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HQ 559675




April 30, 1996

CLA-2 RR:TC:SM 559675 KR

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

V. Hanson
Hanson Holdings, Inc.
P.O. Box 163
Plainview, NY 11803

RE: Applicability of subheading
9802.00.80, HTSUS, to materials used to manufacture slippers.

Dear V. Hanson:

This is in reference to your letter dated February 2, 1996, concerning the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to bulk fabric and materials made in the U.S. and shipped to Canada where it is cut to shape and size, and sewn and/or glued into finished slippers and returned to the U.S.

FACTS:

You state that you intend to export to Canada fabric and material in sheets and rolls, fiberfill in bulk rolls, and elastic on spools. You state that all of the fabric, materials, fiberfill and elastic are products of the U.S. In Canada, the above bulk components will be cut and sewn into slippers which will be packaged and shipped to the U.S. You believe that the finished slippers being imported into the U.S. are eligible for a partial duty exemption under HTSUS 9802.00.80. You enclosed correspondence between Hanson Holdings, Inc., and the U.S. Customs Service, New York, concerning this importation. This ruling concerns only the issue of 9802.00.80, HTSUS. A separate ruling is being issued concerning the NAFTA preference issues.

ISSUE:

Whether the returned finished slippers are entitled to the partial duty exemption under subheading 9802.00.80, HTSUS.

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 subheading 9802.00.80, HTSUS, is subject to duty upon the full value of the imported assembled article less the cost or value of the U.S. components, upon compliance with the documentary requirements of section 10.24, Customs Regulations (19 CFR ?10.24).

Assembly operations for purposes of HTSUS subheading 9802.00.80 are interpreted at section 10.16(a), Customs Regulations (19 CFR ?10.16(a)), which specifically enumerates sewing and gluing as acceptable means of assembly. Further, this section provides that assembly operations may be preceded, accompanied, or followed by operations incidental to the assembly.

Operations incidental to the assembly process are not considered further fabrication, as they are of a minor nature and cannot always be provided for in advance of the assembly operation. Examples of operations considered incidental to the assembly process are delineated at section 10.16(b), Customs Regulations (19 CFR ?10.16(b)), which specifically enumerates cutting to length of finished components exported in continuous lengths.

However, any significant process, operation, or treatment whose primary purpose is the fabrication, completion, or physical or chemical improvement of a component precludes the application of the exemption under subheading 9802.00.80, HTSUS. Section 10.16(c) specifically includes, as an example of an operation not considered incidental to assembly, "[c]utting of garment parts according to pattern from exported material".

In HQ 088053 (January 30, 1991), Customs found that uncut textile fabrics exported in bolts and cut abroad according to a pattern to make wearing apparel components were not regarded as fabricated components pursuant to 19 CFR 10.14(a). Customs found that the U.S. origin fabric exported to Haiti uncut in bolts, and cut there to length and width to form the top and back components of a comforter shell constituted a fabrication of the components abroad. Therefore, no allowance in duty was permitted under subheading 9802.00.80, HTSUS, for the cost or value of the U.S. origin fabric, when the comforter shells were imported into the U.S. See also HQ 555625, (August 8, 1990).

In the instant case, the description of the Canadian operations shows that the finished slippers to be imported will not be eligible for the partial duty exemption available under HTSUS subheading 9802.00.80, except for the value of the elastic. The U.S. materials are sent to Canada in bulk form where they are cut to size and shape, except for the elastic which is cut only to length. The bulk materials have no relationship to the finished slipper prior to the processing occurring in Canada. The Canadian processing, other than the processing of the elastic, is a fabrication which changes the nature of the bulk materials and is clearly an operation not incidental to the assembly process under ?10.16(c).

Therefore, we find that the slippers imported by Hanson Holdings, Inc., are entitled to an allowance in duty under HTSUS 9802.00.80, only for the value of the elastic, assuming the elastic is cut only to length and sewn onto the slipper.

HOLDING:

On the basis of the described foreign operations, the bulk materials, other than the elastic, undergo a fabrication, and when the finished slippers are imported into the U.S. they will be eligible for an allowance in duty under HTSUS subheading 9802.00.80, only for the value of the elastic.

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 Appeals Division

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