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HQ 556594

July 24, 1992

CLA-2 CO:R:C:S 556594 SER

CATEGORY: CLASSIFICATION

TARIFF NO.: 9801.00.10, 9802.00.80

Mr. Daniel B. Hoch
President
Hifort Company
303 Wells Fargo
Suite 7
Houston, TX 77090

RE: Applicability for duty-free treatment under subheading 9801.00.10, HTSUSA, and partial duty exemption under subheading 9802.00.80, HTSUSA, to shipping bag containers.

Dear Mr. Hoch:

This is in reference to your letter of February 14, 1992, addressed to the Area Director of the New York Seaport, concerning the eligibility of shipping bag containers from Mexico for a complete or partial duty exemption under subheading 9801.00.10, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), or 9802.00.80, HTSUSA. Your request was forwarded to this office for a response. Two samples were provided with your request.

FACTS:

The articles at issue consist of several styles of bag containers which are used in the shipping industry. They are described as flexible, semi-bulk containers. The bags are made of woven polypropylene strips and come in different sizes and configurations; one style of bag has fill spouts for easier loading of materials to be shipped, another has discharge spouts, another has both fill and discharge spouts, and the last has a closed bottom with a open top. The bags have seat belt webbing which, when attached to the bags, forms the lifting loops which allow the bags to be moved by forklifts.

In Mexico, all of the bags will have a polyethylene liner of U.S.-origin inserted to function as a moisture barrier. There are four different situations involving the insertion of the liners. In situation A, completed, already separated liners are shipped to Mexico from the U.S. The liners are placed over a jig and the woven outer bags are placed on top of the jig. The liner is then cuffed over the top lip of the bag.n-2-

In situation B, the liners are shipped to Mexico in large rolls. An operator rolls out the required length of liner, and cuts it to the length needed, depending on the height of the bags. The liner is then secured at the bottom by a wire tie, to form a "bag" which is then placed in the woven outer bags.

In situation C, the liners are also shipped to Mexico in large rolls where they are cut to the desired lengths. The cut- to-length liners are then placed in and pulled down through the woven outer bags through the discharge spouts. The discharge spout with liner is then tied off by a wire tie.

In situation D, the liners are shipped to Mexico in rolls with serrated lines at even lengths. Each liner is separated along the serrated line, placed in the woven outer bags and pulled down and through the discharge spout. The spout and liner are then tied off by a wire tie.

The U.S.-made seat belt webbing, in 36 inch lengths is attached to the bags using two lines of double chain stitching. A patch of polypropylene fabric is then placed over the attached ends and another double line of stitching affixes the patch to the webbing and bag body. Several situations are also described in the processing of the webbing. In situation 1, the webbing is shipped to Mexico in long rolls, where it is cut to 36 inch lengths and attached to the bags.

In situation 2, pre-cut webbing packaged loosely in boxes in various lengths, is purchased in the U.S. by Hifort. The longer pieces are cut to 36 inch lengths in the U.S. The shorter pieces are not used. The cut-to-length pieces are then shipped to Mexico where they are attached to the bags.

In situation 3, the pre-cut webbing also purchased by Hifort as described in situation B, is shipped to Mexico where the longer pieces are cut to 36 inch lengths. The cut-to-length pieces are then attached to the bags. The unusable portions are not returned to the U.S.

ISSUE:

What is the dutiable status of the bags when returned to the U.S.?

LAW AND ANALYSIS:

Subheading 9801.00.10, HTSUSA, provides for the free entry of products of the U.S. that have been exported and returned without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, provided the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1), are met. Some change in then-3-
condition of the product while it is abroad is permissible. However, operations which either advance the value or improve the condition of the exported product render it ineligible for duty- free treatment upon return to the U.S. Border Brokerage Company, Inc. v. U.S., 314 F.Supp. 788 (1970), appeal dismissed, 58 CCPA 165 (1970).

Subheading 9802.00.80, HTSUSA, 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 subheading 9802.00.80, HTSUSA, 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 gluing, laminating, welding, soldering, riveting, force fitting, 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. Examples of operations which are incidental to the assembly process include cutting to length of wire, thread, tape, foil, and adjustments in the shape or form of a component to the extent required by the assembly being performed abroad. See, section 10.16(b), Customs Regulations (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, section 10.16(c), Customs Regulations (19 CFR 10.16(c)).

In situation A, the pre-separated liners are merely inserted into the bags. This operation clearly does not advance the value or improve the condition of the liners by a process of manufacture or other means. Therefore, the liners used in situation A are eligible for duty-free treatment under subheading 9801.00.10, HTSUSA, upon compliance with the documentary requirements of 19 CFR 10.1.

The liners in situations B, C, and D, whereby they are cut to length or separated along serrated lines, and tied off by wire, are advanced in value and improved in condition. Therefore, the liners would be precluded from receiving duty- free treatment under subheading 9801.00.10, HTSUSA. However, it is our position that the liners would be entitled to a duty allowance under subheading 9802.00.80, HTSUSA. Attaching the wire tie to the bottom of the liner in situation B and to the discharge spout of the bag with liner protruding in situation C and D constitute acceptable assembly operations under 19 CFR 10.16(a) as they are analogous to force fitting or the use of fasteners. In addition, 19 CFR 10.16(b), allows cutting to length as an operation incidental to the assembly process. Therefore, an allowance in duty may be made for the cost or value of the U.S.-origin liners.

Attaching the webbing to the woven bags to form the lift loops also would be considered an acceptable assembly operation under subheading 9802.00.80, HTSUSA as 19 CFR 10.16(a) allows the joining of components by means of sewing. In addition, the cutting of the webbing to length in Mexico is incidental to assembly pursuant to 19 CFR 10.16(b). Therefore, an allowance in duty may also be made under this tariff provision for the U.S.- origin webbing.

HOLDING:

The liners of U.S.-origin, which are exported to Mexico already separated where they are merely inserted into bag containers (situation A), are eligible for duty free treatment under subheading 9801.00.10, HTSUSA, upon compliance with the documentation requirements of 19 CFR 10.1.

The U.S.-origin liners used in situations B, C, and D described above, and the U.S.-origin webbing, are eligible for duty allowances under subheading 9802.00.80, HTSUSA, provided that the documentation requirements of 19 CFR 10.24 are satisfied.

Sincerely,

John Durant, Director

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