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HQ 561540




January 21, 2000

CLA-2 RR:CR:SM 561540 KSG

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Cynthia J. Penley
The Nature Niche
3311 Princess Lane
Dallas, Texas 75229

RE: Eligibility of toys for a partial duty exemption under subheading 9802.00.80, HTSUS; country of origin marking

Dear Ms. Penley:

This is in reference to your letter dated September 21, 1999, asking about the eligibility of soft toys for a partial duty exemption under subheading 9802.00.80, of the Harmonized Tariff Schedule of the United States (HTSUS). You also asked about the country of origin marking requirements with regard to this merchandise.

FACTS:

This case involves soft toys that are made in the shapes of lizards and frogs. They are made of fabric from the U.S. and Taiwan (either polyester or nylon). Some shells contain both Taiwan and U.S.- woven fabric pieces and some shells are entirely made of U.S.- woven fabric pieces. You intend to die cut the fabric into animal patterns in the U.S. Each toy is made up of either two or three fabric pieces. The eyes are made in Japan and purchased in the U.S. The animal patterns and eyes will be shipped from the U.S. to Taiwan.

In Taiwan, the animal shapes will be sewn together and the eyes will be attached. The empty animal shell will be imported into the U.S. You will stuff the shells and sew them shut in the U.S.

ISSUES:

Whether the toys are eligible for a partial duty exemption under subheading 9802.00.80, HTSUS. What is the proper country of origin marking of the imported animal shells?

LAW AND ANALYSIS:

Subheading 9802.00.80

Subheading 9802.00.80, HTSUS, provides a partial duty exemption for:

Articles assembled abroad in whole or in part of fabricated components, the product of the U.S., 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 articles, less the cost or value of the U.S. component assembled therein, upon compliance with the documentary requirements of 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 U.S. to qualify for the exemption. Components will not lose their entitlement to the exemption by being subject 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 HTSUS subheading 9802.00.80 to that component. See 19 CFR 10.16(c).

Section 10.25 of the Customs Regulations (19 CFR 10.25) states, in pertinent part, as follows:

When a textile component is cut to shape (but not to length, width, or both) in the U.S. from foreign fabric and exported to another country, territory, or insular possession for assembly into an article that is then returned to the U.S. and entered, or withdrawn from warehouse, for consumption on or after July 1, 1996, the value of the textile component shall not be included in the dutiable value of the article.

Section 10.25 incorporates by reference the same operational, valuation, and documentation requirements applicable to goods entered under subheading 9802.00.80, HTSUS. Therefore, imported goods entitled to a duty allowance under 19 CFR 10.25 are to be entered under subheading 9802.00.80, HTSUS, and solely for purposes of calculating the duty allowance under this subheading. Customs will treat the textile components cut to shape in the U.S. from foreign fabric as if they were “U.S. fabricated components.”

Thus, pursuant to 19 CFR 10.25, the Taiwanese-origin fabric in this case which is cut to shape in the U.S. and exported to Taiwan for assembly would not be precluded from receiving a duty allowance under subheading 9802.00.80, HTSUS, when returned to the U.S. However, the eyes, which are of Japanese origin, are ineligible for a duty allowance under this tariff provision.

In this case, the assembly of the cut fabric pieces by sewing and the attachment of the eyes to the fabric by applying heat are acceptable assembly operations pursuant to 19 CFR 10.16(a). Consequently, the toys may enter the U.S. under subheading 9802.00.80, HTSUS, with allowances in duty for the cost or value of the fabric pieces, provided the documentary requirements of 19 CFR 10.24 are satisfied.

2. Country of Origin Marking

Section 304 of the Tariff Act of 1930 (19 U.S.C. 1304), as amended, provides that unless excepted, every article of foreign origin imported into 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.

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements of 19 U.S.C. 1304. Section 134.1(b), Customs Regulations (19 CFR 134.1(b)), defines “country of origin” as the country of manufacture, production or growth of any article of foreign origin entering the U.S. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the “country of origin” within the meaning of the marking laws and regulations.

For country of origin marking purposes, a substantial transformation of an imported article occurs when articles lose their identity and become new articles having a new name, character, or use. Assembly operations which are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. See C.S.D. 80-111, C.S.D. 85-25, and C.S.D. 90-97.

In Headquarters Ruling Letter (“HRL”) 734193, dated January 6, 1992, Customs determined that the sewing of 12 pre-cut pieces of Korean-origin fabric together in China to create a stuffed animal skin did not result in a substantial transformation for country of origin marking purposes. It was found that the Chinese assembly operation was simple in that it required the joinder of only 12 small pieces of fabric, the pieces did not lose their separate identity, and the operation added a relatively small amount to the total value of the stuffed toy. See also HRL 7343916, dated July 29, 1993 (simple assembly of pre-cut pieces of fabric of Hong Kong origin in China to create an animal shell did not result in a substantial transformation). Consistent with the above rulings, we find in regard to this case that the assembly operations performed in Taiwan, consisting of sewing two or three fabric pieces together and attaching two eyes, do not result in a substantial transformation of the U.S. and Japanese components into products of Taiwan.

Since the U.S.- origin fabric pieces and the Japanese eyes are not substantially transformed in Taiwan, their origin does not change. As the country of origin marking requirements of 19 U.S.C. 1304 are inapplicable to U.S.-origin goods, the stuffed animals need not identify the origin of the U.S. fabric pieces. However, the animals must be marked to identify the Taiwanese-woven fabric and Japanese-origin eyes. Acceptable markings for toys made of both U.S. and Taiwan fabric would include: “Fabric made in Taiwan, Eyes made in Japan,” and “Fabric Made in Taiwan and the U.S., Sewn in Taiwan, Eyes Made in Japan.” For toys consisting only of fabric woven in the U.S., acceptable markings would include “Eyes made in Japan” and “Fabric made in USA, Eyes made in Japan.”

The Federal Trade Commission (“FTC”) has jurisdiction concerning the use of the phrase “Made in the U.S.A.,” or similar words denoting U.S. origin. Consequently, any inquiries regarding the use of such phrases reflecting U.S. origin should be directed to the FTC, at the following address: Federal Trade Commission, 6th & Pennsylvania Avenue, N.W., Washington, D.C. 20508. A marking which indicated that the toy was “Assembled in Taiwan” would not be acceptable. See 19 CFR 134.43(e).

HOLDING:

Based on the information provided, the imported toys assembled abroad as described above are entitled to a duty allowance for the fabric under subheading 9802.00.80, HTSUS, provided the documentary requirements of 19 CFR 10.24 are satisfied.

The fabric pieces and eyes are not substantially transformed by the assembly operations in Taiwan. Therefore, the U.S.- origin fabric remains a product of the U.S. which need not be identified on the toy’s country of origin marking. However, the country of origin of the Taiwanese-origin fabric and the Japanese-origin eyes must be indicated on the toy’s marking.

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
Commercial Rulings Division


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