CLA-2 CO:R:C:V 555525 KAC
F. Gordon Lee, Esq.
O'Connor & Hannan
Suite 800
1919 Pennsylvania Avenue, N.W.
Washington, D.C. 20006-3483
RE: Applicability of the partial duty exemption under HTSUS
subheading 9802.00.80 to curtains created by sewing U.S.
fabric pieces together with various types of stitches. Hand-
tying a fabric tube into a bow is not incidental to
assembly.Substantial transformation;assembly;incidental
operations;trimming;cutting to length;folding;Mast;L'Eggs;
General Instrument;555357;555475.
Dear Mr. Lee:
This is in response to your letter dated March 22, 1990, and
several letters written in November and December, 1989, from your
client, Steven L. Markowitz of Max Kahn Curtain Corporation,
requesting rulings on the applicability of subheading 9802.00.80,
Harmonized Tariff Schedule of the United States (HTSUS), to
various curtains to be imported from Haiti. Samples of various
curtain styles were submitted.
FACTS:
Your client intends to ship U.S.-origin fabric, thread,
plastic rings, metal hardware for a shade, and packaging
materials, as well as Colombian and Polish fabric from which
pattern pieces are cut in the U.S., for assembly into various
curtains. Although the foreign operations performed on the
various curtain components will vary slightly, the following
operations are common to all the components:
(1) sewing two or more pieces of fabric together;
(2) folding and sewing a piece of fabric over onto itself
to form a curtain rod pocket or a double ruffle;
(3) sewing a "close out" or finishing stitch onto a single
ply fabric (which keeps the edge of the fabric from
unraveling);
(4) folding the curtain for packaging; and
(5) packaging the curtain in a plastic bag.
Other operations performed are merchandise specific and
include:
(1) shirring fabric to itself (gathering fabric and sewing
it to another piece of fabric to give a ruffle design
to the fabric);
(2) cutting pieces of fabric to length;
(3) attaching plastic rings to fabric with a tacking
stitch;
(4) hemming fabric (handkerchief hem);
(5) tucking/crimping and tacking fabric at established
marks;
(6) sewing fabric to itself to create a tube which is then
hand-tied into a bow (the bows are not attached to the
curtain, but packaged with the curtain);
(7) gluing fabric to the shade hardware and winding fabric
onto the shade hardware; and
(8) trimming macrame edges after attachment to the curtain;
After the foreign operations are performed, the various
curtains will be imported into the U.S.
ISSUE:
Whether the various curtain styles qualify for the partial
duty exemption available under HTSUS subheading 9802.00.80 when
returned to the U.S.
LAW AND ANALYSIS:
HTSUS subheading 9802.00.80 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, 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 10.16(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).
In United States v. Mast Industries, Inc., 515 F.Supp. 43, 1
CIT 188, aff'd, 69 CCPA 47, 668 F.2d 501 (1988), the court, in
examining the legislative history of the meaning of the words
"incidental to the assembly process," stated that:
[t]he apparent legislative intent was to not preclude
operations that provide an "independent utility" or that are
not essential to the assembly process; rather, Congress
intended a balancing of all relevant factors to ascertain
whether an operation of a "minor nature" is incidental to
the assembly process.
The court then indicated that relevant factors included:
(1) whether the relative cost and time of the operation
are such that the operation may be considered minor;
(2) whether the operation is necessary to the assembly
process;
(3) whether the operation is so related to the assembly
that it is logically performed during assembly; and
(4) whether economic or other practical considerations
dictate that the operations be performed concurrently
with assembly.
According to section 10.14(b), Customs Regulations (19 CFR
10.14(b)), foreign-made articles or materials may become products
of the U.S for purposes of subheading 9802.00.80, HTSUS, if they
undergo a process of manufacture in the U.S. which results in
their substantial transformation. This provision further states
that a substantial transformation occurs when, as a result of
manufacturing processes, a new and different article emerges,
having a distinctive name, character, or use which is different
from that originally possessed by the article or material.
Section 12.130(e)(2)(ii), Customs Regulations (19 CFR
12.130(e)(2)(ii)), provides that a textile article or material
usually will not be considered to be a product of a particular
country by virtue of merely having undergone "cutting to length
or width and hemming or overlocking fabrics which are readily
identifiable as being intended for a particular commerical use."
In this case, the Colombian and Polish fabric imported into the
U.S. is laid out for a curtain body, valance, ruffles and
tiebacks (style #ST3-934), and for swags, tiers, and ruffles
(style #TS-934), and then slit down the entire length. The edges
which will comprise the curtain body and swags are then side
hemmed. Finally, the individual curtain pieces are cut for the
body, valances, swags and tiers by spreading the fabric on a
table and cutting with a knife. It is clear that 19 CFR
12.130(e)(2)(ii) does not disqualify the fabric for style #ST3-
934 and #TS-934 from consideration as products of the U.S. See,
Headquarters Ruling Letter 086665 dated March 23, 1990, and
555590 dated May 17, 1990, which held that fabric woven in
country A, shipped to country B where it is cut to length and
width, and hemmed, is considered a product of country B.
