United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 1993 HQ Rulings > HQ 0556734 - HQ 0557035 > HQ 0556774

Previous Ruling Next Ruling


HQ 556774


October 13, 1992

CLA-2 CO:R:C:S 556774 RAH

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Mr. Ted Mittelstaedt
Mittelstaedt, Galaviz & Mylin
Customs House Brokers
450 Sansome St., Suite 200
San Francisco, California 94111-3310

RE: Applicability of duty exemption under subheading 9802.00.80, HTSUS, to strips of leather exported to Mexico and braided into belts

Dear Mr. Millelstaedt:

This is in response to your submission of June 11, 1992, on behalf of Circa Corporation, requesting reconsideration of Headquarters Ruling Letter (HRL) 556627 dated June 3, 1992.

FACTS:

Based on the facts in HRL 556627, supra, your client manufactures belts in the United States and also purchases belts from a Mexican manufacturer. In the latter instance, the leather used in the manufacturing process is of U.S. origin and is sent to Mexico for cutting, braiding and finishing. You state that in the past the belts qualified for "GSP" treatment because the "...manufacturer in Mexico represented 45 to 55% of the actual FOB valuation...."

Your client wants to change their process so that the "raw" manufacturing (cutting, trimming, etc.) would be accomplished in the United States. The strips of leather would then be exported to Mexico and braided into belts. You indicate that the cost of Mexican labor would be 18 to 23% of the total "FOB" value of the final product. You inquire whether the belts would be free of duty under chapter 98, Harmonized Tariff Schedule of the United States (HTSUS), as U.S. components.

Your June 11, 1992, letter forwarded more detailed information concerning the processing to be performed in the U.S. and Mexico. In the United States, leather hides are cut into leather blocks. The leather blocks are cut into strips and packed in bags, boxed and sent to Mexico. Tabs are cut out of extra leather pieces and packed. Long strands of leather are cut out of extra leather pieces to make loops and packed. Metal buckles and thread are counted, packed and all the components are sent to Mexico.

In Mexico, the process is described as follows:

1. Take two strands, match
2. Hand braid
3. Stitch loop, cut loop to size, staple
4. assemble: braid with loop, buckle and tab--then sew together
5. Trim excess thread
6. Paint to match colors between the loop, tab, braid and do final quality control check

You ask whether, in view of this additional information, the opinion expressed in HRL 556627 regarding the eligibility of the belt for subheading 9802.00.80, HTSUS, would remain the same.

In HRL 556627 dated June 3, 1992, we held that braiding U.S.-origin leather into belts in Mexico does not constitute an acceptable assembly operation under subheading 9802.00.80, HTSUS. Moreover, we held that although the belts would be considered "products of" Mexico for purposes of the Generalized System of Preference (GSP) they would not be entitled to duty-free treatment under that program because the 35 percent value content requirement would not be satisfied. Accordingly, since the GSP issue was already discussed in HRL 556627 and no additional cost information has been submitted, we will not address it in this ruling.

ISSUE:

Whether U.S.-origin leather, thread, and buckles exported to Mexico to be made into belts qualifies for a duty allowance under subheading 9802.00.80, HTSUS, when imported into the United States.

LAW AND ANALYSIS:

The provisions governing the dutiable status of U.S. products which are exported to a foreign country for processing and then returned to the United States are set forth in Chapter 98, HTSUS. U.S. Note 2(a), subchapter II, Chapter 98, HTSUS, provides that, except as otherwise prescribed in this subchapter, products of the U.S. which are returned after having been advanced in value or improved in condition abroad by any process of manufacture or other means, shall be dutiable on its full value.

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 subheading 9802.00.80, HTSUS, 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).

Under the facts presented, we affirm our decision in HRL 556627, supra, that braiding the leather strips together exceeds an assembly operation. In HRL 554531 dated May 29, 1987, we held that passing yarn through braiding machines to produce braided rope and cordage is analogous to weaving fabrics from spun yarn, and is considered a manufacturing rather than an assembly process. See also, HRL 553953 dated December 23, 1985 (braiding 3-ply nylon rope yarn into 8 strand plaited rope does not constitute an acceptable assembly operation).

You should be aware, however, that we have held that sewing pre-braided materials together and feeding it through a buckle and sewing it together constitutes an assembly. HRL 555650, citing L'Eggs Products v. United States, 704 F.Supp. 1127 (CIT 1989). The instant case is different in that the unbraided leather strips are not exported to Mexico in (pre-braided) condition ready for assembly.

In L'Eggs, the court held that sewing together U.S.-origin, pre-cut fabric pieces, zippers, buttons, thread, hem ribbon and interfacing in Costa Rica to women's pleated skirts and sewing fabric onto itself constitutes acceptable assembly operations. We have also held that sewing closing out/finishing stitches onto the edges of single ply fabric is an operation incidental to the assembly of quilted bedspreads and will not preclude the U.S. fabric pieces from receiving the duty exemption available under subheading 9802.00.80, HTSUS. HRL 555734, dated March 20, 1991.

Moreover, it is well established that cutting to length (but not to shape) is incidental to assembly. See, HRL 555201 date April 11, 1990.

Therefore in view of the foregoing, we find that cutting the leather loop to size (length) and sewing the loop, buckle and tab to the braided strips constitute acceptable assembly operations or operations incidental thereto. Furthermore, stitching the edges of the loop is an operation incidental to the assembly operation. Accordingly, a duty allowance may be made for the cost of the U.S. leather loops, tabs, buckles and thread. However, no duty allowance may be made for the U.S. leather strips which are braided together in Mexico, as that operation exceeds an assembly.

HOLDING:

Braiding U.S.-origin leather strips into belts in Mexico does not constitute an acceptable assembly operation under subheading 9802.00.80, HTSUS. However, stitching the edges of the leather loop, cutting the loop to size (length) and sewing the loop, buckle and tab to the braided strips constitute acceptable assembly operations or operations incidental thereto. Accordingly, the cost of the U.S.-origin loops, tabs, buckle and thread will be entitled to a duty allowance under subheading 9802.00.80, HTSUS, when returned as part of the finished belts, upon compliance with the documentation requirements of 19 CFR 10.24.

Sincerely,

John Durant, Director
Commercial Operations Division

Previous Ruling Next Ruling

See also: