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HQ 559251




November 30, 1995

CLA-2 RR:TC:SM 559251 AT

CATEGORY: CLASSIFICATION

TARIFF NO.: 9801.00.10; 9802.00.80

Teresa A. Gleason, Esq.
Baker & McKenzie
815 Connecticut Avenue, N.W.
Washington, D.C. 20006-4078

RE: Applicability of subheadings 9801.00.10 and 9802.00.80, HTSUS, to scarves and earmuffs with heatable plastic packs; assembly; advanced in value/improved in condition

Dear Mrs. Gleason:

This is in reference to your letters dated August 19, 1994 and June 7, 1995, on behalf of R.G. Barry Corporation ("RG Barry"), requesting a ruling on the applicability of subheadings 9801.00.10 and 9802.00.80, Harmonized Tariff Schedule of the United States ("HTSUS"), to scarves and earmuffs both with heatable plastic packs ("energy packs") which are to be imported into the U.S. from Mexico. A sample scarf and earmuffs both with energy packs were submitted for our review. Your request as to the 9802.00.90, HTSUS, issue was addressed in HQ 558708 (June 14, 1995). We regret the delay in responding.

FACTS:

RG Barry intends to import into the U.S. from Mexico scarves and earmuffs with energy packs. You state that both the scarves and earmuffs with energy packs will be assembled in Mexico from U.S. origin materials. The scarves are comprised of woven 100% polyester fabric and are designed to hold a heatable energy pack. The earmuffs are comprised of 100% acrylic knit fabric ear coverings, polyurethane foam cushioning and a plastic frame. The scarves have a specially-designed pocket into which the energy pack will be inserted and thereafter secured in place by a velcro closure. The earmuffs have two specially-designed pockets located on the inside of the ear coverings (i.e., located on the side closest to a user's ear) into which the energy packs will be inserted and secured in place by elastic bands.

Scarves with energy packs

RG Barry exports fabric components (consisting of cut-to-shape pieces of polyester fabric measuring approximately 55" x 9" and non-fabric components (rolls of velcro material that are approximately 1" wide and energy packs comprised of plastic sheeting filled with a silica sand and paraffin wax substance), to Mexico to be used in the assembly of heatable scarves.

You state that the fabric is "wholly formed" in the U.S. and will be cut-to-shape (i.e., cut to length and width, and cut with fringes at the ends) in the U.S. The velcro material rolls and energy packs will also be manufactured in the U.S. and shipped to Mexico. According to your submission, the assembly process for the scarf with its energy pack is as follows:

1) The U.S. origin cut-to-shape fabric will be folded in half along its length. Thereafter, the material will be stitched widthwise approximately 17" from one end. The operator will then turn the material 90 degrees and stitch up the length of the scarf for approximately 20" to close this portion of the side of the scarf. This will complete the stitching of the scarf and leave a "pocket" into which the energy pack will later be inserted.

2) The U.S. origin velcro material will be unspooled from the rolls and cut to length, creating velcro pieces that are approximately 1" square. The operator will stitch a velcro piece to one side of the interior surface of the scarf, just above the open end of the pocket. A mating piece of velcro will then be positioned directly opposite the first piece and stitched into place.

3) The U.S. origin energy pack will be inserted into the pocket and secured therein by pressing the velcro pieces together.

4) The resulting scarf with its energy pack will be packaged for retail sale and exported from Mexico into the United States. Earmuffs with energy packs

You state that RG Barry exports Taiwanese origin earmuffs and the following U.S. origin fabricated components to Mexico: (1) cut-to-shape pieces of polyester fabric measuring approximately 7 inches x 3 3/4 inches (for the fabric pouch) and (2) the energy packs, comprised of plastic sheeting filled with a silica sand and paraffin wax substance. RG Barry purchases bolts of polyester fabric from U.S. manufacturers and cuts the fabric to shape in the U.S. The energy packs are purchased by RG Barry from U.S. manufacturers and shipped to Mexico.

According to your submission, the assembly process for the earmuffs with energy packs is as follows:

1) The U.S. origin cut-to-shape polyester fabric will be folded in half along its width. Thereafter, the fabric will be stitched lengthwise along both sides, creating a "pouch" into which the energy pack will later be inserted. An approximately 3/8 inch hem will be sewn along the open edge of the flannel pouch. The flannel pouch will then be turned inside out so that the stitching is not as visible.

2) The U.S. origin energy pack will be carefully inserted into the flannel pouch.

