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HQ 561526




February 9, 2000

RR:CR:SM 561526 RSD

CATEGORY: CLASSIFICATION

TARIFF NO. 9802.00.80

Teresa M. Polino, Esq.
Sander, Travis & Rosenberg
1300 Pennsylvania Avenue
Washington, D.C. 20004-3002

RE: Eligibility of women’s panties and women’s camisole tops for the partial duty exemption under subheading 9802.00.80, HTSUS; further fabrication

Dear Ms. Polino:

This is in response to your letter dated September 23, 1999, on behalf of Kellwood Company (Kellwood), requesting a ruling concerning the eligibility of women’s panties and camisole tops for a partial duty exemption under subheading 9802.00.80 of the Harmonized Tariff Schedule of the United States (HTSUS). We received a supplemental submission dated November 24, 1999. Samples of the garments and two videos were submitted for our consideration. On September 28, 1999, a meeting was held at our offices to discuss this matter.

FACTS:

Kellwood currently produces women’s panties and women’s camisole tops in their lingerie/active wear division in the U.S. Kellwood is contemplating shifting the assembly process for the panties and camisoles to either Honduras or El Salvador. The assembly process is described below.

Panties:

The woman’s panty is knit to shape in the U.S. using advanced knitting technology that enables Kellwood to produce a seamless garment. The U.S. knit articles that will be exported are tubular shaped. As part of this knitting process, the garment is knit with a waistband, as well as knit-in lines that indicate where the fabric is to be slit and elastic is to be attached to finish the leg openings abroad.

The knit to shape articles that are exported from the U.S. will be positioned on a machine that allows the operator to almost simultaneously cut the fabric and sew elastic that is fed from the machine to its proper place around the leg openings identified precisely by the knit-in demarcation lines. The machine operator slits the knit fabric so that the elastic can be attached in its proper place. Excess fabric is removed as a result of this simultaneous sewing and slitting operation. The knit-in lines showing where the garment component is to be cut are curved. The samples submitted indicate that several inches of excess fabric are removed from the garments. The process is repeated as required for the particular style of garment being assembled. The final step involves sewing the crotch closed.

Camisole

The women’s camisole top is also knit to shape in the U.S. using the same knitting technology as described previously. In this garment, lines are knit into the garment to show where the armholes, neck, and back lines are located in the garments. The garment’s hem is also knit into the tubular article that is exported for assembly.

In Honduras or El Salvador, the elasticized trim is attached to the garment armholes and bodice and is looped to form straps. Several inches of excess material are cut away contemporaneous with the sewing of the elastic into the garment. Again, the cutting involves following contoured lines in the garments.

In your supplemental submission, you indicate that the machines used in this slitting and sewing operation are outfitted with guides, approximately two inches long, that hold the fabric flat as the operator guides the fabric through the machine. As the operator lays the fabric flat and guides it through the machine, it will pass over a blade to be slit. The blade is located less than one-quarter inch from the sewing needle that sews the elastic material into the garment immediately after the material is slit. In other words, the garments are trimmed a fraction of a second before the elastic material is sewn into the garment.

ISSUE:

Whether the panty and camisole components will qualify for the partial duty exemption under HTSUS subheading 9802.00.80, when imported into the U.S. as part of the finished garments.

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 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).

With regard to cutting operations, trimming, filing, or cutting off of small amounts of excess materials are examples of operations that are incidental to the assembly process. See 19 CFR §10.16(b)(4). In addition, 19 CFR §10.16(b)(6) provides that cutting to length of wire, thread, tape, foil, or similar products exported in continuous lengths; separation by cutting of finished components, such as pre-stamped integrated circuit lead frames exported in multiple unit strips are also acceptable incidental operations. However, the cutting of garment parts according to pattern is not considered an operation incidental to assembly. (19 CFR §10.16(c)(2).) Such an operation is considered a further fabrication of the exported garment. (See also 19 CFR §10.14(a), Example 4, (exported uncut textile fabrics are not considered fabricated components when cut according to a pattern to form garment parts); and Headquarters Ruling Letter (HRL) 556099 dated July 31, 1991, (cutting and shaping of non-woven materials and fabric to form a belt is a further fabrication of the non-woven materials and fabric)).

In this case, the operator performs the sewing operation and the cutting operation almost simultaneously on the same machine. You contend that the slitting should not be considered a further fabrication of the garments because the articles when exported are in condition ready for assembly without further fabrication. In effect, you maintain that the cutting operation and the sewing operation are so closely related that they are merged into one operation. Thus, you argue that the slitting should be considered part of the assembly operation. Alternatively, you contend that if Customs finds that the slitting is not part of the assembly operation, it should be considered incidental to the assembly of sewing the elastic onto the garments. It is argued that the garment components are fully defined in their final shape and dimension. You contend that the knit–in lines indicating where to cut the component and sew the elastic are the equivalent of scoring.

