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HQ 559361





September 26, 1996

CLA-2 RR:TC:SM 559361 CW

CATEGORY: CLASSIFICATION

Ronald W. Gerdes, Esq.
Sandler, Travis & Rosenberg, P.A.
1341 G Street, N.W.
Washington, D.C. 20005-3105

RE: Applicability of duty allowance under subheading 9802.00.80, HTSUS, to the back pockets of jeans which are subjected to decorative stitching abroad; L'Eggs, Mast,
General Motors

Dear Mr. Gerdes:

This is in reference to your letter dated November 22, 1995, on behalf of Levi Strauss & Co., requesting a ruling on the applicability of the partial duty exemption under subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to jeans assembled in countries other than Mexico.

FACTS:

Levi assembles jeans in various countries, including Mexico, using fabric components of U.S. origin. This ruling request relates only to jeans assembled in countries other than Mexico and specifically concerns the eligibility for a duty allowance under subheading 9802.00.80, HTSUS, of the jean's back pockets which are subjected to a decorative stitching operation abroad prior to being sewn to the garment. You state that the decorative stitching on the back pockets, which resembles the letter "V", constitutes an acceptable assembly operation as it involves nothing more than the joining of two components together--the thread to the fabric.

Alternatively, you contend that the stitching should be considered a minor operation incidental to the assembly of the jeans. In support of this contention, you have submitted information indicating that, with respect to the assembly of a particular type of Levi jeans in Guatemala, the time required to perform the stitching represents approximately 2% of the total labor time to assemble the jeans, and the cost of the stitching represents less than .4% of the total cost of the garment.

ISSUE:

Whether the pocket components to which the decorative stitching is applied are entitled to a duty allowance 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 this tariff provision is subject to duty upon the full appraised value of the imported assembled article, less the cost or value of the U.S. components assembled therein, upon compliance with the documentation requirements of section 10.24, Customs Regulations (19 CFR 10.24).

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. 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 HTSUS subheading 9802.00.80 to that component. See 19 CFR 10.16(c).

In United States v. Mast Industries, Inc., 515 F.Supp. 43, 1 CIT 188, aff'd 69 CCPA 47, 668 F.2d 501 (1988), 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 of the operation are such that the operation may be considered minor;
(2) whether the operation is necessary to the assembly process;
(3) whether the operation is so related to the assembly that it is logically performed during assembly; and
(4) whether economic or other practical considerations dictate that the operation be performed concurrently with assembly.

This ruling will address only the legal implications under subheading 9802.00.80, HTSUS, of the decorative stitching sewn onto the back pockets of the jeans. For purposes of this ruling, we will assume that the jeans otherwise satisfy the conditions and requirements of this tariff provision.

With respect to your contention that the stitching operation constitutes an acceptable assembly operation under HTSUS subheading 9802.00.80, Customs held in C.S.D. 90-28, 24 Cust. Bull. 346 (1990) (Headquarters Ruling Letter (HRL) 555399 dated December 26, 1989), that an embroidered design which penetrated two or three layers of fabric was an acceptable assembly operation. The embroidered design served as binding agent, as it penetrated two or three layers of a laminated 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 a duty allowance under subheading 9802.00.80, HTSUS. By contrast, we have held that where stitching is performed on one layer of fabric only, the thread is used to ornament only and not to join or fit together solid components, as required by the statute. Thus, the mere embroidery of fabric without the requisite joining of materials does not constitute an acceptable assembly operation. See, e.g., HRL 555565 dated May 14, 1990 (embroidery of a logo or trademark onto beach towels does not constitute an acceptable assembly operation).

Consistent with the above, we find that the decorative stitching involved in this case does not constitute an acceptable assembly operation as it is performed on a single layer of fabric. In further support of your position on this issue, you direct our attention to the decision in Peg Bandage v. United States, 17 CIT 1337 (1993). That case involved Ace-type elastic bandages of U.S. origin which were shipped to Haiti where the ends were sewn with thread to prevent unraveling. The court found that this operation amounted to an assembly under the precursor to HTSUS subheading 9802.00.80, as it involved the joinder of the unsewn bandage "with another fully fabricated component, i.e., sewing thread." We believe that the facts in Peg Bandage are distinguishable from those before us here. While the court case concerned the necessary step of sewing the ends of a bandage to prevent unraveling, thereby rendering it a completed reusable elastic bandage, the instant case involves stitching performed for the sole purposes of decorating the jeans. We decline to expand the scope of the court's decision in Peg Bandage to encompass situations involving decorative embroidery or stitching..

With respect to whether the decorative stitching of the jeans' pockets is an operation incidental to the overall assembly, HRL 555565, involving the embroidery of a logo or trademark onto a towel, is instructive. In that case, Customs found that, upon an examination of the Mast criteria, the embroidery operation was not incidental to the assembly process. Although the cost and time to perform the embroidery represented only 3% and 5%, respectively, of the cost and time required to perform the entire assembly operation, we determined that the operation was neither necessary nor related to the assembly process, and that no information had been submitted to indicate that economic or other practical considerations mandated that the operation be performed concurrently with the assembly. However, see HRL 555525 dated June 5, 1990 (stitching a single layer of fabric is incidental to the assembly of curtains as the stitching represents only 2% of the cost of the entire assembly process, takes only a few seconds to perform, and is sufficiently related to the assembly so that it is logically performed concurrently with the assembly).

In regard to this case, you advise that the cost and time required to perform the stitching represents less than 1% and 2%, respectively, of the cost and time required to perform the entire assembly. Moreover, you contend that it would make no sense from either an economic or quality control perspective to establish a separate sewing operation in the U.S. soley to add the stitching to the back pockets. In this regard, you state that "since any given garment must be assembled from the same dye lot, such an approach would not insure lot integrity and the decorative stitching on the pocket might not match the other stitching on the pocket which serves to assemble the pocket to the jeans." In addition to the small percentages of cost and time of assembly which you state are represented by the decorative stitching, we are satisfied that the operation is sufficiently related to the assembly that it is logically performed during assembly. Thus, based on the information presented, we find that the decorative stitching is a minor operation incidental to the assembly of the jeans.

HOLDING:

On the basis of the information presented, it is our opinion that the decorative stitching applied to the back pockets of jeans assembled abroad is an operation incidental to the assembly process and will not preclude the pockets from receiving duty allowances under subheading 9802.00.80, HTSUS, assuming compliance with the documentation requirements of 10 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,


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