United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 2000 HQ Rulings > HQ 561660 - HQ 961050 > HQ 561679

Previous Ruling Next Ruling
HQ 561679




May 17, 2000

CLA-2 RR:CR:SM 561679 BLS

CATEGORY: CLASSIFICATION

John M. Peterson
Maria E. Celis
Neville, Peterson & Williams
80 Broad Street
New York, New York 10004

RE: Eligibility of certain scarves produced in the Dominican Republic for partial duty exemption under subheading 9802.00.80, HTSUS

Dear Mr. Peterson/Ms. Celis:

This is in reference to your letter dated March 11, 2000, on behalf of Totes-Isotoner Corporation (“Totes”), requesting a ruling regarding whether certain scarves produced in the Dominican Republic will qualify for the partial duty exemption under subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS).

FACTS:

The merchandise under consideration consists of three styles of scarves to be assembled in the Dominican Republic: hoodscarves (Style 39319), rectangular (Style 80148), and rectangular two-ply (Style 80155).

The Style 80148 rectangular scarf is made from rolls of “fleece” knit fabric cut to length and width in the U.S. into the form of 60” by 10” rectangles, which comprise the body of the scarves. These rectangles will then be shipped to the Dominican Republic, where a hem will be stitched around all edges of the scarf.

The Style 80155 rectangular two-ply scarf is made from soft textured fabric also cut to length and width into the form of 60” by 10” rectangles. These fabric rectangles will be sewn together as a two-ply scarf in the Dominican Republic and hemmed.

Style 39319, a “hood scarf,” is made from components which are cut to shape in the U.S. The cut components feature right angles at three edges and a curved shape on the fourth edge.

These cut shapes will be shipped to the Dominican Republic to be sewn together and hemmed in a manner which forms a crown or peak.

You request that Customs consider two alternative scenarios: 1) that all of the components for the scarves will be cut in the U.S., from fabric which is formed in the U.S., and (2) that the components of the scarves will be cut in the U.S., from fabric which is formed abroad, and imported into the U.S. for consumption.

ISSUE:

Whether the scarves assembled in the Dominican Republic under the described scenarios are eligible for the partial duty exemption under subheading 9802.00.80, HTSUS, upon importation into the U.S.

LAW AND ANALYSIS:

U.S. Formed Fabric

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).

Section 10.14(a), Customs Regulations (19 CFR 10.14(a)), provides in part that the 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.

As the scarf components in the first scenario are produced from U.S. origin fabric, the sole issue to be addressed is whether the operations performed in the Dominican Republic constitute an acceptable assembly for purposes of subheading 9802.00.80, HTSUS. We are assuming for purposes of this ruling request that the operations abroad otherwise conform to the requirements and examples set forth in Section 10.16, Customs Regulations (19 CFR 10.16).

In L’Eggs Products Inc. v. United States, 704 F.Supp. 1127 (CIT 1989), the Court of International Trade 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. In Peg Bandage v. United States, 17 CIT 1337 (1993), elastic bandages of U.S. origin 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.” See also, e.g., Headquarters Ruling Letter (HRL) 555648 dated July 16, 1991 (U.S.-origin fabric pieces cut in the U.S. and subjected to hemming, washing and folding operations in Mexico, will qualify for a duty allowance under subheading 9802.00.80, HTSUS) and HRL 560409 dated June 24, 1997 (stitching around the edges of belt material is an acceptable assembly operation under subheading 9802.00.80, HTSUS, as it involves the joinder of the thread and belt material.)

Similarly, we find in the instant case that the hemming operation (used for all three styles) and the operation involved in sewing the scarf components

4
together (Styles 81155 and 39319), which involve the joinder of the thread and garment materials, constitute acceptable assembly operations for purposes of subheading 9802.00.80, HTSUS. Therefore, under this scenario, and based on the information presented, the imported scarves will be entitled to the partial duty exemption under subheading 9802.00.80, HTSUS, provided the documentary requirements of 19 CFR 10.24 are satisfied.

Fabric of Foreign Origin

On December 8, 1994, the President signed into law the Uruguay Round Agreements Act (“URAA”) Section 334 of the URAA (codified at 19 U.S.C. 3592) provides new rules of origin for textiles and apparel entered, or withdrawn from warehouse, for consumption, on or after July 1, 1996. On September 5, 1995, Customs published section 102.21, Customs Regulations (19 CFR 102.21), in the Federal Register, implementing section 334. See 60 FR 46188. Thus, effective July 1, 1996, the country of origin of a textile or apparel product shall be determined by sequential application of the general rules set forth in paragraphs (c)(1) through (5) of section 102.21.

19 U.S.C. 3592(b)(4) provides that:

[t]he value of a component that is cut to shape (but not to length, width, or both) in the United States from foreign fabric and exported to another country, territory, or insular possession for assembly into an article that is then returned to the United States --

(i) shall not be included in the dutiable value of such article.

The effect of 19 U.S.C. 3592(b)(4) is to preserve the tariff treatment afforded by subheading 9802.00.80, HTSUS, that otherwise would not be available under the section 334 origin rules.

Section 10.25, Customs Regulations (19 CFR 10.25), implements 19 U.S.C. 3592(b)(4), and incorporates by reference the same operational, valuation, and documentation requirements applicable to goods entered under subheading 9802.00.80, HTSUS. That is, imported goods entitled to a duty allowance under section 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 textile components cut to shape in the U.S. from foreign fabric as if they were U.S. fabricated components.

