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HQ 559702




July 12, 1996

CLA-2-05 RR:TC:SM 559702 DEC

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Mr. Arthur W. Bodek
Siegel, Mandell & Davidson, P.C.
1515 Broadway - 43rd Floor
New York, New York 10036

RE: 19 CFR 10.16; HRL 558819; HRL 555686; HRL 555008; HRL 554939;
HRL 554676; HRL 554232; HRL 554599; HRL 554497; HRL 554582; United States v. Mast Industries, Inc., 515 F. Supp. 43 (CIT 1981), aff'd
69 CCPA 47, 668 F.2d 501 (1981); General Motors Corp. v. United States,
976 F.2d 716, 719 (Fed. Cir. 1992); Samsonite Corp. v. United States, 702
F. Supp. 908, 911 (1988), aff'd, 889 F.2d 1074 (1989); 19 U.S.C. 334;
19 CFR 10.25

Dear Mr. Bodek:

This is in response to your letter dated February 15, 1996, on behalf of Liz Claiborne, Incorporated (Liz Claiborne) in which you seek a ruling regarding the eligibility of garments subjected to an enzyme wash process for the partial duty exemption under subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS).

FACTS:

You indicated in your submission that Liz Claiborne is contemplating the importation of trousers and/or shorts which are to be assembled in the Dominican Republic. The fabric from which the components will be cut to size and shape in the United States will be of U.S. origin. Alternatively, you requested telephonically that Customs also address the use of foreign fabric imported into the U.S. and cut to shape prior to the assembly operation in the Dominican Republic. The garments will also be subjected to one of two types of enzyme-washing processes while abroad.

The first wash process will be used on black denim trousers or shorts. The second wash process will be used on khaki twill trousers or shorts. You have submitted samples of both the denim material and the khaki twill material before and after the wash process has been conducted.

The first cycle of the wash process of the black denim garments will involve the washing of the black denim shorts or trousers in hot water (140 Fø) and 0.25% detergent (the percentage figures refer to the weight of the substance relative to the unwashed (dry) garments) for five minutes. You state that the detergent that will be used is approximately twice the strength of an ordinary detergent available in a supermarket. The second cycle will involve the addition of a 2% buffer solution to the washing machine to maintain a steady pH level during the washing process. An enzyme softener will be added (1.0% Collase 225) and the garments will be washed for an additional 45 to 60 minutes after which the washing machine will be drained. Subsequently, the washing machine will be refilled with hot water (100 Fø) and the garments will be washed for two minutes and the machine will be drained. The washing machine will be refilled again with hot water (100 Fø) and then a silicone-based softener (3% Sandoperm ME) will be added to the hot water as will acetic acid in order to maintain a stable pH level. The garments will then be washed for 10 minutes, the washing machine will be drained, and the garments will then be tumbled dry.

The first cycle of the wash process of the khaki twill garments will involve the washing of the khaki twill shorts or trousers in hot water (140 Fø) for five minutes. The second cycle will involve the addition of a 2% buffer solution to the washing machine to maintain a steady pH level during the washing process. After adding 1.5% an enzyme softener (1.5% Collase 225), the garments will be washed for an additional 45 to 60 minutes after which the washing machine will be drained. Subsequently, the washing machine will be refilled with hot water (100 Fø) and the garments will be washed for two minutes and the machine will be drained. The washing machine will be refilled again with hot water (120 Fø) and then a cationic softener (2% Ultrasoft LSF), a silicone-based softener (Vicrosoft 342), and acetic acid will be added. The garments will then be washed for 15 minutes and the washing machine will be drained and the garments will then be tumbled dry.

You state that the importer estimates that the wash process applied to the black denim garments or the khaki twill garments accounts for less than 10% of the total assembler's charge. The purpose of the wash processes, you state, is to clean and soften the garments.

ISSUE:

Whether the garments subjected to the wash processes as described above will qualify for the partial duty exemption available under subheading 9802.00.80, HTSUS, when returned to the United States.

LAW AND ANALYSIS:

Subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS) provides for 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 United States components assembled abroad, provided the section 10.24, Customs Regulations (19 CFR 10.24), documentary requirements are satisfied.

