to address in this case is whether the cutting of the fabric both to width and length to form the shape of surgical towels is more than an operation incidental to the assembly process, thereby precluding application of the exemption in subheading 9802.00.80, HTSUSA. In C.S.D. 90-82(10), 24 Cust. Bull. ___ (1990) HRL 555565 dated May 14, 1990, Customs determined that "cutting the proper-width towels and beaded weights to length are considered acceptable operations incidental to the assembly process pursuant to 19 CFR 10.16(b)(6), which states that cutting to length is an acceptable incidental operation. However, 19 CFR 10.16(c)(2) provides that cutting garment parts according to pattern from exported material is not considered an operation incidental to assembly.

It is our position in this case that cutting the fabric to width and length (pattern pieces) is not an acceptable assembly operation or an operation incidental to assembly, but rather is a further fabrication of the fabric. The cutting operations in this case do not simply involve cutting a component to length, but are analogous to cutting fabric to a specific pattern piece in order to enter it into a proper assembly (i.e., sewing) operation. See 19 CFR 10.16(c)(2).

Accordingly, based on the manufacturing processes you described, it is our position that the U.S.-origin fabric which has been cut both to length and width in Haiti, and which is later subjected to hemming, washing and folding operations in Haiti, will not qualify for the partial duty exemption available under subheading 9802.00.80, HTSUSA.

III. Country of Origin Determination

Textile articles produced in more than one foreign country are subject to the country of origin criteria set forth in section 12.130, Customs Regulations (19 CFR 12.130). Generally, the country of origin rules for textiles and textile products is set forth in 19 CFR 12.130(b). However, there is an exception to the general rule in cases where products of the U.S. are involved. See 19 CFR 12.130(c). According to 19 CFR 12.130(c):

Chapter 98, Subchapter II, Note 2, HTSUSA, provides that any product of the U.S. which is returned after having been advanced in value or improved in condition abroad, or assembled abroad, shall be a foreign article for purposes of the Tariff Act of 1930, as amended . . . merchandise which falls within the purview of Note 2 may not, upon its return to the U.S. be considered a product of the U.S.

In the present case, the huck weave cotton fabric which is specially manufactured in the U.S. for use in making surgical towels will clearly be advanced in value and improved in condition by the cutting, sewing, folding and laundering operations, and therefore, qualify as foreign articles for purposes of 19 CFR 12.130(c). Accordingly, since the manufacturing processes described above are performed in Haiti, the surgical towels will be a product of Haiti and subject to all applicable quota and visa requirements.

HOLDING:

On the basis of the information and sample submitted, it is our position that the operations performed to the U.S.-origin fabric in Haiti are not considered proper assembly operations or operations incidental to the assembly process. Therefore, the surgical towels are not entitled to a partial duty exemption under subheading 9802.00.80, HTSUSA. The proper classification of the surgical towels is under subheading 6307.90.8710, HTSUSA, which provides for other made up articles, other, other, surgical towels, dutiable at 7% ad valorem, and falls within textile category 369. The operations performed to the surgical towels in Haiti advances them in value and improves them in condition. Therefore, upon reimportation, the surgical towels are considered products of Haiti pursuant to 19 CFR 12.130(c), and must be marked accordingly.

Due to the changeable nature of the statistical annotation (the ninth and tenth digits of the classification) and the restraint (quota/visa) categories applicable to textile merchandise, you should contact your local Customs office prior to importation of the merchandise to determine the current status of any import restraints or requirements.

The designated textile and apparel category may be subdivided into parts. If so, visa and quota requirements applicable to the subjected merchandise may be affected. Since part categories are the result of international bilateral agreements which are subject to frequent renegotiations and changes, to obtain the most current information available, we suggest that you check, close to the time of shipment, the Status Report on Current Import Quotas (Restraint Levels), an internal issuance of the U.S. Customs Service, which is available for inspection at your local Customs office.

Sincerely,


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