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 > 2004 HQ Rulings > HQ 562825 - HQ 563026 > HQ 562935

Previous Ruling Next Ruling
HQ 562935




March 16, 2004

CLA-02 RR:CR:SM 562935 DCC

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Mr. Arthur W. Bodek
Grunfeld, Desiderio, Lebowitz, Silerman & Klestadt LLP 399 Park Avenue, 25th Floor
New York, NY 10022-4877

RE: Applicability of HTSUS subheading 9802.00.80 to U.S.-origin trim returned from Mexico

Dear Mr. Bodek:

This is in response to your letters dated December 17, 2003, and March 10, 2004, in which you request a ruling regarding the treatment of U.S.-origin trim under 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), on behalf of LEI Division of Jones Apparel of Texas, Ltd. (“LEI”). In addition to your letters, you provided samples of the trim items.

FACTS:

LEI intends to assemble jeans in Mexico from U.S.-origin fabric components and trim. These trim articles include: rivets, zippers, labels, bias, Q-loop belt loop fusing, elastics, and non-woven waistband fusing (the “trim articles”). After assembly, the garments will be subjected to stonewashing, sandblasting, or another similar washing treatment. LEI will then import the finished jeans into the United States.

According to your submission, the rivets will be formed in the United States and sent to Mexico to be attached to the jeans. The zippers will consist of four components: two zipper chains, a slider, and a stopper, all of which will be produced in the United States and shipped to Mexico where they will be assembled to form finished zippers and sewn into the assembled jeans. The labels will be produced in the United States, except the printing will be done in Mexico. The bias, Q-loop belt loop fusing, and elastic will be formed in the United States and shipped in rolls to the Mexican manufacturer. In Mexico, these materials will be cut to length to form a straight edge. The non-woven waistband fusing will consist of fabric formed in the United States. The waistband fusing will be cut to dimension in either the United States or Mexico.

Although you recognize that subjecting the garments to stonewashing or a similar washing process abroad would disqualify the U.S.-origin fabric components from receiving an allowance in duty under subheading 9802.00.80, HTSUS, you assert that the U.S.-origin trim articles would remain eligible for a duty reduction under this tariff provision.

ISSUE:

Whether the garments described above are entitled to a partial exemption from duty under subheading 9802.00.80, HTSUS.

LAW & ANALYSIS:

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 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 19 C.F.R. § 10.24.

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. Examples of operations incidental to the assembly process include trimming, filing, or cutting off of small amounts of excess materials, and cutting to length of wire, thread, tape, foil and similar products exported in continuous length, and marking assembled articles. See 19 C.F.R. § 10.16(b)(4), (b)(6), and (b)(7).

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 C.F.R. § 10.16(c). According to section 10.16(c)(4), the chemical treatment of components or assembled articles to impart new characteristics, such as showerproofing, permapressing, sanforizing, dying or bleaching of textiles, is not considered incidental to the assembly process.

In two separate cases, the Supreme Court reviewed Customs and Border Protection’s (“CBP”) application of the HTSUS subheading 9802.00.80 duty exemption to garments made from U.S.-origin components. See United States v. Haggar Apparel Co., 526 U.S. 380 (1999), and Levi Strauss & Co. v. United States, 527 U.S. 1001 (1999). In both cases, the issue presented was whether the CBP Regulations relating to subheading 9802.00.80, HTSUS, were entitled to Chevron deference by the courts. See Chevron USA v. Natural Resources Defense Council, 467 U.S. 837 (1984) (courts should defer to a reasonable agency interpretation of a statute when the statute itself is ambiguous). The Supreme Court determined in both Haggar and Levi Strauss that the applicable regulations must, when appropriate, be given Chevron deference.

Upon remand, the U.S. Court of Appeals for the Federal Circuit and the U.S. Court of International Trade affirmed CBP’s decision to deny duty exemptions for the value of U.S.-origin fabric components when those components were shipped abroad, assembled to produce garments, and subjected to oven-baking or stonewashing. Although the manufacturers in both cases also used U.S.-origin non-fabric components—such as buttons, zippers, and thread—the Haggar and Levi Strauss decisions only affirmed CBP’s decision with regard to the duty treatment of the U.S.-origin fabric components. See Haggar Apparel Co. v. United States, 938 F. Supp. 868, 869 (Ct. Int’l Trade 1996) (“Customs denied a duty allowance for the post-cured, cut-to-shape fabric components, but granted the duty allowance for all other components produced in the United States”), aff’d 127 F. 3d 1460 (Fed. Cir. 1997), rev’d 526 U.S. 380 (1999). Consequently, although it is clear that Haggar and Levi Strauss affirmed CBP’s determination to deny the duty exemption under subheading 9802.00.80, HTSUS, for U.S.-origin body fabric components when those components are assembled abroad and subjected to oven-baking, stonewashing or similar washing treatment, these cases do not preclude a HTSUS subheading 9802.00.80 claim for the cost or value of non-fabric components.