If Liz Claiborne uses U.S.-origin fabric that will be cut to shape in the U.S. and then exported to be assembled into either the black denim or the khaki twill garments, the exported garment pieces will be products of the U.S. Should Liz Claiborne use foreign-origin fabric that is cut to shape in the U.S., the exported pieces will not be considered products of the U.S. (See Uruguay Round Agreements Act ("URAA"), Pub. L. No. 103-465, 108 Stat. 4809. Subtitle D of Title III of URAA deals with textiles and includes section 334 (codified at 19 U.S.C. 3592, which concerns rules of origin for textile and apparel products). Customs published a final rule on September 5, 1995, in the Federal Register (60 Fed. Reg. 46188) setting forth the final amendments to implement the provisions of section 334 of the URAA relating to the country of origin of textile and apparel products. These amendments became effective on July 1, 1996, and are set forth in section 102.21, Customs Regulations (19 CFR 102.21)). In promulgating section 10.25, Customs Regulations (19 CFR 10.25), which implements the duty allowance provided under section 334(b)(4)(A) for textile components cut in the U.S. from foreign fabric, Customs stated:

Under ?334(b)(4)(A), where goods are assembled abroad from components cut in the United States from foreign fabric (even though under ?334 rules the cut components are not products of the United States and the assembling country is the country of origin), the assembled goods, when imported into the United
States, will continue to receive the same duty treatment presently accorded to such goods under subheading 9802.00.80, HTSUS. ...
?334(b)(4) serves to preserve a tariff treatment that otherwise would no longer be available under ?334 origin rules....

Section 10.25 incorporates by reference the same operational, valuation, and documentation requirements applicable to goods entered under subheading 9802.00.80, HTSUS. Accordingly, Customs already has expressed its intent to continue to allow entry of these goods under subheading 9802.00.80, HTSUS, on and after July 1, 1996. Thus, Customs will allow entry of goods assembled abroad from textile components cut to shape from foreign fabric in the U.S. to be made under subheading 9802.00.8065, HTSUS, and, solely for purposes of calculating the duty allowance under this subheading, Customs will treat these textile components as if they were "U.S. fabricated components."

It is important to note, however, that Customs allowance of entry under subheading 9802.00.80, HTSUS, in order to implement the duty allowance provided under section 334(b)(4), should not be interpreted as a determination of the country of origin of these cut components. The determination of the country of origin of textile components cut in the U.S. from foreign fabric will be made under a general application of the section 334 rules of origin.

In regard to the issue of whether the wash process described above qualifies as an operation incidental to the assembly, section 10.14(a), Customs Regulations (19 CFR 10.14(a)), states, in part, that

The 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.

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). According to 19 CFR 10.16(c)(4), the chemical treatment of components or assembled articles to impart new characteristics, such as shower-proofing, permapressing, sanforizing, dying or bleaching of textiles, is not considered incidental to the assembly process, although 19 CFR 10.16(b)(1) states that cleaning is an example of an operation which is incidental to assembly.

Consistent with the above regulation, Customs has held that operations such as stone-washing, acid-washing and ovenbaking are not incidental to the assembly process and preclude subheading 9802.00.80, HTSUS, treatment to the U.S. components subjected to such an operation. See, Headquarters Ruling Letter (HRL) 555686, dated July 23, 1990; HRL 555008, dated March 24, 1990; and HRL 554939, dated November 15, 1988.

In HRL 554676, dated November 23, 1987, dyed denim fabric was assembled into wearing apparel articles in the Dominican Republic, and then washed in a washing machine. It was stated that the washing not only cleaned the newly assembled garments of dust and dirt but also of the excess dye, which would prevent the dye from running and staining other garments during the first washing. The detergents used in the foreign washing cycle were either plain high strength detergent or high strength detergent containing about 10 percent bleach substance. It was held that washing the textile articles with high strength detergent was a process analogous to cleaning, and considered incidental to assembly; however, washing with a high strength detergent containing a 10 percent bleach was regarded as too substantial to be treated as merely incidental. The bleaching changed the color of the exported fabric, similar to dyeing fabric, and was not considered an incidental operation. In HRL 554232, dated August 25, 1986, bleaching and softening exported fabric was also regarded as too substantial to be treated as merely incidental because there was not only a change in color, but a change in texture as well.

