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HQ 560933




June 26, 1998

CLA-2 RR:CR:SM 560933 MLR

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

John S. Rode, Esq.
Rode & Qualey
295 Madison Avenue
New York, NY 10017

RE: Applicability of partial duty exemption under HTSUS subheading 9802.00.80 to scarves; country of origin marking; cutting-to-length; fringe

Dear Mr. Rode:

This is in reference to your letter dated March 17, 1998, to Customs in New York, requesting a ruling on behalf of Amicale Industries, Inc., concerning the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to certain scarves, and the appropriate country of origin marking. Samples of the article exported from and imported into the U.S. were submitted with the request. Additional arguments were submitted in a letter dated June 11, 1998.

FACTS:

It is stated that Amicale currently imports camel hair into the U.S., classifiable under heading 5102, HTSUS, when not carded or combed, and under heading 5105, HTSUS, if the hair is carded or combed as necessary. The hair is spun into yarn and woven into fabrics of various kinds, depending upon the intended use of the apparel or other textile product. In this instance, Amicale proposes to weave 100 percent camel yarn into "scarves", and to self-fringe the ends so that the resultant product is 15 inches in width and 72 inches in length inclusive of the fringes.

Next, Amicale intends to export the articles as is to Scotland, or alternatively, cut the articles in half lengthwise to form two "scarves" 7 « inches in width and 72 inches in length, prior to export to Scotland. If the cutting operation is not performed in the U.S., that operation will be performed in Scotland. In Scotland, yarns originating in Scotland and the United Kingdom will be hand sewn to each "scarf" (in addition to the cutting procedure, if not performed in the U.S.). According to the sample, the hand sewing creates a large criss-cross decorative pattern over the entire surface of the scarf.

ISSUES:

I. Whether the scarves with the decorative pattern and possibly cut lengthwise in Scotland will qualify for the partial duty exemption under HTSUS subheading 9802.00.80, when imported into the U.S.

II. What are the country of origin marking requirements of the scarves at issue?

LAW AND ANALYSIS:

I. 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 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 U.S. components assembled therein, 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, lamination, 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. See 19 CFR 10.16(a). 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).

It is stated that camel hair classifiable under heading 5102 or 5105, HTSUS, will be imported into the U.S., where it is carded or combed as necessary, spun into yarn, and woven into scarves 15 inches wide and 72 inches long. It is claimed that this process results in scarves that are products of the U.S.

Section 334 of the Uruguay Round Agreements Act, codified at 19 U.S.C. 3592, provides rules of origin "for purposes of the customs laws and the administration of quantitative restrictions" for textiles and apparel entered, or withdrawn from warehouse, for consumption, on and after July 1, 1996. Section 102.21, Customs Regulations (19 CFR 102.21) implements section 334. Pursuant to 19 CFR 102.21, the country of origin of a textile or apparel product shall be determined by hierarchical application of the general rules set forth in paragraphs (c)(1) through (c)(5).

Paragraph (c)(2) states that "Where the country of origin of a textile or apparel product cannot be determined under paragraph (c)(1) of this section, the country of origin of the good is the single country, territory, or insular possession in which each foreign material incorporated in that good underwent an applicable change in tariff classification, and/or met any other requirement, specified for the good in paragraph (e) of this section." It is stated that the scarves are classifiable under subheading 6214.20.00, HTSUS. The applicable rule in 19 CFR 102.21(e) is as follows:

6213-6214 ... The country of origin of a good classifiable under heading 6213 through 6214 is the country, territory, or insular possession in which the fabric comprising the good was formed by a fabric-making process.

It is indicated that the scarf is woven from imported camel hair classifiable under heading 5101 or 5105, which is spun into camel hair yarn classifiable under heading 5106 or 5107, HTSUS. Therefore, since the fabric-making process will occur in the U.S., we find that the finished article will be a product of the U.S.

