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HQ 556608

July 24, 1992

CLA-2 CO:R:C:S 556608 SER

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80, 9615.19.6010

Samuel J. Tamkin, Esq.
Two Prudential Plaza
Suite 1680
Chicago, IL 60601

RE: Various hair bows; Generalized System of Preferences; 9802.00.80; HRLs 555357, 071450, 553674, 554965, 554943

Dear Mr. Tamkin:

This is in reference to your letter of March 3, 1992, on behalf of Gold Coast Bows, Inc., concerning a binding ruling request for various hair bows produced in Mexico. Your request concerns the eligibility of the articles at issue under the Generalized System of Preferences (GSP)(19 U.S.C. 2461-2466), and subheading 9802.00.80, Harmonized Tariff Schedule of the United States Annotated (HTSUSA).

FACTS:

The hair bows will be produced from U.S.-origin polyester ribbon, nylon, cotton thread, glue, velcro patches, and a regular barrette (metal clip). Alternatively, some bows will be produced with "automatic lock barrettes" (metal clips) from Asia, or France.

The ribbon will be sent to Mexico either in spools or precut to the proper lengths; the thread will be sent to Mexico in spools; the glue will be sent in its packaged form; the velcro patch will be sent in sections for attachment to the barrettes (metal clips); and the barrettes will be shipped in their condition as received by Gold Coast.

In Mexico, the ribbon (if not precut) will be cut to the proper lengths, the velcro patch will be glued to the barrettes, and the ribbon will be glued or sewn to the barrette in the form of a bow. The Mexican company will then label the bows and ship them to the U.S. in shipments of various quantities.

ISSUES:

1. Whether the hair bows are eligible for duty-free treatment under the GSP.

2. Whether the hair bows are entitled to the partial duty exemption under subheading 9802.00.80, HTSUSA.

LAW AND ANALYSIS:

1. Generalized System of Preferences

Under 19 U.S.C. 2463, as amended, a GSP eligible article may receive duty-free treatment if it is either wholly the growth, product, or manufacture of a designated beneficiary developing country (BDC) or a new or different article of commerce which has been grown, produced, or manufactured in the BDC. Accordingly, where, as in this case, materials are imported into a BDC from a non-BDC, those materials must be substantially transformed into a new and different article of commerce, the product of the BDC.

As provided in General Note 3(c)(ii)(A), HTSUSA, Mexico is a BDC. In addition, the tariff provision under which the hair bows are classified, subheading 9615.19.6010, HTSUSA, is a GSP eligible provision.

The process of producing the hair bows, especially when the ribbons will be pre-cut in the U.S., primarily involves assembly- type operations. Customs has previously ruled on whether assembly operations constitute a substantial transformation. In C.S.D. 85-25 dated September 25, 1984 (Headquarters Ruling Letter (HRL) 071827), we considered the issue of whether the assembly of components onto a printed circuit board (PCB) resulted in a substantial transformation of the materials. In that decision, Customs held that an assembly process will not constitute a substantial transformation unless the operation is "complex and meaningful." Whether an operation is "complex and meaningful" depends on the nature of the operation, including the number of components assembled, number of different operations, time, skill level required by the operation, attention to detail and quality control, and the benefit to the BDC from the standpoint of both the value added to each PCB and the overall employment generated thereby. In C.S.D. 85-25, it was stated that the factors which determine if a substantial transformation occurs should be applied on a case-by-case basis.

The focus of C.S.D. 85-25 was a PCBA produced by assembling in excess of 50 discrete fabricated components (e.g., resistors, capacitors, diodes, transistors, integrated circuits, sockets, connectors) onto a PCB. Customs determined that the assembly of the PCBA involved a large number of components and a significant number of different operations, required a relatively significant period of time as well as skill, attention to detail, and quality control.

Using the standards defined in C.S.D. 85-25, it is our opinion that the production of the bows is not a complex and meaningful assembly operation and, therefore, does not result in a substantial transformation. In addition, we believe that no substantial transformation results in those situations in which the ribbon is cut to length prior to assembly. In HRL 555878 dated June 19, 1991, Customs held that cutting fabric to length and width did not constitute a substantial transformation. Since the bows do not undergo a substantial transformation in Mexico, they would not be considered "products of" Mexico, and, therefore, are ineligible for duty-free treatment under the GSP.

2. Eligibility under subheading 9802.00.80. HTSUSA.

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. n-4-

Operations incidental to the assembly process are not considered further fabrication operations, as they as 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 subheading 9802.00.80, HTSUSA, to that component. See, section 10.16(c), Customs Regulations (19 CFR 10.16(c)).

It is our position that a duty allowance may be made for the cost or value of the U.S.-origin materials. We have previously held that cutting U.S. ribbon to appropriate lengths abroad, forming one or more pieces of ribbon into the shape of a bow,and securing the bow's shape by tinsel wire or some other object constitute an acceptable assembly or operation incidental to assembly under subheading 9802.00.80, HTSUSA, and its precursor provision, item 807.00, Tariff Schedules of the United States (TSUS). See, HRL 071450 dated September 8, 1983, 553674 dated June 14, 1985, 554956 dated April 6, 1988, and 554943 dated April 18, 1988. Furthermore, 19 CFR 10.16(b)(6) specifically allows cutting to length as an operation incidental to the assembly process. In addition, the attachment of the velcro by gluing and the attachment of the ribbon to the barrettes by gluing and/or sewing, is specifically allowed as an acceptable assembly operation pursuant to 19 CFR section 10.16(a).

HOLDING:

The production of the hair ribbons and bows in Mexico would not constitute a substantial transformation, and, therefore, these articles would not be considered "products of" Mexico. Accordingly, they are ineligible for duty-free treatment under the GSP.

On the basis of the information presented, an allowance in duty may be made under subheading 9802.00.80, HTSUSA, for the cost or value of the U.S.-origin components used in the assembly of the ribbons and bows, provided that the documentation requirements of 19 CFR 10.24 are satisfied.

Sincerely,

John Durant, Director

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