CLA-2 CO:R:C:V 555625 KAC
Alan G. Lebowitz, Esq.
Grunfeld, Desiderio, Lebowitz & Silverman
12 East 49th Street
New York, NY 10017
RE: Applicability of duty exemption available under HTSUS
subheading 9802.00.80 to designs created by embroidering
knit fabric and pelon backing together and importing them
as part of boot slippers.Assembly;incidental operations;
eligible component;C.S.D. 90-28;060398;071031
Dear Mr. Lebowitz:
This is in response to your letter dated March 29, 1990, on
behalf of R.G. Barry Corporation, requesting a ruling on the
applicability of subheading 9802.00.80, Harmonized Tariff
Schedule of the United States (HTSUS), to embroidered fabric
imported as part of boot slippers into the U.S. Samples were
submitted for examination.
FACTS:
R.G. Barry Corporation plans to ship U.S.-origin thread,
knit fabric, and pelon backing to Mexico for an embroidery
operation, after which the embroidered fabric will be assembled
into completed boot slippers. The foreign embroidery operation
involves placing knit fabric and pelon backing into an embroidery
hoop, placing the hoop in an embroidery machine and embroidering
a design onto the material in the hoop. After the design is
complete, the portion of the pelon backing not caught between the
material and embroidered thread is removed. The pelon backing is
necessary to the embroidery operation because, without the
backing, the thread would become entangled in the embroidery
machine, making the embroidery operation impossible. The pelon
backing also prevents the embroidery stitch from unraveling.
Upon completion of the embroidery operation, the
embroidered fabric will be assembled into a boot slipper and
imported into the U.S.
ISSUE:
Whether the duty exemption is available under HTSUS
subheading 9802.00.80 when the embroidered fabric is imported as
part of boot slippers into 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 cost or value of the imported assembled article,
less the cost or value of the U.S. components assembled therein,
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 C.S.D. 90-28, 24 Cust. Bull. (1990) (Headquarters
Ruling Letter (HRL) 555399 dated December 26, 1989), we found
that an embroidered design which penetrated two or three layers
of fabric was an acceptable assembly operation. The embroidered
design served as a binding agent, as it penetrated two or three
layers of a slipper vamp and served to keep the center of the
vamp from puckering. See, L'Eggs Products Inc. v. United
States, Slip Op. 89-5, 13 CIT , 704 F.Supp. 1127 (1989), which
held that thread used as a binding agent to join material to
itself qualified as a component and was eligible for the duty
exemption available under subheading 9802.00.80, HTSUS. The
operation involved in this case is clearly distinguishable from
previous rulings which held that embroidering a single layer of
fabric did not qualify as an acceptable assembly operation. See,
HRL's 060398 dated June 7, 1979, and 071031 dated November 12,
1982.
In the present case, the embroidery stitch will be used to
join the knit fabric and the pelon backing together. The pelon
backing is a necessary part of the operation, for without it the
thread would become entangled in the embroidery machine making
the embroidery operation impossible. The pelon backing also
prevents the embroidery stitch from unraveling. As the thread
is used in the embroidery operation to join the knit fabric and
pelon backing together, the embroidery operation will qualify for
the duty exemption available under subheading 9802.00.80, HTSUS.
However, the pelon backing will not be eligible for the duty
exemption upon import into the U.S., because nearly all of the
pelon backing will be removed after the assembly operation.
Cf., 19 CFR 10.16(b)(4) which allows trimming, filing, or cutting
off of small amounts of excess material in an incidental
operation. Therefore, since removal of the backing is too
significant an operation to be considered incidental and is not
an assembly operation, the cost or value of the pelon backing
will not be exempt from duty under this tariff provision.
HOLDING:
On the basis of the information and samples presented, it is
our opinion that the removal of the pelon backing is not
incidental to the embroidery operation. Therefore, the pelon
backing is not entitled to a duty allowance under subheading
9802.00.80, HTSUS, although allowances may be made under this
tariff provision for the cost or value of the knit material and
thread of U.S. origin, which are properly assembled and
incorporated into a boot slipper, upon compliance with the
documentary requirements of 19 CFR 10.24.
Sincerely,
John Durant, Director
Commercial Rulings Division