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HQ 556982


January 27, 1993

CLA-2 CO:R:C:S 556982 MLR

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Mr. Robert E. Burke, Esq.
Barnes, Richardson & Colburn
200 East Randolph Drive
Suite 7920
Chicago, IL 60601

RE: Applicability of partial duty exemption under HTSUS subheading 9802.00.80 to diagnostic reagent strips; laminating; cutting

Dear Mr. Burke:

This is in reference to your letter of September 30, 1992, on behalf of your client, requesting a ruling regarding the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to diagnostic reagent strips. Samples were submitted with your request.

FACTS:

Your client produces diagnostic reagent strips. In the United States, chemicals are mixed in a solution and impregnated several times into bulk rolls of a paper "carrier matrix" material. After the last time the chemicals are impregnated and dried, a double sided adhesive with a carrier backing is laminated onto one side of the carrier matrix material. The bulk reagent material rolls which are usually over 100 meters in length are slit lengthwise into bulk ribbons (typically .2 inches wide) for export on large spools to a reagent strip assembly site overseas.

Abroad, several different spools of reagent material are simultaneously placed on equipment which removes the adhesive carrier backing from the ribbons and pressure laminates the various ribbons onto 3 1/4 inches wide polystyrene roll stock. The chemical composition of the reagent strips is not changed or altered.

The reagent strips are sold either in bottle form or in individual foil wrappings. When the reagent strips are sold in bottle form, within moments after the ribbon is laminated onto the polystyrene roll stock, the roll stock is sliced at approximately ten inch intervals to form cards. The cards are then placed on a cutting machine where a multiple blade "knife" slits the cards into .2 inch wide reagent strips and trims off excess material at each end of the card. Next, the strips slide down a ramp into retail bottles.

When the reagent strips are sold in individual foil wrappings, the reagent/polystyrene combination is not cut into individual cards, but remains in roll form. The rolls are placed on foiling equipment where .2 inch wide strips are sliced and individually sealed between two layers of foil. The reagent strips are then imported at the ports of Chicago and New York.

ISSUE:

Whether the diagnostic reagent strips will qualify for the partial duty exemption available under subheading 9802.00.80, HTSUS, when returned to the United States.

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, 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).

Section 10.14(a), Customs Regulations {19 CFR 10.14(a)}, states in 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, lamination, 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. See 19 CFR 10.16(a). 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, HTSUS, to that component. See 19 CFR 10.16(c).

The operation of removing the adhesive carrier backing from the ribbons and pressure laminating the various ribbons onto 3 1/4 inches wide polystyrene roll stock is considered an acceptable assembly operation pursuant to 19 CFR 10.16(a) for purposes of subheading 9802.00.80, HTSUS. After the ribbons are joined with the polystyrene roll stock, the cutting of the polystyrene to length, whether performed once (in the case of sealing the strips in foil) or twice (in the case of cutting the polystyrene in ten inch pieces and then again into .2 inch wide strips), is considered an acceptable operation incidental to the assembly process under 19 CFR 10.16(b)(6). This conclusion was followed by Headquarters Ruling 067089, dated February 20, 1981, where textile fabrics exported in continuous-length rolls, joined by lamination to a foreign-made plastic-layered component, and cut into shorter lengths did not preclude application of the assembly provision of item 807.00, Tariff Schedules of the United States (TSUS) (now subheading 9802.00.80, HTSUS). As stated in United States v. Baylis Brothers Co., 451 F.2d 643, 646, 59 CCPA 9, C.A.D. 1026 (1971), "Congress did not intend to exclude articles from item 807.00 merely because the American components had undergone some change of form or shape. The test specified in item 807.00 is whether the components have been changed in form, shape, or otherwise to such an extent that they have lost their physical identity in the assembled article." It is our opinion that the assembly process conducted abroad does not change the chemical composition of the reagent material. Furthermore, in General Instrument Corp. v. United States, 480 F.2d 1402, 1406, 60 CCPA 178, C.A.D. 1106 (1973), it was determined that, whether the articles were cut before or after assembly, they would be subject to the same treatment.

Trimming the ends of the polystyrene cards of excess material is considered an acceptable operation incidental to assembly pursuant to 19 CFR 10.16(b)(4), which states that trimming, filing, or cutting off of small amounts of excess materials is an acceptable incidental operation.

HOLDING:

On the basis of the information and samples submitted, it is our opinion that the operations performed abroad to create the diagnostic reagent strips are considered proper assembly operations or operations incidental to the assembly process. Therefore, allowances in duty may be made under subheading 9802.00.80, HTSUS, for the cost or value of the U.S. fabricated components incorporated into the diagnostic reagent strips when they are returned to the United States, provided the documentary requirements of 19 CFR 10.24 are satisfied.

Sincerely,

John Durant, Director

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