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HQ 559107




June 20, 1995

CLA-2 R:C:S 559107 WAS

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Mr. Jim Riley
Nazareth/Century Mills, Inc.
500 South Archusa Avenue
Quitman, Mississippi 39355

RE: Applicability of the partial duty exemption under subheading 9802.00.80, HTSUS, to an embroidered knit shirt

Dear Mr. Riley:

This is in reference to your letter dated February 27, 1995, regarding the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to an embroidery operation performed on the front panel of a boy's cotton knit shirt assembled in Colombia, South America. A sample of the merchandise was submitted for our review.

FACTS:

The subject merchandise consists of a boy's cotton knit shirt, style number 58C-7396. The shirt has a three button opening at the neck which fastens left over right, hemmed short sleeves, a hemmed bottom and a ribbed neck opening. The words "Little Arizona Jean Co" are embroidered onto the upper left part of the front panel of the shirt.

You state that the embroidery process performed in Colombia consists of the following operation:

(1) U.S.-origin thread is used to machine embroider the selected design onto two layers of components. The top layer will consist of a knit cut component. The bottom layer will consist of a suitable sized piece of pellon backing.

(2) The pellon backing that is not joined to the knit fabric by the thread is perforated during the embroidery process in such a way that this non-essential backing material is pulled off by hand or trimmed to within « inch of the stitch line.

ISSUE:

Whether the embroidered knit shirt will be eligible for the partial duty exemption under subheading 9802.00.80, HTSUS, upon importation into 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 inform, shape, or otherwise, and 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 10.16(c).

Since we are addressing the applicability of subheading 9802.00.80, HTSUS, to the embroidery operation only, we will assume that the knit shirts otherwise qualify for treatment under this tariff provision. In Headquarters Ruling Letter (HRL) 555625 dated August 1990, U.S.- origin thread, knit fabric, and pellon backing were shipped to Mexico for an embroidery operation. The pellon backing was considered necessary to the embroidery operation because, without the backing, the thread would become entangled in the embroidery machine, making the embroidery operation impossible. The pellon backing also prevented the embroidery stitch from unraveling. After the design was complete, the portion of the pellon backing not caught between the material and embroidered thread was removed. Based upon C.S.D. 90-28, 24 Cust. Bull. 346 (1990), (HRL 555399 dated December 26, 1989), which held that an embroidered design which penetrated two or three layers of fabric was an acceptable assembly operation, the embroidery operation in HRL 555625 was also found to be acceptable because the embroidery stitch was used to join the knit fabric and the pellon backing together. In C.S.D. 90-28, the embroidered design served as a binding agent, as it penetrated two or three layers of a slipper vamp and served to keep the center of the vamp from puckering. See L'Eggs Products Inc. v. United States, 704 F. Supp. 1127 (CIT 1989), which held that thread used as a binding agent to join material to itself qualified as a component and was eligible for the duty exemption available under subheading 9802.00.80, HTSUS. See also HRL 557386 dated August 20, 1993, where we considered the embroidery of sweatshirt components with the use of pellon backing. It was held in HRL 557386 that because a pellon backing was used, the embroidery operation which joined the garment components and the pellon backing together was an acceptable assembly operation.

By contrast, the operations in the above-cited cases must be distinguished from embroidery operations in which the stitching is performed on one layer of fabric only. In HRL 555565 dated May 14, 1990, we considered the embroidery of a logo onto beach towels. This operation was not considered an acceptable assembly operation because we stated that the mere embroidery of fabric without the requisite joining of two materials does not qualify as an acceptable assembly operation for purposes of subheading 9802.00.80, HTSUS. In the instant case, because the embroidery operation will be used to join the shirt components and the pellon backing together, it is an acceptable assembly operation within the meaning of subheading 9802.00.80, HTSUS, as in HRL 555625, and HRL 557386. Therefore, the shirt components and the thread will be eligible for the duty allowance under subheading 9802.00.80, HTSUS. However, the pellon backing is not eligible for the duty allowance under this tariff provision upon importation into the U.S. because nearly all of it is removed after the assembly operation. (Section 10.16(b)(4), Customs Regulations {19 CFR 10.16(b)(4)}, considers trimming, filing, or cutting off of small amounts of excess material to be incidental operations.)

HOLDING:

On the basis of the information and sample submitted, the embroidery operation used to join the shirt components and the pellon backing together is considered an acceptable assembly operation. However, the removal of nearly all of the pellon backing is not incidental to the embroidery operation. Therefore, the knit shirts subjected to the embroidery operation may be entered under subheading 9802.00.80, HTSUS, with allowances in duty for the cost or value of the U.S. components (except the pellon backing), provided the documentary requirements of 19 CFR 10.24 are satisfied.

A copy of this ruling should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

John Durant, Director

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