CBP considered a similar matter in Headquarters Ruling Letter (“HRL”) 555665, dated March 11, 1991. In HRL 555665, CBP reviewed the applicability of subheading 9802.00.80, HTSUS, to U.S.-origin components including fabric, elastic, buttons, zippers, labels, size tickets and thread. In that case, the Dominican manufacturer assembled the fabric components with elastic, zippers, labels, and thread, after which the garments were stonewashed. Following the stonewashing, buttons and size tickets were attached. CBP determined that the stonewashing precluded application of subheading 9802.00.80, HTSUS, to the fabric components, but not to the other items. CBP found that imported garments were entitled to a partial duty exemption for the cost or value of the elastic, zippers, labels, thread, buttons and size tickets because the stonewashing had no effect on the intended function of these items.

Consistent with HRL 555665, we find that the stonewashing, sandblasting, and other similar washing treatment of the finished jeans in the instant case is incidental to the assembly process with regard to the trim articles described above. As you note, the primary purpose of these finishing treatments is to alter the fabric components of the jeans—not the various trim articles. Consequently, the stonewashing, sandblasting and other similar washing treatment of the assembled garments will not disqualify an allowance for the value of the trim articles under subheading 9802.00.80, HTSUS.

With regard to the cutting operations, the CBP Regulations distinguish operations that may be considered incidental to the assembly process from more significant operations. Cutting to length material that is exported in continuous rolls and trimming or cutting off excess materials are processes that are deemed incidental to the assembly. See 19 C.F.R. § 10.16(b)(4) and (b)(4). By contrast, cutting exported fabric to pattern is considered an operation that is not incidental to the assembly process. See 19 C.F.R. § 10.16(c)(2).

In HRL 554924, dated November 16, 1989, CBP ruled that cutting U.S.-origin fabric in West Germany into a specific size and shape was not an operation incidental to the assembly process. On the other hand, in HRL 951319, dated May 13, 1992, CBP held that where U.S.-origin fabric tape and paper strips were cut to length before being glued together, the cutting process qualified as “incidental to the assembly process” and therefore met the requirements of subheading 9802.00.80, HTSUS.

In the instant case, the U.S.-origin non-woven waistband fusing may be cut to dimension in either the United States or Mexico. This cutting operation is not simply cutting a component to length, but rather is comparable to cutting fabric for a specific pattern in order to sew the newly cut components together. As noted above, such cutting is identified specifically in section 10.16(c)(2) as an operation not incidental to the assembly of a good. Consequently, to the extent that it is cut to dimension in Mexico, the waistband fusing would not satisfy the requirements of subheading 9802.00.80, HTSUS. See also HRL 088053, dated January 30, 1991 (U.S.-originating fabric that is cut to length and width abroad is precluded from receiving a duty allowance under subheading 9802.00.80, HTSUS).

Finally, with regard to the various U.S.-origin labels, you claim that the Mexican printing operation should not disqualify the labels from receiving preferential treatment under 9802.00.80, HTSUS. You note that in HRL 561394, dated August 26, 1999, CBP held that the foreign printing of labels was an operation that was incidental to the assembly process and, therefore, did not preclude an allowance for the value of the U.S.-origin labels.

As noted above, the CBP regulations specifically state that marking assembled articles is an operation deemed incidental to the assembly operation. See 19 C.F.R. § 10.16(b)(7). Furthermore, as you point out, CBP held in HRL 561394 that printing labels is an incidental operation. We therefore find that the printing of the labels in Mexico to be an operation incidental to the assembly process for purposes of 9802.00.80, HTSUS.

Assuming that the documentation requirements of 19 C.F.R. § 10.24 are satisfied, the garments may be entered under subheading 9802.00.80, HTSUS, with allowances in duty for the cost or value of the U.S.-origin rivets, zippers, labels, bias, Q-loop belt loop fusing, and elastics. To the extent that the non-woven fusing for the inside waistband is cut to dimension in Mexico, no allowance in duty would be allowed for the value of the non-woven fusing.

HOLDING:

On the basis of the information and sample provided, and assuming that the documentation requirements of 19 C.F.R. § 10.24 are met, the jeans may be entered under subheading 9802.00.80, HTSUS, with allowances in duty for the cost or value of the U.S.-origin rivets, zippers, labels, bias, Q-loop belt loop fusing, and elastics, and—to the extent it is cut to dimension in the United States—the non-woven fusing for inside waistband. No allowance in duty may be made under this tariff provision for the cost or value of the non-woven fusing fabric when it is cut to dimension in Mexico.

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 CBP officer handling the transaction.

Sincerely,

Myles B. Harmon, Director
Commercial Rulings Division

Previous Ruling Next Ruling

See also: