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HQ 560409




June 24, 1997

CLA-2 RR:TC:SM 560409 JML

CATEGORY: CLASSIFICATION

TARIFF NO: 9802.00.80

Mr. Richard Tinelli
Mastercargo Inc.
161-15 Rockaway Blvd.
Jamaica, NY 11434

RE: Applicability of partial duty exemption under subheading 9802.00.80, HTSUS, to plastic belts assembled in the Dominican Republic from U.S.-origin components; United States v. Mast Industries, Inc., 1 CIT 188, 515 F. Supp. 43 (1981), aff'd, 69 CCPA 47, 668 F. 2d 501 (1981).

Dear Mr. Tinelli:

This is in response to your letter of March 18, 1997, requesting a binding ruling for plastic belts assembled in the Dominican Republic. Specifically, you ask if the belts are eligible for the partial duty exemption provided for under subheading 9802.00.80, Harmonized Tariff Schedule of the United States ("HTSUS"). You provided our office with samples of the belts at various stages of their production.

FACTS:

Your client, M.Y. Accessories Inc., intends to produce plastic belts in the Dominican Republic. The belts will be produced from United States ("U.S.")-origin fabricated components sent to the Dominican Republic for assembly. The U.S.-origin fabricated components consist of plastic sheeting material cut into belt size strips in the U.S., a buckle, rivets, a plastic belt loop (made from the same material as the strips), and thread for stitching. You presented various scenarios depicting the manner in which the belts will be produced:

SCENARIO 1

Country of Process Performed
Production

U.S. Plastic sheeting cut into belt size strips.

Dominican Republic Sizing holes will be cut into one end to allow buckle point to enter

Dominican Republic Slot cut into opposite end so that the buckle point can swivel.

Dominican Republic End with sizing holes cut to a point.

Dominican Republic Belt stitched around edges.

Dominican Republic Loop and buckle attached by riveting.

SCENARIO 2

Country of Process Performed
Production

U.S. Plastic sheeting cut into belt size strips.

U.S. Sizing holes will be cut into one end to allow buckle point to enter

Dominican Republic Slot cut into opposite end so that the buckle point can swivel.

Dominican Republic End with sizing holes cut to a point.

Dominican Republic Belt stitched around edges.

Dominican Republic Loop and buckle attached.

SCENARIO 3

Country of Process Performed
Production

U.S. Plastic sheeting cut into belt size strips.

U.S. Sizing holes will be cut into one end to allow buckle point to enter

U.S. Slot cut into opposite end so that the buckle point can swivel.

Dominican Republic End with sizing holes cut to a point.

Dominican Republic Belt stitched around edges.

Dominican Republic Loop and buckle attached by riveting.

SCENARIO 4

Country of Process Performed
Production

U.S. Plastic sheeting cut into belt size strips.

U.S. Sizing holes will be cut into one end to allow buckle point to enter

U.S. Slot cut into opposite end so that the buckle point can swivel.

U.S. End with sizing holes cut to a point.

Dominican Republic Belt stitched around edges.

Dominican Republic Loop and buckle attached by riveting.

SCENARIO 5

Country of Process Performed
Production

U.S. Plastic sheeting cut into belt size strips.

U.S. Sizing holes will be cut into one end to allow buckle point to enter

U.S. Slot cut into opposite end so that the buckle point can swivel.

U.S. End with sizing holes cut to a point.

U.S. Belt stitched around edges.

Dominican Republic Loop and buckle attached by riveting.

Under all scenarios, the completed belts will be sold to another manufacturer in the Dominican Republic for attachment to finished apparel products.

The total cost of the operations to be performed in the Dominican Republic is $.075 per belt. Of that total, $.0015 is for the pointing of the belt strap, $.002 for cutting the belt holes, $.0015 for cutting the back slit, $.025 for the stitching, and $.045 for attaching the buckle and the loop by riveting.

ISSUE:

Whether the assembled belts, imported attached to finished apparel products, are eligible for 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, lubrication, 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.

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

With respect to scenario one, Customs considers the U.S.-origin belt size strips exported to the Dominican Republic as fabricated components in condition ready for assembly. Attaching the U.S.-origin loop and buckle to the belt strips by riveting are the type of operations contemplated by subheading 9802.00.80, HTSUS. The buckle and the loop are components in condition ready for assembly upon their exportation to the Dominican Republic and will not undergo any further fabrication abroad. Section 10.16(a), Customs Regulations, expressly states that riveting together components is a permissible form of assembly under subheading 9802.00.80, HTSUS. Similarly, Customs is of the opinion that stitching around the edges of the belt is an acceptable assembly operation for purposes of that subheading as it involves the joinder of the thread and the belt strip. See Peg Bandage v. United States, 17 CIT 1337 (1993).

In regard to cutting sizing holes, a buckle slit and an end point into the belt strips, Customs is of the opinion that while those operations are not acceptable assembly operations for purposes of subheading 9802.00.80, HTSUS, they are operations incidental to the assembly process. In United States v. Mast Industries, Inc., 1 CIT 188, 515 F. Supp. 43 (1981), aff'd, 69 CCPA 47, 668 F. 2d 501 (1981), the court considered the legislative history of the phrase "incidental to the assembly process," and found that Congress intended a balancing of all relevant factors to ascertain whether an operation of a "minor nature" was incidental to the assembly process. The court stated that relevant factors included:

(1) the relative cost and time of the operation; (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.

In Oxford Industries, Inc. v. United States, 1 CIT 230, 517 F. Supp 694 (1981), aff'd, 668 F. 2d 507 (CCPA 1981), a case which involved buttonholing U.S.-origin men's shirts in Mexico, the court, applying the Mast factors, determined that buttonholing was incidental to assembly and did not disqualify the shirts from receiving the partial duty exemption accorded under item 807.00, TSUS (the precursor to subheading 9802.00.80, HTSUS). In making its decision, the court noted that the cost of performing the buttonholing was between 8% and 11% of the cost of the components. In addition, the court examined the time required to perform the buttonholing and concluded that both factors were so relatively minor that the buttonholing should be considered a minor operation incidental to assembly.

Consistent with the above, Customs is of the opinion that the cutting of sizing holes, a buckle slot and an end point into the belt strips are operations which are minor in nature and do not constitute further fabrication of the belt strips. Applying the Mast factors, the relative cost of cutting the holes and buckle slit into the belt strips each represents 3% of the cost of the assembly operations and the cutting of the belt point represents 4%. Thus, based on the information presented, Customs is of the opinion that the cutting of sizing holes, a buckle slit and an end point into the belt strips are minor operations incidental to the assembly of the finished belts.

Customs is of the opinion that under the facts presented in regard to scenario one, all three requirements of subheading 9802.00.80, HTSUS, are satisfied. The assembled belts are made from fabricated components exported in condition ready for assembly. The foreign operations that entail riveting the U.S.-origin buckle and loops to the belts strips and stitching around the edges are acceptable assembly operations under this provision. The processes of cutting sizing holes and a buckle slot into the belt strips, and cutting the belt end to a point are minor operations incidental to the assembly of the belts abroad.

As scenarios two through five all involve the same operations as in scenario one (except that many of the above described incidental to assembly operations are performed in the U.S.), the belts produced pursuant to the remaining scenarios also will be entitled to subheading 9802.00.80, HTSUS, treatment, possibly even without having to satisfy the Mast factors.

HOLDING:

On the basis of the information provided, the imported belts assembled in the Dominican Republic under all scenarios presented will be eligible for the partial duty exemption under subheading 9802.00.80, HTSUS, provided the documentary requirements of 19 CFR 10.24 are satisfied.

A copy of this ruling letter should be attached to the entry documents 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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