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HQ 563296




October 13, 2005

CLA02 RR:CTF:VS 563296 FP

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Ms. Lucy Richardson
Sony Electronics, Inc.
1 Sony Drive
Park Ridge, New Jersey 076568003

RE: Applicability of subheading 9802.00.80 to thermal transfer ribbon; cutting to width

Dear Ms. Richardson:

This is in response to your letter dated June 7, 2005, which requests a binding ruling regarding the applicability of subheading 9802.00.80, HTSUS to certain thermal transfer ribbon. A sample of the ribbon was submitted for our examination.

FACTS:

Sony Chemical Corporation of America (Sony) is a manufacturer of thermal transfer ribbons, which are used in thermal transfer printers that produce labels for various industrial products, such as electronic parts, chemical drums, and compliance labels for the automotive, steel and apparel industries. These labels require printing that can withstand friction, moisture, rubbing, solvents and heat.

We are informed that Sony intends to assemble the thermal transfer ribbons in their Indonesian Export Processing Zone (Indonesian EPZ) from U.S. originating jumbo rolls of thermal transfer film, fiber cores, leader and trailer film and plastic packaging. The foreign processing will entail the slitting (cutting or disjoining) of a jumbo roll of thermal transfer film into specific lengths and widths, and affixing the film to cores by means of "trailer" plastic, which acts to warn the user that the roll has ended, and "leader" plastic, which serves both to protect the first portion of thermal transfer film on the roll and to assist as a means of feeding to the printer. Once completed, the finished rolls of thermal transfer ribbon will be shrinkwrapped in plastic and boxed for exportation back to the United States.

In detail, the processing operations begin when Sony procures fiber cores, leader tape, trailer tape and plastic packaging from U.S. manufacturers. Sony produces jumbo rolls of thermal transfer film and exports them to the Indonesian EPZ together with the U.S. originating cores, leader tape, trailer tape and clear plastic film packaging. There, the jumbo rolls and fiber cores are moved to a manufacturing floor where the atmospheric condition is maintained at prescribed temperatures and relative humidity levels to prevent tunneling, telescoping or ribbon slippage during printing.

The jumbo roll is placed on a slitting machine that holds the roll under tension while cutting it into specific widths and lengths. The cut film is transferred from the jumbo roll core, that measures approximately 6 inches in diameter, to a finished product roll fiber core, which measures only 1/2 inch in diameter. A clear pressure sensitive tape is used to attach the trailer tape to a core and the film to the trailer tape. The film is wound around the core and a leader tape is attached using clear pressure sensitive tape. In some cases, an additional white tape is used to make a pull tab to close the leader tape and indicate the beginning of the roll.

Leader tapes facilitate the loading of the ribbon into the printer and provide protection against damage to the ribbon. These tapes may be blue, clear or custom designed and allow for the application of a customer name or logo for identification, marketing and promotional purposes.

The trailer tape is essentially a ribbon sensing mechanism. It allows the printer to sense the end of the ribbon. The printer type determines the type of trailer tape to be used. There are three different types of trailer tape. The first type is aluminum (silver colored) trailer tape designed for printers with a reflective type sensor that reflects light indicating that the ribbon is at its end. The second type is a transparent (clear) trailer tape designed for a transmissive type sensor that allows light to shine through to indicate to the printer that the ribbon is at its end. Lastly, no trailer tape is applied for ribbon designed for printers with mechanical type sensors where the printer's response to tension tells it that the ribbon is at its end.

Finally, the rolls of thermal ribbon are shrink wrapped in plastic and boxed for export back to the United States.

Sony provided photographs that display the actual machines used to manufacture thermal transfer ribbons for our examination. It appears from the exhibit provided that a single jumbo roll of thermal transfer film can be cut into several finished ribbon rolls of smaller, but different dimensions (widths and lengths).

The diameter of the core as well as the dimensions of the slit thermal transfer ribbon are specified by the needs of the customers and their printer types.

ISSUE:

Whether U.S. origin ribbon, cores, leader tape, trailer tape and plastic packaging will qualify for the duty exemption under subheading 9802.00.80, HTSUS, when returned to the U.S. as finished rolls of thermal transfer ribbon.

LAW AND ANALYSIS:

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

A[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, lubrication, and painting.@

All three requirements of HTSUS subheading 9802.00.80 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 value of the imported assembled article, less the cost or value of such U.S. components, 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:

A[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 assembly operations for purposes of subheading 9802.00.80 encompass any method used to join together solid components such as sewing, welding, soldering, riveting, force fitting, gluing, or the use of fasteners and may be accompanied by operations that are incidental to the assembly as provided in section 10.16(b).

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. See 19 CFR 10.16(b)(4) and (b)(6).

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. According to section 10.16(c)(2), cutting of garment parts according to pattern from exported fabric is not an operation that is incidental to the assembly process.

With regard to cutting operations, 19 CFR 10.16(b)(6) provides that cutting to length wire, thread, tape, foil, or similar products exported in continuous lengths is an acceptable incidental operation. Under the processing scenario you propose, the thermal ribbon will not merely be cut to length, but will be cut to width as well.

In this case, it is our opinion that your proposed operation, slitting a jumbo roll of thermal transfer film into specific widths and lengths, exceeds the scope of allowed incidental operations in 19 CFR 10.16(b)(6). See Headquarters Ruling Letters 567804 and 557842, dated February 17, 1994 and March 25, 1999, respectively, where Customs and Border Protection held that cutting to length and width of vinyl cover was not an operation incidental to assembly, but only cutting to length was.

Therefore, we find that cutting the film to length and width in Indonesia does not qualify as an operation merely incidental to assembly but constitutes "further fabrication" for purposes of subheading 9802.00.80, HTSUS.

However, we find that affixing U.S.-origin fiber cores, adding leader and trailer tape are acceptable assembly operations for purposes of subheading 9802.00.80, HTSUS.

With regard to packing, 19 CFR 10.16(f) provides that the packing abroad of merchandise into containers does not in itself qualify either the containers or their contents for the exemption. However, U.S.-origin containers or packaging materials generally qualify for duty free treatment under 9801.00.10, HTSUS (American goods returned provision).

HOLDING:

On the basis of the information and sample provided, the finished thermal transfer ribbons will be eligible for a partial duty exemption under subheading 9802.00.80 for the cost or value of the U.S.-origin fiber cores, and leader and trailer tape. However, no allowance in duty may be made under this tariff provision for the cost or value of the jumbo thermal transfer film if it is cut to length and width in Indonesia.

In addition, U.S.-origin plastic packaging is entitled to duty-free treatment under subheading 9801.00.10, HTSUS.

Sincerely,

Monika R. Brenner, Chief

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