CLA-2 CO:R:C:V 555565 KAC
TARIFF NO: 9802.00.80
Mr. Neil Boyle
Wren Marketing
1916 Youngblood Street
Suite A
McLean, Virginia 22101
RE: Applicability of the duty exemption under subheading
9802.00.80, HTSUS, to weighted beach towels
Dear Mr. Boyle:
This is in response to your letter of January 11, 1990,
requesting a ruling on the applicability of subheading
9802.00.80, Harmonized Tariff Schedules of the United States
(HTSUS), to weighted beach towels to be imported from a
Caribbean country.
FACTS:
Wren Marketing will be shipping U.S. components to a
Caribbean country for assembly into weighted beach towels. The
assembly operations to be performed include the following:
(1) cutting to length of proper-width cotton toweling;
(2) cutting to length of beaded lead pellets;
(3) sewing the cut-to-length beaded lead pellets to the
edge of the cut-to-length towel;
(4) marking the individual towels with washing instructions
and country of origin;
(5) attaching hangtags; and
(6) packaging the towel for retail sale.
Consideration also is being given to the possibility of
performing certain additional operations abroad. These include:
(1) embroidering a logo, trademark or other identifying symbol
onto the towel; and/or (2) sewing a patch or small label onto the
towel.
Upon completion of the assembly operations the weighted
beach towels will be imported into the U.S.
ISSUE:
Whether the weighted beach towels will 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, section 10.16(c), Customs
Regulations (19 CFR 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 "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 operation be performed concurrently
with assembly.
The operations of sewing beaded weights and a patch or label
onto the towel are considered acceptable assembly operations
pursuant to 19 CFR 10.16(a). Cutting the proper-width towels and
beaded weights to length are considered acceptable operations
incidental to the assembly process pursuant to 19 CFR
10.16(b)(6), which states that cutting to length is an
acceptable incidental operation. Marking the towels with washing
instructions and country of origin, as well as attaching
hangtags, will not preclude tariff treatment under HTSUS
subheading 9802.00.80. See, C.S.D. 79-314 (1979), which found
that "foreign stamping, markings, coding, or printing, when
serving the purpose of origin markings, trademark, ... or
instruction for use, would not preclude tariff treatment under
item 807.00," Tariff Schedules of the United States (TSUS) (the
precursor to HTSUS subheading 9802.00.80). Packaging the
assembled towels into plastic bags for retail sale also would not
preclude treatment under this tariff provision pursuant to 19 CFR
10.16(f).
However, the operation of embroidering the logo, trademark
or other identifying symbol onto the towels is not considered an
acceptable assembly operation. We have previously held that
embroidering a single layer of fabric does not qualify as an
acceptable assembly operation for purposes of HTSUS subheading
9802.00.80. See, Headquarters Ruling Letters 063098 dated June
7, 1979, and 071031 dated November 12, 1982. Moreover, the
embroidery operation is not considered an incidental operation
upon examination of the Mast requirements. We recognize that the
cost and time required to perform the embroidery operation
represents only three and five percent, respectively, of the cost
and time required to perform the entire assembly operation.
However, we find that the embroidery operation is not necessary,
nor is it related, to the assembly process. The embroidery is
merely a decorative feature of the beach towel. Moreover, there
is no indication from the information presented that economic or
other practical considerations mandate that the embroidery
operation be performed concurrently with the assembly.
Therefore, we find that, on balancing the relevant factors, the
embroidery operation in this case does not constitute an
operation incidental to the assembly process.
HOLDING:
On the basis of the information presented, it is our opinion
that the embroidery operation is neither an assembly operation
nor an operation incidental to the assembly process. Therefore,
towels with an embroidered design applied abroad will not be
entitled to the partial duty exemption under subheading
9802.00.80, HTSUS. However, if no embroidery is performed
abroad, the towels may be entered under this tariff provision,
with allowances in duty for the cost or value of the U.S. cotton
toweling, beaded lead pellets, and patches or labels, upon
compliance with the documentary requirements of 19 CFR 10.24.
Sincerely,
Jerry Laderberg
Acting Director
Commercial Rulings Division