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HQ 557586




March 11, 1994

CLA-2 CO:R:C:S 557586 WAS

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Mr. Ronald DiGiovanni, President
Custom Nine Designs, Inc.
181-21 Aberdeen Rd.
Jamaica, N.Y. 11432

RE: Applicability of the partial duty exemption under subheading 9802.00.80, HTSUS, to hot air balloons from Mexico

Dear Mr. DiGiovanni:

This is in response to your letters dated September 17, 1993, and January 24, 1994, requesting a ruling on the applicability of the partial duty exemption available under subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to hot air balloons from Mexico.

FACTS:

You state that you will purchase U.S.-origin 60" - 70 denier rip-stop nylon cloth, cut the balloon panels in the U.S. and ship them along with U.S.-origin one inch webbing material for assembly in Mexico. You state that the assembly process in Mexico will account for approximately three quarters of the total labor cost. The balance of the finishing work will be completed in the U.S. when the bulk of the balloon is returned. You also state that all materials used in the production of the hot air balloons will be of U.S. origin. In addition, all tools used in the process, including sewing machines and attachments will be shipped to Mexico from the U.S.

The steps involved in the assembly of the hot air balloon in Mexico are as follows:

1. On the standard cut envelope, the six individual panels of each gore are sewn together. For this purpose a folding device is attached to the forward slide plate of the sewing machine.

2. Matching panels are first sewn together vertically along their common curved edges at 8 stitches/inch. Then the three resulting full gore sections are sewn horizontally at 5 stitches/inch. This minimum number of stitches is used in that these seams will be sewn over once again, at 5 stitches/inch, when the horizontal load bands are attached, resulting in 10 stitches/inch.

3. The next step involves joining the individual gores together along their straight edges with a LSc-2 seam at 8 stitches/inch. At the same time, a one inch webbing is run over the top of the folder so that the entire process is completed with one needle pass. Any broken ends in the nylon webbing are sewn together with a 12 inch minimum splice.

4. As each consecutive gore is sewn to the developing envelope, the next gore is placed to the right of the needles and fed under the machine arm. This process continues from gore one through 10 of the W-140-X model, gores one through 9 on the W-175-X model, and one through twelve on the W-210-X model.

5. Once the gores are sewn together in an open envelope, the circumferential load bands of one inch nylon webbing are sewn to the lines made on the outside of the balloon at the stations marked by triangles, and on top of the horizontal seams. In addition, a run of this same material is sewn to the edge of the throat on the uncoated side (outside) of the fabric. A length of two inch wide nylon webbing is sewn to the outside crown edge with the envelope fabric facing down on the sewing bed to maximize shrinkage. Along the inside (coated) edge of the crown, just above the maneuvering vent, two 3 1/2 inch loops of webbing are sewn along the two marks which stagger the center seam of the vent, with the loops facing the center of the vent. Starting from four gore widths from each side of the 12/13 vertical band, a run of 1 1/2 inch velcro hook is sewn to the inside upper edge of the 2 inch crown band for a total of 16 gore widths along the crown opening at 8 stitches/inch.

6. All circumferential bands with the exception of the throat and crown bands are sewn at 5 stitches/inch with one double needle pass. Splices made in these bands and the throat and crown bands are sewn with 8 stitches/inch.

7. At the beginning and end of each sewing run, a 3 inch margin is made to allow for a seam at the time of closing. At the end of each run, a 14 inch excess of webbing is provided for overlap at the time of closing.

8. The rip-line equator ring is then sewn in at certain intersections.

ISSUE:

Whether the hot air balloon qualifies for the partial duty exemption 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. 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 10.14(a).

We are satisfied from the information provided that the U.S. components meet the requirements of subheading 9802.00.80, HTSUS, and therefore, are entitled to the partial duty exemption available under this tariff provision. In the instant case, there is no question that the balloon panels, webbing material and thread are finished components when exported and, therefore, meet the requirements of clause (a) of HTSUS subheading 9802.00.80. We believe that once the fabric is woven, and cut to shape it becomes a completed component, which possesses custom-made characteristics to meet customer requirements. There is no operation performed on the exported fabric components to complete them in preparation for the assembly operation. Accordingly, we find that the balloon panels are finished components as exported and are in condition ready for assembly when sent to Mexico.

In addition, the foreign operations that entail sewing fabric onto itself using any type of stitch, attaching two or more components together by sewing are considered acceptable assembly operations. See 19 CFR 10.16(a); L'Eggs Products v. United States, 13 CIT 40, 704 F. Supp. 1127 (CIT 1989), which held that sewing together the end of a pantyhose tube is considered an acceptable assembly operation as the thread serves as a joining agent by joining the tube to itself; and Headquarters Ruling Letter (HRL) 555525 dated June 5, 1990. Therefore, sewing the cut component balloon panels, webbing material and equator ring together in Mexico to produce the final article is an acceptable assembly operation within the meaning of subheading 9802.00.80, HTSUS.

It should be noted that, as a result of the North American Free Trade Agreement (NAFTA) Implementation Act, a new subheading (9802.00.90, HTSUS) was created which affords duty-free treatment to:

Textile and apparel goods, assembled in Mexico in whole of fabrics wholly formed and cut in 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; provided that goods classifiable in chapters 61, 62 or 63 may have been subject to bleaching, garment dyeing, stone-washing, acid-washing or perma-pressing after assembly as provided for herein.

HOLDING:

Based on the documentation submitted, it is our opinion that the foreign operations performed on the U.S.-origin materials are considered proper assembly operations. Therefore, the imported hot air balloons may be entered under subheading 9802.00.80, HTSUS, with allowances in duty for the cost or value of the U.S.- origin materials incorporated therein, upon compliance with the documentation requirements of 19 CFR 10.24.

Sincerely,

John Durant, Director

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