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HQ 557602




January 26, 1994

CLA-2 CO:R:C:S 557602 MLR

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Mr. Phil Koch
General Manager
Hilos American & Efird de Mexico, S.A. de C.V.
Calle 8 No. 17-A Fracc
Industrial Alce Blanco Naucalpan
Edo. de Mexico C.P. 53370

RE: Applicability of partial duty exemption under HTSUS subheading 9802.00.80 to sewing thread; L'Eggs

Dear Mr. Koch:

This is in response to your letter of August 30, 1993, to U.S. Customs in New York, requesting a ruling regarding the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to sewing thread.

FACTS:

American & Efird Inc. ("Efird") manufactures and distributes industrial and retail sewing thread. Efird plans to export U.S.-origin thread to its company in Mexico, Hilos American & Efird ("Hilos"), where it will be sold to Maquiladora and PITEX companies who plan to use it to produce garments. It is stated that the sewing thread will not be further manufactured or processed in Mexico, and that Hilos may store the thread in either a bonded or non-bonded warehouse. The garments will then be imported into the U.S.

ISSUE:

Whether the sewing thread will qualify for the duty allowance 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).

This ruling only addresses the U.S.-origin sewing thread used to make the garments. In L'Eggs Products Inc. v. United States, 704 F. Supp. 1127 (CIT 1989), it was held that U.S.-origin thread used as a joining agent was a component for purposes of item 807.00, Tariff Schedules of the United States (TSUS) (now subheading 9802.00.80, HTSUS), and, therefore, qualified for the partial duty exemption under that provision. In Headquarters Ruling Letter (HRL) 554953 dated October 16, 1989, we also held that U.S.-origin thread exported in continuous lengths and used abroad in a sewing operation to join foreign components together to create certain garments was eligible for the duty allowance under item 807.00, TSUS.

In the instant case, the U.S.-origin thread will be used to produce garments. Therefore, as long as the thread is used as a joining agent, pursuant to 19 CFR 10.16(a), allowances in duty for the cost or value of the U.S.-origin thread in the garments may be made. However, although you state that the thread will not be further manufactured or processed in Mexico, we note that if the garments assembled with the thread are subjected to a process which is not incidental to assembly, such as those chemical processes enumerated in 19 CFR 10.16(c)(4) that impart new characteristics (i.e., showerproofing, permapressing, sanforizing, dyeing or bleaching), the thread will no longer qualify for the duty allowance available under subheading 9802.00.80, HTSUS, because it will have been affected by the process as well. Furthermore, whether or not the thread is stored in a bonded or a non-bonded warehouse does not change its eligibility under subheading 9802.00.80, HTSUS, as long as the documentary requirements of 19 CFR 10.24 are met (copy enclosed).

HOLDING:

On the basis of the information submitted, it is our opinion that sewing garments with the use of U.S.-origin thread is a proper assembly operation. Therefore, allowances in duty for the cost or value of the U.S.-origin thread may be made under subheading 9802.00.80, HTSUS, provided the thread is not subjected to any processes not incidental to assembly and the documentary requirements of 19 CFR 10.24 are satisfied.

Sincerely,

John Durant, Director

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