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HQ 561635





May 14, 2002

CLA-2 RR:CR:SM 561635 MLR

CATEGORY: CLASSIFICATION

Ms. Sandra Tovar
CST, Inc.
120 B Commerce Circle
Fayetteville, GA 30214

RE: Eligibility of Automobile Accessories from the Dominican Republic for duty-free treatment under U.S. Note 2(b), Subchapter II, Chapter 98, HTSUS; Subheading 9802.00.80, HTSUS; Country of Origin Marking

Dear Ms. Tovar:

This is in response to your letter of January 6, 2000, requesting a ruling on behalf of McMurray Fabrics, Inc. (“McMurray”), regarding the applicability of duty-free treatment for certain automobile accessories, pursuant to Section 222 of the Customs Trade Act of 1990 (Public Law 101-382), which amended U.S. Note 2, Subchapter II, Chapter 98, Harmonized Tariff Schedule of the United States (HTSUS) (hereinafter “Note 2(b)”). You also ask about the partial duty exemption under subheading 9802.00.80, HTSUS, for a particular accessory. Samples were submitted with your request. We regret the delay in responding.

FACTS:

The articles at issue are automobile accessories, namely a “convenience net”, a “side net storage assembly”, a “scuff pad assembly”, a “tool tie down assembly”, and a “pin enter occupant comfort clip.”

The convenience net is used in automobiles to hold items for the convenience of the passengers and driver. The sample consists of a net, reinforced on three sides with a fabric band, and with cord loops on all four corners to allow the net to be secured in the automobile. It is stated that the knitted net fabric, the support edge webbing material, and the braided cord are produced by McMurray in their U.S. facility. These components are shipped directly to the Dominican Republic where the net is cut to length. The webbing support material is sewn around the net material on three sides. The top edge of the net is folded to create a pocket for the cord. The braided cord is inserted in the pocket, the ends of the cord are folded to create a loop, and the loop is sewn to the webbing. An additional piece of cord is cut and folded and inserted into the bottom corners to allow the finished net to be secured to the vehicle.

The side net storage assembly is similar to the convenience net, but is used on the sides of an automobile. The sample is of a net that is attached to a piece of plastic on three sides, with the top folded over a fabric band. The mesh fabric is knit by McMurray in the U.S., and shipped in rolls to the Dominican Republic. The plastic piece at the bottom and the webbing encased in the netting pocket at the top of the storage assembly are also stated to be made in the U.S. In the Dominican Republic, the mesh material is cut, and the plastic bottom support is stitched and glued to the mesh.

The scuff pad assembly is a part used under the rear seats of vehicles to protect the floor when the seats are removed or laid down. The sample consists of a wide elastic band of fabric, reinforced with plastic down one side and two circular metal rings on the other side. The fabric, metal rings, and plastic support are stated to be of U.S. origin and will be shipped directly to the Dominican Republic. In the Dominican Republic, the metal rings are inserted and the plastic strip is sewn onto the fabric.

The tool tie down assembly is used to secure tools in a vehicle. The sample consists of an elastic cord with two metal clamps on each end. The cord is manufactured in the U.S. by McMurray, and the metal end pieces are also stated to be of U.S. origin. In the Dominican Republic, the cord is cut to length and the metal ends are inserted and crimped.

The pin center occupant comfort clip is a part used in a vehicle to keep the shoulder harness in a comfortable position for children. The sample consists of an elastic cord, looped at one end, with a plastic hook over the other end. The plastic hook is stated to be of Taiwanese origin and is shipped to the Dominican Republic. The cord is manufactured by McMurray in the U.S. In the Dominican Republic, the cord is cut to length, each end of the cord is folded and bar tacked to itself. The plastic hook is placed over and securely attached to the looped end.

You state that the automobile accessories will be sold to automobile producers for installation in vehicles, and, therefore, you wish to mark the outer shipping carton with the country of origin.

ISSUES:

Whether the automobile accessories (other than the pin center occupant comfort clip) produced in the Dominican Republic are eligible for duty-free treatment under Note 2(b).

Whether the pin center occupant comfort clip is eligible for the partial duty exemption under subheading 9802.00.80, HTSUS.

LAW AND ANALYSIS:

Note 2(b)

Section 222 of the Customs and Trade Act of 1990 (Public Law 101-382) amended U.S. Note 2, Subchapter II, Chapter 98, HTSUS, to provide for the duty-free treatment of articles (other than textile and apparel articles, and petroleum and petroleum products) which are assembled or processed in a Caribbean Basin Economic Recovery Act (CBERA) beneficiary country (BC) wholly of fabricated components or ingredients (except water) of U.S. origin.