In support of these arguments, you point to the decision in United States v. Texas Instruments, 545 F.2d 739 (CCPA 1976). In United States v. Texas Instruments, a highly complex process was used to form thousands of chips on silicon slices. Thousands of transistor chips were arranged in rows and columns on the silicon slices with so-called “streets” separating them from one another. After the slices were tested, they were shipped abroad for the assembly of the individual transistor chips into operative transistors. Before the foreign assembly process took place, the silicon slices were scored along the “streets”. The scored silicone slices were then placed in an evacuated plastic bag and broken along the scored lines, resulting in the separation of the individual transistor chips. After the defective transistor chips were discarded, those remaining were finally assembled into the finished transistors.

The primary issue before the court was whether the scoring and breaking of the silicon slices prior to the assembly constituted a further fabrication. The scoring and breaking was held not to be a further fabrication of the otherwise fully defined components. The court determined that the process of scoring and breaking the silicon slices was incidental to the assembly process because the chips were completely fabricated and tested in the U.S. The court explained that the streets were properly oriented with respect to the crystalline structure of the silicon slices in the U.S., such that the breakage would occur after scoring along the “streets”. The lines of separation of the individual chips were clearly defined before exportation and all that remained to be done was the separation of the individual chips along the provided lines. The court further explained that the transistor chips themselves were unchanged after the scoring and breaking operation, as they merely had to be separated from each other, which did not otherwise affect them.

In reviewing the processing performed to make the panties and camisoles in this case, we believe that the cutting of the garment components is not analogous to the scoring and breaking of the integrated circuits in the Texas Instruments case. In Texas Instruments, the scoring and breaking was done along straight lines to separate already fabricated transistor chips. In this case, the garment components are slit on a machine according to contoured lines, which give these garments their final form and shape. We do not view the fact that the garment components are knit with lines instructing the operator where the components are to be cut and the elastic attached as evidence that they are fully fabricated articles ready for the assembly process. While the cutting is accomplished very quickly, it is clearly more than simple cutting to length or trimming small amounts of excess material. Rather, the cutting involved in this case resembles a cutting to a pattern that gives the final form and shape to the panties and the camisole tops and results in the removal of relatively substantial amounts of excess fabric. As already noted, 19 CFR 10.14(a) indicates that materials, which are cut into specific shapes or patterns abroad, are ineligible for a duty allowance under this tariff provision. See also Headquarters Ruling Letter (HRL) 556099 dated July 31, 1991.

Moreover, although the cutting will occur virtually simultaneously with the sewing of the elastic to the garment, we do not agree that that the cutting in this case should be considered an inseparable part of the assembly operation. In HRL 560648, dated October 27, 1997, awnings used for motor homes and travel trailers were trimmed in order to form a decorative edge, while concurrently a bias tape was sewn onto the decorative cut edge of the awning. The trimming, folding of the bias tape, and sewing of the bias tape to the trimmed edge of the panel was performed simultaneously on a single trimming and sewing machine. The ruling pointed out that photographs of the pre-cut awning fabric showed that lines were drawn on the fabric for the operator to follow when trimming the fabric. This indicated that the awning fabric needed to be trimmed according to a specific pattern in order to create the desired design on the decorative edge. Consequently, Customs ruled that although the “trimming” operation was performed simultaneously with the sewing of the bias tape to the awning, there was a further fabrication of the affected components because they were not exported in a condition ready for assembly. Similarly, in this instance, the garments will be cut abroad along a line knitted into the garment components, which resembles a pattern, to achieve their final shape and form. Consequently, we conclude that, like the awning fabric in HRL 560648, the garment components in this case are not exported in condition ready for an assembly without further fabrication.

Because we find that that the cutting of the garments constitutes a further fabrication, it is not necessary to address whether the cutting operation is incidental to the assembly of the garments. As the panty and camisole components do not meet all of the requirements of subheading 9802.00.80, HTSUS, no allowance in duty may be allowed for the cost or value of the U.S. components that are slit abroad as described above.

HOLDING:

The slitting of the fabric components of the knit women’s panties and camisoles, just prior to the attachment of elastic to the garments, constitutes a further fabrication of the exported fabric components of the garments. Therefore, the fabric components in the panties and camisoles that are slit will not be eligible for the partial duty exemption under subheading 9802.00.80, HTSUS upon return to the U.S.

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,


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