Therefore, the foreign fabric which undergoes the above
operations will be considered substantially transformed into
products of the U.S. for purposes of HTSUS subheading 9802.00.80.
We are satisfied from the documentation and samples
submitted that the U.S. components meet the requirements of HTSUS
9802.00.80, and therefore, are entitled to the partial duty
exemption available under this tariff provision. The foreign
operations that entail sewing fabric onto itself using any type
of stitch, including a "close out"/finishing stitch, tucking,
shirring, crimping, hemming, and rod pocket and double ruffle
formation are considered acceptable assembly operations. See,
L'Eggs Products, Inc. v. United States, Slip Op. 89-5, 13 CIT ,
704 F.Supp. 1127 (CIT 1989). Sewing two or more pieces of fabric
together, gluing and winding the fabric onto the shade hardware,
and tacking the plastic rings to the fabric are considered
acceptable assembly operations pursuant to 19 CFR 10.16(a). See
also, General Instrument Corporation v. United States, 61 CCPA
86, C.A.D. 1128, 499 F.2d 1318 (1974), rev'g, 70 Cust.Ct. 151,
C.D. 4421, 359 F.Supp. 1390 (1973), which held that winding of
wire around a core is considered an acceptable assembly
operation.
Trimming the macrame attached to the curtains is considered
an operation incidental to the assembly process pursuant to 19
CFR 10.16(b)(4), which states that trimming or cutting off small
amounts of excess materials is an acceptable incidental
operation. Pursuant to 19 CFR 10.16(b)(6), cutting the fabric to
length is an appropriate operation incidental to the assembly.
Folding the curtains after assembly is also considered an
operation incidental to the assembly process pursuant to 19 CFR
10.16(b)(7), which states that final folding operations are
incidental to the assembly process.
Sewing the "closing out"/finishing stitches onto the edges
of the fabric either before or after the fabric pieces enter into
assembly is not an acceptable assembly operation. The thread
used in sewing the "closing out"/finishing stitches onto the edge
of single ply fabric does not serve as a binding agent, but is
merely used to prevent the unraveling of the fabric. See,
L'Eggs, Slip Op. 89-5, (CIT 1989). However, upon reviewing the
Mast criteria, we find that sewing the "closing out"/finishing
stitches is an operation incidental to the assembly process.
According to your March 22, 1990 letter, a comparison of the
relative cost and time required to perform the operation in
question with the cost and time required to perform the entire
assembly reveals that two percent of the cost and a few seconds
of time are necessary to sew on the "closing out"/finishing
stitches. Although the "closing out"/finishing stitches may not
be necessary to the assembly process, we believe that the
operation is sufficiently related to the assembly so that it
logically is performed concurrently with the assembly. The
operation normally takes place after the curtain is assembled,
because only after the completed assembly are the necessary raw
edges exposed for the stitching operation that will keep the
fabric from unraveling. However, in a few cases, the "closing
out"/finishing stitches will be sewn before the assembly
process. In either case, sewing the "closing out"/finishing
stitches is an acceptable incidental operation which will not
preclude the U.S. fabric pieces from receiving the duty exemption
available under HTSUS subheading 9802.00.80.
We have previously held in Headquarters Ruling Letter 555357
dated February 16, 1990, that forming a single length of U.S.
ribbon into a bow which is knotted to secure its shape is not an
acceptable assembly operation, but rather is a further
fabrication of the exported ribbon before it enters the assembly
process (the bow later is tacked to footwear). We have also held
that ribbon cut to length, wrapped twice around the middle of a
coat hanger bar and base of a hanger hook, and knotted into a bow
qualified as an assembly operation or operations incidental to
assembly since the bow formation process involved the joinder of
two components. See, Headquarters Ruling Letter 555475 dated
November 3, 1989. In the present case, the U.S. fabric is first
assembled into a tube by sewing the fabric over onto itself, and
then the tube is hand knotted into a bow. As the hand-tying of
the tube into a bow is not itself an assembly operation, it is
necessary to consider whether this operation is incidental to the
process of assembling the tube. Applying the Mast criteria, we
are unable to conclude that this operation is either a minor one
or that there are any considerations which dictate that the hand-
tying operation be performed concurrently with assembly.
Therefore, as we find that this operation is not incidental to
the assembly of the tube, no allowance may be made under
subheading 9802.00.80, HTSUS, for the cost or value of the fabric
used in creating the tube.
Foreign packaging of the curtains is permissible under 19
CFR 10.16(f).
HOLDING:
From the information and samples presented, it is our
opinion that, with the exception of the hand-tying of the fabric
tube into a bow, the foreign operations performed to the curtains
are considered proper assembly operations or operations
incidental to the assembly process. Therefore, the imported
curtains may be entered under subheading 9802.00.80, HTSUS, with
allowances in duty for the cost or value of the U.S. components
incorporated therein, except for the fabric tube, upon compliance
with the documentary requirements of 19 CFR 10.24. The cutting
to length and width and hemming of foreign fabric in the U.S. to
create curtain fabric pieces results in the substantial
transformation of the fabric into products of the U.S. for
purposes of this tariff provision.
Sincerely,
John Durant, Director
Commercial Rulings Division