HQ 0557366 - Subheading 9802.00.80, HTSUS; U.S. Note 2(b), subchapter II, Chapter 98, HTSUS; vinyl belts; cut to width; belt buckle; men's pants; articles of apparel; sets; - United States International Trade Commision Rulings

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HQ 557366

October 6, 1993

CLA-2 CO:R:C:S 557366 BLS

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80, 6203.42.4015, 3926.20.5050

Mr. Miguel Ruiz
MIF
P.O. Box 523730
Miami, Florida 33152-3730

RE: Subheading 9802.00.80, HTSUS; U.S. Note 2(b), subchapter II, Chapter 98, HTSUS; vinyl belts; cut to width; belt buckle; men's pants; articles of apparel; sets;

Dear Mr. Ruiz:

This is in reference to your letters dated March 8 and April 16, 1993, on behalf of Drusco, Inc., in connection with the contemplated importation of men's cotton pants and a vinyl belt. You advise that these items may be imported separately, or together, and request that we rule as to the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), and U.S. Note 2(b), subchapter II, Chapter 98, HTSUS ("Note 2(b)"), to the importation of these articles under the described scenarios.

FACTS:

1) Men's Pants

Various components of U.S. origin are sent to the Dominican Republic. Such components include the pant panels, front and back legs, waistband, interlining, pocketing material, buttons, zippers, and labels. In the Dominican Republic, the cut parts and trim will be sorted. The cut parts will then be sewn together, button holes created, pockets fashioned, the garment hemmed, and all accessories will be attached. The garments will then be cleaned of any loose thread or dirt, and will be ironed if necessary.

2) Vinyl Belt

U.S.-origin vinyl material in 54" rolls and other U. S.- origin components for the belt will be exported to the Dominican Republic. In the Dominican Republic, the vinyl material will be cut to varying lengths and rolled through a strip cutting machine. The machine cuts the material into 1" wide strips, which are then
assembled to the exported belt buckle by riveting.

After the belts have been completed, either they will be imported separately or they will be sent to the assembler of the pants (in the Dominican Republic). If the latter, the belts will then be placed through the belt loops of the pants to be shipped to the U.S. The pants and belts will be sold together as described to the ultimate consumer.

ISSUES:

1) If imported separately, whether the men's pants will qualify for the partial duty exemption under subheading 9802.00.80, HTSUS, or duty-free treatment under Note 2(b).

2) If imported separately, whether the vinyl belts will qualify for the partial duty exemption under subchapter 9802.00.80, HTSUS, or duty-free treatment under Note 2(b).

3) If imported together, whether the men's pants and/or vinyl belt will qualify for the partial duty exemption under subchapter 9802.00.80, HTSUS, or duty-free treatment under Note 2(b).

LAW AND ANALYSIS:

1) Imported Separately

A) Subheading 9802.00.80, HTSUS

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, lubrication, 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 value of the imported assembled article, less the cost or value of such U.S. components, 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, laminating, 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. 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).

In Headquarters Ruling Letter (HRL) 556099, dated July 31, 1991, non-woven material was cut to width and length to a specific shape for use in the production of belts. We held in that case that subheading 9802.00.80, HTSUS, was not applicable since cutting to width and length was analagous to cutting garment parts according to a specific pattern, which is not considered to be an operation incidental to assembly pursuant to 19 CFR 10.16(c)(2). See also HRL 555798, dated March 25, 1991 (cutting to width and length fabric used to manufacture surgical towels); and HRL 555425, dated October 17, 1989 (cutting ribbon material to width).

Similarly, in this case we find that cutting the belt material to width and length is analagous to cutting according to a specific pattern and shape, an operation which is not considered incidental to assembly, but rather is a further fabrication of the belt material. Therefore, upon importation, the vinyl belt material will not be eligible for a duty allowance under subheading 9802.00.80, HTSUS. However, an allowance in duty may be made under this provision for the cost or value of the U.S.-origin belt buckle returned as part of the completed belt, since upon exportation it is a fully fabricated component, and is attached to the belt material by riveting, an acceptable assembly operation under 19 CFR 10.16(a).

In connection with the men's pants, we find that under the facts presented, all three requirements of subheading 9802.00.80, HTSUS, will be satisfied. The foreign operations that entail sewing together pre-cut pattern pieces, which include labels, and sewing on buttons are acceptable assembly operations under this provision. The buttonholing is incidental to the assembly process (see United States v. Oxford Industries, Inc., 517 F. Supp. 694 (1981)), as are the cleaning and ironing operations (see 19 CFR

Therefore, we find that the pants will be eligible for the partial duty exemption under subheading 9802.00.80, HTSUS, under this scenario.

Section 222 of the Customs and Trade Act of 1990 (Public Law 101-382) amended U.S. Note 2, subchapter II, Chapter 98, HTSUSA, to provide for the duty-free treatment of articles (other than textile and apparel articles, petroleum and petroleum products) which are assembled or processed in a Caribbean Basin Economic Recovery Act (CBERA) beneficiary country (BC) wholly of fabricated components or ingredients (except water) of U.S. origin. This amendment was effective with respect to goods entered on or after October 1, 1990.

