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HQ 557364


July 19, 1993

CLA-2 CO:R:C:S 557364 MLR

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Mr. Terry Pilant
Carson Customs Brokers (USA) Inc.
P.O. Box 653
Blaine, Washington 98231

RE: Applicability of partial duty exemption under HTSUS subheading 9802.00.80 to wearing apparel; sewing; fusing; pressing; ironing; attaching hang-tags; placing on hangers

Dear Mr. Pilant:

This is in response to your letter of May 18, 1993, requesting a ruling on behalf of Koret of Canada regarding the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to wearing apparel from Canada. A sample of a golf skirt was submitted with your request. Your question regarding the basis of appraisement of the wearing apparel between related parties will be addressed in a separate letter.

FACTS:

Koret of Canada plans to assemble 60,000 golf skirts in their Vancouver plant in August, September, and October 1993. The fabric (65 percent dacron polyester, 35 percent) used to produce the skirts is manufactured and cut into components in the U.S. The components for each skirt are: four body panels, two under-pockets, and two pocket welts.

The cut fabric components and U.S.-origin cut pellon (two cut pellon pieces are needed for each garment to back the pocket welt components) will be packaged in cardboard cartons and shipped to the Vancouver plant where the following operations will be performed: fuse pellon to pocket welts, sew the components together, sew labels on the garment, attach hang-tags to garment, press garment and place on hanger, cover each garment with a plastic bag, and stick a style/size sticker on each bag. The elastic for the waist, labels (a block label, and a care, content, and size label), hang-tags, and bag stickers will be supplied by Koret U.S. Koret Canada will supply the thread, hangers, plastic bags, elastic bands, and swiftach (used to attach the hang-tags).

The finished garments will then be shipped in cardboard cartons (approximately 50 units per carton) to Chico, California. At this time, their estimates of cost and value added per unit in Canada are as follows:

U.S.A. Canada

Fabric $3.80 Labor $4.20
Cutting .25 Trimmings & Sundries .21
Trimmings .22 Shipping Cartons .04
Shipping cartons .04 $4.31 $4.45

ISSUE:

Whether the wearing apparel will qualify for the partial duty exemption available under subheading 9802.00.80, HTSUS, when returned to the U.S.

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 operations of sewing the pre-cut fabric pieces together, sewing the elastic to the body panels, and sewing the labels in place, are considered acceptable assembly operations pursuant to 19 CFR 10.16(a), because in each instance, two solid components are being joined (i.e., sewn) together. Furthermore, labeling the skirts and attaching hang-tags, will not preclude tariff treatment under subheading 9802.00.80, HTSUS. See C.S.D. 79- 314, 13 Cust. Bull. 1468 (1979), which found that "foreign stamping, markings, coding, or printing, when serving the purpose of origin marking, trademark, ... or instruction for use", would not preclude tariff treatment under item 807.00, Tariff Schedules of the United States (TSUS) (the precursor to subheading 9802.00.80, HTSUS); see also Headquarter Ruling Letter (HRL) 555565 dated May 14, 1990.

The fusing of the pellon backing to the pocket welts is also an acceptable assembly process. See HRL 555554 dated May 21, 1990, (heat fusing acetate and braided cord in a tipping operation constituted an acceptable method of assembly). We also note that from an examination of the sample, it appears that the pellon backing is also sewn to the pocket welt.

Pressing the garments constitutes an acceptable incidental operation pursuant to 19 CFR 10.16(b)(7). Trimming the excess thread off of the fabric, although not specifically mentioned in your letter, 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.

With respect to the packaging operations, such as placing the skirts on hangers and covering them with plastic bags, these are permissible operations under 19 CFR 10.16(f). Those packaging materials that are of U.S.-origin (i.e., hang-tags, plastic bag stickers, and shipping cartons), will be entitled to duty-free treatment under subheading 9801.00.10, HTSUS. Subheading 9801.00.10, HTSUS, 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. However, with respect to the packaging materials that are Canadian-origin (i.e., hangers, plastic bags, elastic bands, and swiftach), their cost or value will be included as part of the dutiable value of the golf skirts. See HRL 556069 dated August 13, 1991.

HOLDING:

On the basis of the information and sample submitted, it is our opinion that the operations performed abroad to create the golf skirts 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 golf skirts when they are returned to the U.S., provided the documentary requirements of 19 CFR 10.24 are satisfied.

Sincerely,

John Durant, Director

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