CLA-2 CO:R:C:V 555128 GRV
Mr. Doug Coath, Jr.
Frank W. Winne & Son, Inc.
44 North Front Street
Philadelphia, Penn. 19106
RE: Applicability of partial duty exemption under HTSUS sub-
heading 9802.00.80 to 3-strand twisted and 8-strand braided
rope to be imported from South Korea.553593;554531;553953;
classification;dutiability;subchapter II, Chapter 98,
HTSUS.
Dear Mr. Coath:
This is in response to your letters of September 14, 1988,
requesting rulings on the applicability of subheading 9802.00.80,
Harmonized Tariff Schedule of the United States (HTSUS) (formerly
item 807.00, Tariff Schedules of the United States (TSUS)), to
3-strand twisted and 8-strand braided rope to be imported from
South Korea after processing. A sample of the 3-ply nylon yarn
to be exported was submitted for examination. You also request
information concerning the manner in which Customs duties would
be calculated, assuming that HTSUS sub-heading 9802.00.80
applies.
FACTS:
You state that 3-ply nylon rope yarn of U.S. manufacture
will be exported to South Korea in 15 pound tubes (each tube
contains 9,000 continuous feet of yarn). In South Korea, 30 of
these tubes of yarn will be connected to a rope machine which
will first twist the 30 yarn fibers into 3 strands of 10 yarn
fibers each and then twist the 3 strands into a 3-strand twisted
rope. The 3-strand twisted rope will then be cut into lengths of
600 feet and wound onto spools for return to the U.S.
You also state that 3-ply nylon rope yarn will be plaited
(braided) into 8-strand nylon rope.
ISSUE:
Whether the 3-strand twisted rope and/or the 8-strand
braided rope will be eligible for the partial duty exemption
provided for under subheading 9802.00.80 (Harmonized Tariff
Schedule of the United States (HTSUS)) when returned to the U.S.
- 2 -
LAW AND ANALYSIS:
As you may know, the HTSUS replaced the TSUS, effective
January 1, 1989. TSUS item 807.00 was carried over into the
HTSUS without change as subheading 9802.00.80. This tariff
provision provides a partial duty exemption for articles:
[a]ssembled 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.
An article entered under HTSUS subheading 9802.00.80 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 of the Customs
Regulations (19 CFR 10.24).
Section 10.16(a), Customs Regulations (19 CFR 10.16(a)),
provides, in part, that:
The assembly operations 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....
We have previously held that the mere twisting of exported
yarn into twine or rope represented a combining or joining of
components in an acceptable assembly operation for purposes of
TSUS item 807.00. See, Headquarters Ruling Letters (HRL) dated
May 16, 1985 (HQ 553593) and May 29, 1987 (HQ 554531). However,
we stated that passing yarn through braiding machines to produce
braided rope and cordage is analagous to weaving fabrics from
spun yarn and, therefore, is considered a manufacturing process
that is not within the contemplation of TSUS item 807.00.
In the instant case, the 3-ply nylon rope yarn to be
exported will first be twisted into strands of 10 yarn fibers
each and then three of those strands will be twisted together to
form 3-strand twisted rope. Consistent with our prior rulings on
this subject, we are of the opinion that the twisting of the
3-ply yarn into 3-strand twisted rope constitutes an acceptable
assembly operation for purposes of HTSUS subheading 9802.00.80.
Moreover, cutting the rope to individual lengths is considered
- 3 -
an operation which is incidental to the assembly process. See,
19 CFR 10.16(b)(6).
However, braiding the 3-ply nylon rope yarn into 8-strand
plaited rope does not constitute an acceptable assembly operation
as we previously advised you in HRL dated December 23, 1985 (HQ
553953).
In regard to your inquiry concerning the manner in which
duty would be calculated for the returned rope, you state that it
is your understanding that the duty rate on twisted nylon rope is
12 1/2 cents per pound plus 15 percent ad valorem. You estimate
that the cost of the yarn will be $1.00 per pound FOB U.S. port
of exportation, ocean freight costs from the U.S. to South Korea
will be $.10 per pound, the processing in Korea will cost $.20
per pound, and the return ocean freight costs will be $.10 per
pound.
Under the HTSUS, twisted nylon rope is classifiable under
subheading 5607.50.20, with duty at the rate of 27.6 cents per
kilogram plus 15 percent ad valorem, and braided nylon rope is
classifiable under subheading 5607.50.40, with duty at the rate
of 7.2 percent ad valorem. As we stated earlier, merchandise
entitled to HTSUS subheading 9802.00.80 treatment is subject to
duty upon the full value of the imported article less the cost or
value of components of U.S. origin. U.S. Note 4(b), subchapter
II, Chapter 98, HTSUS, provides in regard to HTSUS subheading
9802.00.80 that if the imported assembled article is subject to a
specific or compound rate of duty, the total duties shall be
reduced in such proportion as the cost or value of the U.S.
components bears to the full value of the imported article.
Therefore, it is necessary first to determine the "full" or
appraised value of the imported assembled article. Under the
circumstances of this case, if we assume that the twisted nylon
rope will be appraised on the basis of transaction value (19
U.S.C. 1401a(b)), the appraised value would equal the cost of the
assembly operation, plus the value (as an assist) of the nylon
rope yarn to be provided to the Korean assembler. The value of
the assist would include the cost of transporting the rope yarn
to the production facility in South Korea. The appraised value
of the imported rope would not include charges incurred in
connection with the international shipment of the rope from South
Korea to the U.S.
Once the appraised value of the imported twisted nylon rope
is determined, the "total" duties applicable to the imported rope
would be calculated pursuant to HTSUS subheading 5607.00.20 (27.6
cents per kilogram plus 15 percent ad valorem). Pursuant to
HTSUS subheading 9802.00.80 and U.S. Note 4(b), subchapter II,
- 4 -
Chapter 98, HTSUS, these duties would be reduced in such
proportion as the cost or value of the U.S. nylon rope yarn bears
to the full appraised value of the imported rope. This results
in the actual duty liability for the imported rope.
HOLDING:
On the basis of the described assembly operation, it is our
opinion that the 3-strand twisted rope to be imported will be
entitled to the partial duty exemption under HTSUS subheading
9802.00.80, upon compliance with the requirements of 19 CFR
10.24. Allowances in duty may be made under this tariff
provision for the cost or value of the nylon rope yarn of U.S.
origin to be exported to South Korea. However, the 8-strand
plaited rope will not qualify for the partial duty exemption
under HTSUS subheading 9802.00.80, as plaiting (braiding) is
considered a manufacturing process. Thus, the 8-strand plaited
rope will be dutiable on its full value.
Sincerely,
John Durant, Director
Commercial Rulings Division