The foregoing rulings are distinguished from HRL 554599, dated June 8, 1987, which held that washing garments in a fabric softener and pressing them were operations incidental to assembly, because the inclusion of a softener in the wash cycle was considered a part of the cleaning process. The softener was also comparable to commercial softeners available to retail consumers. Furthermore, in HRL 554695, dated June 16, 1989, it was held that washing garments, which were assembled in the Dominican Republic or Costa Rica, with a detergent and softener in hot water without any bleach constituted a minor procedure with minimal change in color. It was stated that the washing process removed sizing and excess pigment from the fabric and merely constituted a cleaning operation. The same conclusion was
reached in HRL 554497, dated March 18, 1987, which involved washing assembled garments in a commercial laundry using a standard detergent and softener, and tumble drying and lightly pressing them, and in HRL 554582, dated March 12, 1987, which involved garments washed in an industrial machine utilizing an alkaline detergent and fabric softener.

In HRL 558819, dated March 29, 1995, Customs determined that a visual inspection of the sample garment after being subjected to a "pigment wash" process clearly indicated that prominent fading had occurred. In applying the standards for permissible subheading 9802.00.80, HTSUS, operations that are incidental to assembly, Customs concluded that the "pigment wash" imparted a significant new characteristic to the garment at issue, e.g. a very prominent fading and acid-wash appearance. Notwithstanding the importer's claims that no bleaching agents, oxidants, or perborates were used in the "pigment wash" process or that the fabric was specially treated, it was clear that as a result of the pigment wash, the garment possessed a significant new characteristic. HRL 558819 also addressed a "silk wash" process. Unlike the "pigment wash" which produced an inconsistent fading and streaking in the garment, the "silk wash" yielded a garment that was uniformly and mildly faded from the pre-wash garment and that was only slightly softer to the touch. We were satisfied that the "silk wash" was incidental to the assembly process and did not impart a significant new characteristic to the garment.

In United States v. Mast Industries, Inc., 515 F. Supp. 43, (CIT 1981), aff'd, 69 CCPA 47, 668 F.2d 501 (1981), the court, in examining the legislative history of the meaning of "incidental to the assembly process," stated that

[t]he apparent legislative intent was to not preclude operations that provide an "independent utility" or that are not essential to the assembly process; rather, Congress intended a balancing of all relevant factors to ascertain whether an operation of a "minor nature" is incidental to the assembly process.

The court then indicated that relevant factors included: (1) whether the relative cost and time required by the operation are such that the operation may be considered minor; (2) whether the operation is necessary to the assembly process; and (3) whether the operation is so related to the assembly that it is logically performed during assembly. The Court of Appeals for the Federal Circuit noted in General Motors Corp. v. United States, 976 F.2d 716, 719 (Fed. Cir. 1992), that the Mast decision is not to be interpreted "as announcing factors that must invariably be used to the exclusion of all others, or that all such factors are pertinent in every case involving [subheading 9802.00.80, HTSUS]."

With regard to the relative cost and time of an operation, the trial court in Samsonite Corp. v. United States, 702 F. Supp. 908, 911 (1988), aff'd, 889 F.2d 1074 (1989), stated that "[t]he magnitude of a particular process in terms of time and cost does not make that process any less one of fabrication, nor does it make the result thereof any less significant." On appeal, the court stated "[t]he critical inquiry in determining whether fabrication rather than mere assembly took place . . ., is not the amount of processing that occurred . . ., but its nature."

While the enzyme wash processes in this case produce slight fading to both the black denim and khaki twill fabric, it is our opinion that the processing described above serves chiefly as a cleaning and fabric softening process. Unlike the "pigment wash," discussed above, which produced an inconsistent pattern of fading and streaking in the garment that was disallowed as an operation incidental to assembly in HRL 558819, the wash processes applied to the black denim and khaki twill fabrics yield garments that are uniformly and only mildly faded from the pre-wash garments and which are slightly softer to the touch. Based on the cost information provided and our conclusion that the washing processes do not impart a significant new characteristic to the garments, we are satisfied that these processes are minor operations incidental to the assembly process.

HOLDING:

The wash enzyme processes of the black denim and khaki twill fabric described above are operations incidental to an assembly operation and will not preclude the application of the subheading 9802.00.80, HTSUS, exemption to the fabric components cut to shape in the United States, assuming compliance with the documentary requirements of 19 CFR 10.24.

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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