Counsel for Amicale states that the article exported to Scotland is a U.S. fabricated component in the form of fringed scarves woven from camel hair yarn, will be ready for assembly without further fabrication in Scotland, and that the hand sewing of wool yarn to the woven camel hair scarves is an acceptable assembly operation. As support that an acceptable assembly process occurs in Scotland, United States v. Baylis Brothers Co., 451 F.2d 643, 645 (CCPA 1971), is cited where the court found that a smocking operation performed on certain dresses was an assembly since the operation merely consisted in joining the two components, fabric of U.S. origin and thread of foreign origin, together according to the stencil design. Furthermore, the court found that the thread and fabric did not lose their physical identity by the process. E. Dillingham and Sons, Inc. v. United States, 470 F.2d 629 (CCPA 1972), is also cited, where the court held that a needling operation was a proper assembly, which entailed needling fibers into a base fabric to create papermakers' felts. HRL 556672 dated February 25, 1993, is also cited, where a tufting operation was found to be analogous to sewing and was an acceptable assembly operation under subheading 9802.00.80, HTSUS.

In HRL 560201 dated May 14, 1998, Customs considered a men's suit-type jacket, made from some shell fabric and interlining components that were "block cut" in the U.S. These block cut components were cut to shape but excess material was intentionally left on the components to allow the components to be fused together more easily. Customs held that trimming the components after they were fused together while abroad was not incidental to the assembly process as the markings on the components indicated that a significant portion of the fabric comprising the component was removed as "excess." It was also found that such cutting was to a specific pattern shape which was necessary to create the finished component, and constituted a further fabrication of the exported fabric. Customs distinguished such cutting from other cutting performed on different components, where only a very small amount of excess fabric (between 1/4 to 3/4 inch) was removed from approximately 50 percent of the outer edges of the component.

In HRL 560648 dated October 27, 1997, Customs held that "trimming" one long edge of an awning fabric to create a decorative edge was more akin to cutting to a specific pattern than removing a small amount of excess fabric, and constituted a further fabrication of the fabric component. In HRL 557503 dated November 24, 1993, pre-cut components comprising extra-large size garments were die-cut into smaller sizes abroad and then assembled into garments. It was held that such cutting was a further fabrication of the components for purposes of subheading 9802.00.80, HTSUS.

It is claimed that HRL 560201 is not applicable here because HRL 560201 distinguished between the removal of a "very small amount of excess fabric" and the removal of a "significant portion" of excess material. In this case, it is stated that Amicale exports a 15 inch wide article from the U.S. and cuts that article in half lengthwise, which does not entail the removal of excess material. Therefore, it is claimed that this is analogous to the cutting in HRL 560201 where only a small amount of excess fabric was removed. Rather, it is suggested that HRL 558816 dated February 1, 1995, is applicable.

In HRL 558816, Customs considered footwear insoles or "footbeds" which were molded in the U.S. as pairs. The body was molded directly onto a piece of fabric backed with plastic. This operation simultaneously created the footbed bodies and bonded the fabric to the bodies. The footwear component was then exported abroad, where the fabric was slit to separate the footbeds and trimmed so that it covered only the top surface of the bodies. It was held that cutting to separate the footbeds was incidental to the assembly process as it was similar to Texas Instruments v. United States, 545 F.2d 739 (CCPA 1976), where scoring and breaking a silicon slice along already marked "streets" to separate individual transistors was incidental to the assembly process. It is claimed that as in HRL 558816, the 15 inch wide article exported to Scotland consists of two components produced simultaneously in the U.S., exported in the physical form of a single unit. As the footbeds, it is claimed that Amicale's articles are to be separated by cutting at their mid-point. However, unlike HRL 558816 where the division of the molded product into two parts was necessary before the assembly operations could be performed, it is stated that it is possible to assemble the wool yarn without cutting the article, but that the cutting is performed to facilitate the assembly operation.

It is also stated that HRL 556982 dated January 27, 1993, allowed more complex cutting operations. HRL 556982 concerned reagent strips assembled by laminating bulk reagent material rolls to polystyrene roll stock. The roll stock was then sliced to form cards, and then slit into 0.2 inch wide reagent strips, followed by trimming of excess material at each end. In HRL 557709 dated May 24, 1994, Customs held that vinyl material cut to length and then rolled onto a self-adhesive roller to create a window shade qualified for subheading 9802.00.80, HTSUS, treatment.