Note 2(b) provides as follows:

(b) No article (except a textile article, apparel article, or petroleum, or any product derived from petroleum, provided for in heading 2709 or 2710) may be treated as a foreign article, or as subject to duty, if--

(i) the article is--

(A) assembled or processed in whole of fabricated components that are a product of the United States, or

(B) processed in whole of ingredients (other than water) that are a product of the United States, in a beneficiary country; and

(ii) neither the fabricated components, materials or ingredients, after exportation from the United States, nor the article itself, before importation into the United States, enters the commerce of any foreign country other than a beneficiary country.

To qualify for Note 2(b) dutyfree treatment, an eligible article must be assembled or processed in a BC entirely of components or ingredients that are a “product of” the U.S. As used in this paragraph, the term “beneficiary country” means a country listed in General note 7(a), HTSUS, which includes the Dominican Republic. Although Note 2(b)(i)(A) and (B) are separated by the word “or”, it is our opinion that Congress did not intend to preclude free treatment under this provision to an article which is created in a BC both by assembling and processing U.S. fabricated components and by processing U.S. ingredients.

In regard to your question concerning the classification of the automobile accessories, based on the samples submitted, they are all classifiable under subheading 8708.29.50, HTSUS, which provides for other parts and accessories of motor vehicle bodies, except for the pin center occupant comfort clip which is classifiable under subheading 8708.99.80, which provides for other parts and accessories of motor vehicles. As subheading 8708.29.50, HTSUS, is not a provision associated with a textile category number, the automobile accessories will be eligible for duty-free treatment under Note 2(b) provided the other requirements of Note 2(b) are satisfied. It is also stated that all of the materials of the accessories (except the comfort clip), namely, the knitted net fabric, supporting edge webbing material, cord, plastic pieces, and metal rings or end pieces are of U.S. origin. It is also stated that these materials will be shipped directly to the Dominican Republic where they are cut and sewn or crimped together to form the finished automobile accessories. It is our opinion that the assembly and other operations performed in the Dominican Republic are encompassed by the operations specified in Note 2(b). Therefore, if, in fact, the materials above are of U.S.-origin, these materials are shipped directly from the U.S. to the Dominican Republic, and the finished automobile accessories are shipped directly to the U.S. without entering into the commerce of any foreign country other than a BC, the finished automobile accessories will be entitled to duty-free treatment under Note 2(b), assuming all documentation requirements of Headquarters telex 9264071 dated September 28, 1990, are satisfied.

In addition, Note 2(b) states that articles which are eligible for duty-free treatment under Note 2(b) may not be treated as foreign. Therefore, Customs has held that Note 2(b) articles are not subject to the country of origin marking requirements of 19 U.S.C. 1304. See HRL 558658 dated June 27, 1995.

II. Subheading 9802.00.80

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).

Regarding the pin center occupant comfort clip, we find that placing and securing the plastic hook over the looped end of the cord is an acceptable assembly operation within the meaning of subheading 9802.00.80, HTSUS. Furthermore, cutting the cord to length is a process incidental to the assembly process pursuant to 19 CFR 10.16(b)(6). Accordingly, assuming the documentary requirements under 19 CFR 10.24 are met, we find that the finished pin center occupant comfort clips will qualify for a duty allowance under subheading 9802.00.80, HTSUS, for the cost or value of the U.S.-origin elastic cord.

Regarding how the pin center occupant comfort clips should be marked, we note that the cord is cut to length in the Dominican Republic and the plastic hook is placed and secured over the cord to form the comfort clip. As separate materials, the cord and hook can be used for many different applications. Therefore, it is our opinion that when the cord is cut and the hook is placed over the cord, both materials undergo a change in name, character and use, such that a substantial transformation occurs in the Dominican Republic. Therefore, the comfort clips must be marked as a product of the Dominican Republic. Provided the comfort clips will be installed by automobile manufacturers in automobiles and they will not be sold at retail sale, we find an exception under 19 CFR 134.32(d) is warranted. Therefore, only the outermost container in which the comfort clips are imported and delivered to the automobile manufacturers needs to be marked with the country of origin of the comfort clips.

HOLDING:

Based upon the information provided, the automobile accessories described above (except for the pin center occupant comfort clip) will be eligible for duty-free treatment under Note 2(b), provided the materials used to make the automobile accessories are, in fact, of U.S. origin, and both the materials and finished automobile accessories satisfy the direct shipping requirements. As Note 2(b) products, they are not subject to the marking requirements of 19 U.S.C. 1304.

Furthermore, provided the documentary requirements under 19 CFR 10.24 are met, the finished pin center occupant comfort clips will qualify for a duty allowance under subheading 9802.00.80, HTSUS, for the cost or value of the U.S.-origin elastic cord. The comfort clips are considered a product of the Dominican Republic. Provided they are sold to automobile manufacturers for installation in automobiles and will not be sold at retail sale, we find an exception under 19 CFR 134.32(d) is warranted and only the outermost container in which the comfort clips are imported and delivered to the automobile manufacturers needs to be marked.

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

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