CLA-2 CO:R:C:V 555612 GRV
Leslie Alan Glick, Esq.
Porter, Wright, Morris & Arthur
1233 20th Street, N.W., 4th Floor
Washington, D.C. 20036-2395
RE: Partial Reconsideration of Customs Headquarters Ruling
Letter 555214 (December 26, 1989)
Dear Mr. Glick:
This is in response to your letter of March 15, 1990, on
behalf of Tyrone Art, Inc., requesting partial reconsideration of
Headquarters Ruling Letter (HRL) 555214 (December 26, 1989).
That ruling held, in relevant part, that while wood and aluminum
picture frame materials, exported in continuous lengths and cut-
to-length abroad, would be eligible for the duty allowance
available under subheading 9802.00.80, Harmonized Tariff Schedule
of the United States (HTSUS), the plastic border material,
exported in a straight, pre-notched condition and hand-wrapped
around the 3-part picture print sandwich, would not be eligible
for the duty exemption under this tariff provision. You request
that we reconsider that portion of the ruling which found the
plastic border material ineligible for the duty exemption under
HTSUS subheading 9802.00.80. Additional samples of the plastic
border material were submitted for examination.
FACTS:
In HRL 555214, we considered, in part, whether three U.S.
component materials--wood, aluminum and plastic--used to create
picture frames would qualify for HTSUS subheading 9802.00.80
tariff treatment. Although all three materials would be exported
in straight or continuous lengths, we found that only the miter
cut-to-length wood and aluminum moldings would qualify for the
duty exemption, as the cutting operation was considered
incidental to the assembly process rather than further
fabrication. However, we found that the hand-wrapping, i.e.,
bending, of the pre-notched, "one piece [plastic] wrap" around
the 3-part sandwich of common components created the component to
be assembled, and constituted further fabrication, citing
Samsonite Corporation v. United States, Slip Op. 88-166, 12 CIT
___, 702 F.Supp. 908 (1988) (aff'd, 8 Fed.Cir. ___, 889 F.2d 1074
(1989), reh'g denied In Banc, (January 25, 1990)). Accordingly,
we held that the plastic border material would not be eligible
for the duty exemption under HTSUS subheading 9802.00.80. We
also indicated that HRL 815445 dated November 5, 1986, which
allowed the duty exemption for straight brass strips that were
bent abroad to form a photo frame, no longer reflected the
position of the Customs Service on the issue of bending, in view
of the court's holding in the Samsonite decision.
In your letter of March 15, 1990, you state that "this
denial was erroneous" because the hand-wrapping of the plastic
border material around the picture print sandwich is a minor
operation incidental to the assembly process that cannot be
performed in the U.S. prior to exportation. You add that another
reason the plastic border material is exported as straight pieces
of plastic "is due to economies for shipping purposes." You also
state that this hand-wrapping process is distinguishable from the
automated four-step process to which the steel strips were
subjected in Samsonite, wherein "the strips were bent by machine
...." (Your emphasis). Again, you reference HRL 815445, as
allowing the bending operation in the case of pre-notched brass
picture frames, and, lastly, you suggest that the process of
bending the frame to fit around the glass and picture is, in
itself, a separate assembly operation.
ISSUE:
Whether the U.S. plastic border material, exported in a
straight, pre-notched condition to be hand-wrapped, i.e., bent,
around a picture print sandwich to create the picture frame, is
eligible for the partial duty exemption under HTSUS subheading
9802.00.80.
LAW AND ANALYSIS:
HTSUS subheading 9802.00.80 provides a partial duty exemp-
tion for:
[a]rticles assembled abroad in whole or in part of fab-
ricated 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 HTSUS subheading 9802.00.80 must be
satisfied before a component may receive a duty allowance. 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 19 CFR 10.24.
Fabricated components subject to the exemption are provided
for at 19 CFR 10.14(a), which provides, in part, that:
[t]he components must be in condition ready for assembly
without further fabrication at the time of their exporta-
tion from the United States to qualify for the exemption.
.... Materials undefined in final dimensions and shapes,
which are cut into specific shapes or patterns abroad are
not considered fabricated components.
The correct starting point for the application of HTSUS sub-
heading 9802.00.80 is the components as "exported," in the condi-
tion in which they leave the U.S. See, E. Dillingham, Inc., v.