We agree that based on the foregoing, the operation of pulling wool yarn over and under the scarf fabric is a proper assembly operation akin to sewing, as the scarf fabric and wool are being joined together. As in Baylis, though this operation creates a decorative design, this fact alone does not indicate further fabrication.

With regard to the cutting operation, 19 CFR 10.16(b)(6) provides that cutting to length wire, thread, tape, foil, or similar products exported in continuous lengths is an acceptable incidental operation. In this case, it is our opinion that while a smaller scarf is created by a straight cut, and, therefore, may be considered a cutting to shape, cutting from continuous rolls of fabric would create the same result. Furthermore, we find that the cutting is not as extensive as in HRL 560201 (cutting of garment shape) or HRL 560648 (cutting of decorative awning edge). Therefore, we find that cutting the article to width in Scotland is an operation incidental to assembly.

II. Country of Origin Marking

The marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that unless excepted, every article of foreign origin imported in the U.S. shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article.

As indicated above, the general rules set forth in 19 CFR 102.21(c)(1) - (5), which implement section 334 of the Uruguay Round Agreements Act will be used to determine the country of origin of the finished scarves for country of origin marking purposes. The country of origin is the country in which the fabric comprising the good was formed by a fabric-making process. As determined above, the country where the fabric-making process of the scarves occurs is the U.S.

However, 19 CFR 12.130(c) is applicable, which provides in part that:

... notwithstanding paragraph (b), merchandise which falls within the purview of Chapter 98, Subchapter II, Note 2, Harmonized Tariff Schedule of the United States, may not, upon its return to the U.S., be considered a product of the U.S.

According to T.D. 90-17, published in the Federal Register on March 1, 1990 (55 FR 7303), the principles of country of origin for textiles and textile products contained in 19 CFR 12.130 are applicable to such merchandise for all purposes, including duty and marking. Therefore, 19 CFR 12.130(c) must be applied to determine the country of origin marking requirements for the imported scarves. As the scarves will be eligible for subheading 9802.00.80, HTSUS, which falls within the purview of Chapter 98, Subchapter II, Note 2, HTSUS, the scarves may not be considered a product of the U.S. Rather, the scarves shall be considered a product of Scotland.

Since the scarves are produced as a result of an assembly operation, pursuant to 19 CFR 134.43(e), the scarves may be marked "Assembled in Scotland", or "Made in Scotland". However, as it is indicated that yarns originating in Scotland and the United Kingdom will be hand sewn to the scarf as part of the assembly process, we find that it will not be acceptable to mark the scarves "Assembled in Scotland from components of U.S. origin", but rather would have to be marked "Assembled in Scotland from components of U.S. and foreign origin." Please note that on June 15, 1998, Customs published a notice in the Federal Register, 63 F.R. 32697, soliciting comments concerning the country of origin marking rules for textiles advanced in value, improved in condition, or assembled abroad. If this proposal becomes a final rule, the marking of the returned scarf would be different.

HOLDING:

On the basis of the information and samples submitted, we find that the scarves are exported in a condition ready for assembly, the hand sewing operation performed in Scotland is a proper assembly, and that cutting the scarves to width in Scotland is an acceptable operation incidental to the assembly process. Therefore, allowances in duty may be made under subheading 9802.00.80, HTSUS, for the cost or value of the fabricated components of U.S. origin incorporated into the scarves, provided the documentary requirements of 19 CFR 10.24 are satisfied. Furthermore, we find that pursuant to 102.21(c)(2) and 19 CFR 12.130(c), the country of origin of the scarves for marking purposes will be Scotland and the scarves may be marked "Assembled in Scotland", "Made in Scotland", or "Assembled in Scotland from components of U.S. and foreign origin".

A copy of this ruling letter should be attached to the entry documents filed at the time the goods are 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
Commercial Rulings Division

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