3) Flannel pouches with their enclosed energy packs will be placed into specially designed "pockets" located on the inside of the ear covering. The energy packs will be secured by elastic bands sewn onto the inside edge of the ear coverings.

4) The resulting earmuffs with their energy packs will be packaged for retail sale and exported from Mexico into the U.S.

The heatable scarves and earmuffs are designed to be used by an individual during the colder months of the year, in the same manner as a traditional scarf or earmuffs. The energy pack (scarf) or packs (earmuffs) is/are designed to be placed in a microwave oven for a certain period of time and heated. Thereafter, the pack(s) will retain and radiate heat for a number of hours. You assert that both the subject scarves and earmuffs imported from Mexico are eligible for a partial duty exemption under subheading 9802.00.80, HTSUS. You further assert that the U.S. origin energy packs are eligible for a full duty exemption under subheading 9801.00.10, HTSUS.

ISSUES:

1. Whether the subject scarves and earmuffs imported from Mexico are eligible for a partial duty exemption under subheading 9802.00.80, HTSUS, upon importation into the U.S.

2. Whether the U.S. origin energy packs imported from Mexico with the scarves and earmuffs are eligible for duty-free treatment under subheading 9801.00.10, HTSUS.

LAW AND ANALYSIS:

Applicability of 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 a 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 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.

Examples of operations incidental to the assembly process include trimming, filing, or cutting off of small amounts of excess materials, and cutting to length of wire, thread, tape, foil and similar products exported in continuous length. (19 CFR 10.16(b)(4) and (b)(6)).

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.

In the instant case, the sewing operations used to join the fabric components to make the scarf body or the pouches for the earmuffs are acceptable assembly operations. See, L'eggs Products, Inc v. United States, 704 F. sup. 1127, 1134 (CIT 1989) (the joining of fabric to itself with thread constitutes an assembly of two separate components).

Accordingly, the imported scarves and earmuffs from Mexico will be eligible for allowances in duty for the cost or value of the U.S. origin components under subheading 9802.00.80, HTSUS, upon compliance with the documentary requirements of 19 CFR 10.24.

Applicability of subheading 9801.00.10 to the energy packs

Subheading 9801.00.10, HTSUS, provides for the free entry of products of the U.S. that are 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. While some change in the condition of the product while it is abroad is permissible, operations which either advance the value or improve the condition of the exported product render it ineligible for duty-free entry upon return to the U.S. See Border Brokerage Co. v. United States, 65 Cust. Ct. 50, C.D. 4052, 314 F.Supp. 788 (1970), appeal dismissed, 58 CCPA 165 (1970).

In United States v. John V. Carr & Sons, Inc., 69 Cust. Ct. 78, C.D. 4377, 347 F.Supp. 1390 (1972), 61 CCPA 52, C.A.D. 1118, 496 F.2d 1225 (1974), the court stated that absent some alteration or change in the item itself, the mere repackaging of the item, even for the purpose of resale to the ultimate consumer, is not sufficient to preclude the merchandise from being classified under item 800.00, Tariff Schedules of the United States (TSUS) (the precursor to subheading 9801.00.10, HTSUS).

In HQ 952898 (April 23, 1993) Customs held that golf tees placed inside a small bag, the top of which was securely closed by fastening velcro strips, were entitled to duty-free treatment under subheading 9801.00.10, HTSUS.

Consistent with HQ 952898, we find that the operation performed in Mexico consisting of merely inserting the energy pack into the scarf body and pressing the velcro pieces together, or inserting the energy packs into the earmuff pouches which are then held by elastic bands, constitutes nothing more than a part of the repackaging of the energy packs. The energy packs are neither advanced in value nor improved in condition as a result of this operation. Accordingly, the energy packs are entitled to duty-free treatment under subheading 9801.00.10, HTSUS, provided the documentary requirements of 19 CFR 10.1 are satisfied.

HOLDING:

1) The imported scarves and earmuffs from Mexico are eligible for allowances in duty for the cost or value of the U.S. origin components under subheading 9802.00.80, HTSUS, provided the documentary requirements of 19 CFR 10.24 are satisfied.

2) The U.S. origin energy packs which are imported with the scarves and earmuffs from Mexico are entitled to duty-free treatment under subheading 9801.00.10, HTSUS, provided the documentary requirements of 19 CFR 10.1 are satisfied.

A copy of this ruling letter 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
Tariff Classification

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