United States, C.D. 4278, 67 Cust.Ct. 226, (1971), modified,
C.A.D. 1078, 60 CCPA 39, 470 F.2d 629 (1972). This judicial
approach to the applicability of HTSUS subheading 9802.00.80,
suggests a sequential framework of analysis, wherein clause (a)
looks to the condition of the component at the time of export,
whereas clauses (b) and (c) look exclusively to the nature of the
operation(s) performed abroad on the finished U.S. components.
Therefore, the first hurdle to clear in qualifying an article for
HTSUS subheading 9802.00.80 treatment is to determine whether the
U.S. components are finished components, ready for assembly at
the time of their export from the U.S. See also, Zwicker
Knitting Mills v. United States, C.D. 4786, 82 Cust.Ct. 34, 469
F.Supp. 727 (1979), aff'd, C.A.D. 1240, 67 CCPA 37, 613 F.2d 295
(1980).
As there is no one, all-embracing definition of what steps
or processes constitute "further fabrication" within the meaning
of this statutory provision, whether a particular foreign pro-
cess constitutes a "further fabrication" depends upon the facts
of the particular case. See, Zwicker Knitting Mills. For
textile cases in general, the courts have observed that sewing
and knitting operations constitute a further fabrication only if
they create the basic article, and, in making this determination,
the courts look not only at the condition of the exported compo-
nent, but at the nature of the foreign operation involved. See,
E. Dillingham, and, L'Eggs Products, Inc., v. United States, 13
CIT ____, 704 F.Supp. 1127 (1989).
In Samsonite the court considered whether steel strips that
were exported for incorporation into luggage were exported in
condition ready for assembly without further fabrication. The
strips were exported in a straight condition. Once abroad, the
strips were bent by machine into a form analogous to a square-
sided letter C and subjected to other operations prior to
becoming the bottom plates of completed "frame assemblies." As
the straight strips of steel could not be placed immediately
into the assembly of the luggage bags without the bending
operation, the court found that the strips were not exported in
condition ready for assembly. In considering whether the mere
bending of the strips was an incidental operation, the court
found that the bending process did more than "adjust" (19 CFR
10.16(b)(5)) the article, but rather created the component to be
assembled, the essence of which was its configuration. Address-
ing plaintiff's attempt to equate "incidental" with "insignifi-
cant" and thereby argue that the bending process was a minor one
allowable under item 807.00, Tariff Schedules of the United
States (TSUS) (the precursor provision to HTSUS subheading
9802.00.80), the court stated that:
[t]he magnitude of a particular process in terms of time and
cost, however, does not make that process any less one of
fabrication, nor does it make the result thereof any less
significant.
Accordingly, the court upheld Customs denial of the duty deduc-
tion under TSUS item 807.00 for the value of the steel strips.
On appeal, the appellate court affirmed the trial court's
determination and added, at page 1077, that:
[t]he critical inquiry in determining whether fabrica-
tion rather than mere assembly took place here, is not
the amount of processing that occurred..., but its
nature. (Emphasis supplied).
The nature of the processing that occurred in Samsonite was
the bending of straight steel strips into a special configura-
tion, which was found to constitute a further fabrication of the
U.S. component exported. The nature of the operation performed
in this case is the same--bending the straight, pre-notched
plastic strip into a special configuration suitable for picture
frames. Accordingly, we continue to believe that our previous
ruling, adopting the Samsonite bending process rationale to the
plastic border material in this case, was correct and adhere to
it. As to the difference in the method of bending between the
Samsonite case and this case, i.e., machine-bending versus hand-
wrapping, we do not consider this difference to be material, as
the thrust of Samsonite spoke to a bending process which created
the component to be assembled.
HOLDING:
For the reasons set forth above, we remain of the opinion
that the U.S. plastic border material, exported in a straight,
pre-notched condition to be hand-wrapped, i.e., bent, around a
picture print sandwich to create the picture frame, is not
exported in condition ready for assembly without further fabri-
cation, as required by clause (a) of HTSUS subheading 9802.00.80.
Therefore, no allowance in duty may be made under this tariff
provision for the cost or value of the plastic border material.
HRL 555214 is affirmed.
Sincerely,
John Durant, Director
Commercial Rulings Division