Note 2(b) provides as follows:

(b) No article (except a textile article, apparel article, or petroleum, or any product derived from petroleum, provided for in heading 2709 or 2710) may be treated as a foreign article, or as subject to duty, if--

(i) the article is--

(A) assembled or processed in whole of fabricated components that are a product of the United States, or

(B) processed in whole of ingredients (other than water) that are a product of the United States, in a beneficiary country; and

(ii) neither the fabricated components, materials or ingredients, after exportation from the United States, nor the article itself, before importation into the United

States, enters the commerce of any foreign country other than a beneficiary country.

As stated in this paragraph, the term "beneficiary country" means a country listed in General Note 3(c)(v)(A).

Although Note 2(b)(i)(A) and (B) are separated by the word "or", it is our opinion that Congress did not intend to preclude free treatment under this provision to an article which is created in a BC both by assembling and processing U.S. fabricated components and by processing U.S. ingredients.

Pursuant to General Note 3(c)(v)(A), HTSUSA, the Dominican Republic has been designated as a BC for CBERA purposes. Note 2(b) specifies four categories of products which are excluded from duty- free treatment under this provision: textile articles; apparel articles; petroleum; and certain products derived from petroleum. In this regard, for purposes of Note 2(b), Customs has held that "textile" and "apparel" articles are articles classified in provisions of the HTSUS which include a textile category number, i.e., are subject to textile agreements. See T.D. 91-88, dated October 18, 1991.

The subject vinyl belt is classifiable under subheading 3926.20.5050, HTSUS, which provides for "Other articles of plastics and articles of other materials of headings 3901 to 3914, Articles of apparel..., Other". This provision does not include a textile category number, and therefore the vinyl belt is not considered a textile or article of apparel for purposes of Note 2(b). Since the belt is processed in a BC wholly of fabricated components of U.S. origin, it qualifies for duty-free treatment under Note 2(b), HTSUS, if imported separately and classified accordingly.

The men's woven cotton pants are classifiable under subheading 6203.42.4015, HTSUS, "Men's trousers, Of cotton, Other, Other". Textile category number 347 is applicable to this article. Therefore, since the men's trousers are considered an article of apparel for purposes of Note 2(b), they are not eligible for duty- free treatment under this provision.

2) Imported Together

The belt and the men's trousers will be sold together at retail under this scenario. Based on this fact, and after examination of the sample, it is our opinion that the articles qualify as goods put up in sets for retail sale. To determine the proper classification of the imported articles, the General Rules of Interpretation (GRI's) must be considered. GRI 1 states, in part, that "classification shall be determined according to the terms of
the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following [GRI's] ...." GRI 3(b) governs the classification of goods put up in sets for retail sale where the goods are, prima facie, classifiable under two or more headings. According to GRI 3(b), such sets are classified as if they consisted of the component which imparts the essential character to the set.

In our opinion, the men's pants clearly impart the essential character to the set. Therefore, the set will be classifiable under subheading 6203.42.4015, HTSUS, as heretofore described.

A) Subheading 9802.00.80, HTSUS

The vinyl belt material will not qualify for a duty allowance under subheading 9802.00.80, HTSUS, whether imported separately or as part of a set, for the reasons stated, supra. However, the belt buckle and men's trousers will be eligible for the benefits of this provision, under either of the described scenarios. Thus, duties will be assessed pursuant to subheading 9802.00.80, HTSUS, upon the full appraised value of the set less the cost or value of the U.S.- origin belt buckle and trouser components. The rate to be applied will be the rate applicable to subheading 6203.42.4015, HTSUS. See, U.S. Note 4(b), subchapter II, Chapter 98, HTSUS, and T.D. 91- 7, 25 Cust. Bull. 8, dated January 8, 1991.

Since the set will be classified under a provision which carries a textile category number (subheading 6203.42.4015, HTSUS), neither the belt nor the trousers will be eligible for duty-free treatment under Note 2(b), HTSUS, although, as discussed, above, the belt would qualify for such treatment if separately imported.

HOLDING:

1) Upon importation, the men's pants imported without the belt will be eligible for the partial duty exemption under subheading 9802.00.80, HTSUS, provided the documentation requirements of 19 CFR 10.24 are satisfied. However, the pants are considered articles of apparel and therefore will not be eligible for duty- free treatment under Note 2(b).

2) Upon importation, an allowance in duty may be made under subheading 9802.00.80, HTSUS, for the cost or value of the belt buckle when when returned as part of the completed belt. No allowance in duty may be made under this provision for the cost or value of the vinyl belt material, as it is not exported in condition ready for assembly without further fabrication. However,
the belt will qualify for duty-free treatment under Note 2(b), HTSUS, assuming compliance with the direct shipment and documentation requirements. (See Headquarters telex 9264071 dated September 28, 1990 (copy enclosed)).

3) If imported together, the men's pants and vinyl belt will be considered to be goods put up in sets for retail sale. Since the article which imparts the essential character to the set is the trousers, the imported articles will be classified under subheading 6203.42.5050, HTSUS, "Men's trousers of cotton, Other, Other." Articles classified under this provision are considered articles of apparel and therefore the imported set will be ineligible for duty-free treatment under Note 2(b), HTSUS. However, since the U.S.-origin belt buckle and trousers qualify for a duty allowance under subheading 9802.00.80, HTSUS, duties will be assessed upon the full value of the set based upon the classification of the trousers, with a duty allowance for the cost or value of the U.S.- origin buckle and trouser components.

Sincerely,

John Durant, Director
Commercial Rulings Division

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