5

As noted above, we find that the operations performed in the Dominican Republic on the scarf components in connection with the three styles (sewing the fabric components together and/or hemming) constitute an acceptable assembly operation for purposes of subheading 9802.00.80, HTSUS. We are also assuming under this scenario that the operations abroad otherwise conform to the requirements and examples set forth in Section 10.16, Customs Regulations (19 CFR 10.16). The remaining issue to be resolved is whether the processing of the foreign origin fabric in the U.S. satisfies the requirements of section 10.25 to the extent that the components are cut to shape in the U.S. As noted, the fabric is cut in the U.S. as follows:

Style 39319

The fabric is cut to form right angles at three edges and a curved shape on the forth edge.

Style 80148

The fabric is cut to length and width into 60” by 10” rectangles, which is used as the body of each individual scarf.

Style 80155

The fabric is cut to length and width into 60” by 10” rectangles, two of which are used to create the two-ply scarf.

It is your view that although the foreign-origin fabric used for styles 80148 and 80155 is cut to length and width, these components are dedicated for use as parts of scarves and thus should be treated as “U.S. fabricated components” for purposes of determining eligibility of the imported merchandise for the subheading 9802.00.80 exemption.

In HRL 560637 dated December 22, 1997, Customs considered whether the processing of foreign fabric used to create two types of nylon bags used to contain and protect a pair of sunglasses satisfied the requirements of 19 CFR 10.25. The first bag was rounded and assembled in Mexico from components cut in the U.S. into a shape straight on one edge and rounded on the other three sides. The second bag was assembled in Mexico from components cut in the U.S. into a rectangular form. In that case, we found that the processing in the U.S. of the foreign fabric to create the rounded bag components met the requirements under 19 CFR 10.25 as it involved cutting the fabric to shape. However, we found that cutting the fabric to length and width to create the 6
rectangular bag components did not meet the requirements under 19 CFR 10.25 because this provision specifically excludes from entitlement textile components which are cut to length, width, or both in the U.S.

With regard to the argument that the cut components in this case are dedicated for use as scarf components, you cite HRL 560497 dated October 9, 1997. In that case, Customs considered men’s ties assembled from foreign origin fabric cut in the U.S. There, the fabric was cut into the three components of the ties. We stated that the fabric components “are shapes apparently dedicated for use as tie components.” However, in that case the components were not cut merely to length or width, but were cut to a specific shape to form a tie when assembled. Therefore, we found in that case that the processing in the U.S. met the requirements of section 10.25, Customs Regulations.

In HRL 560883 dated January 26, 1999, foreign-origin fabric was cut in the U.S. into 15 x 15 inch or 12 x 12 inch squares for the purpose of producing eyeglass pouches. In that case, the importer argued that the imported foreign fabric was cut to shape in the U.S. into the final configurations of the subject drawstring bags and that the components were “solely dedicated to completion as drawstring pouches....” Customs held in that case that as the fabric pieces were square they were cut to length and width. Thus, as the components were not cut to shape, we held that the processing in the U.S. did not conform to the requirements of 19 CFR 10.25.

Similarly, as the scarf components of Styles 80148 and 80155 are cut into rectangles, they are cut to length and width and thus do not meet the requirements of 19 CFR 10.25. However, the scarf components of Style 39319 meet the requirements of 19 CFR 10.25 as the foreign fabric used to produce this style is cut to shape (cut to right angles at three edges and a curved shape on the fourth edge). Accordingly, notwithstanding that the foreign fabrics cut in the U.S. are not a “product of” the U.S., pursuant to 19 U.S.C. 3592(b)(4) and section 10.25, Customs Regulations, Style 39319 qualify for the partial duty exemption provided for in subheading 9802.00.80, HTSUS, provided the documentary requirements of 19 CFR 10.24 are satisfied.

HOLDING:

Based on the information submitted:

1) Scarves made from components cut in the U.S. from U.S.-origin fabric undergo acceptable assembly operations under subheading 9802.00.80, HTSUS, when they are sewn together and/or undergo hemming operations 7
in the Dominican Republic. Therefore, the imported scarves are entitled to the partial duty exemption under HTSUS subheading 9802.00.80, provided the documentary requirements of 19 CFR 10.24 are satisfied.

2) Scarves assembled in the Dominican Republic from components cut in the U.S. into rectangles from foreign origin fabric do not meet the requirements of 19 CFR 10.25 as they are merely cut to length and/or width. Therefore, no allowance in duty under subheading 9802.00.80, HTSUS, will be permitted for the foreign origin fabric components used to produce Styles 80148 and 80155, as the textile components used for these scarves do not satisfy the cut- to-shape requirements of 19 CFR 10.25.

However, as the foreign origin fabric components of Style 39319 are cut to shape, they meet the requirements of 19 CFR 10.25. Accordingly, notwithstanding that the foreign fabrics cut in the U.S. are not a “product of” the U.S., pursuant to 19 U.S.C. 3592(b)(4) and section 10.25, Customs Regulations, Style 39319 is entitled to the partial duty exemption provided for in 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 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

Previous Ruling Next Ruling

See also: