CLA-2 CO:R:C:S 555798 WAW
TARIFF NO: 6307.90.8710, 9802.00.80
Ms. Linda A. DiPietro
Price Waterhouse
Arco Center
200 Oceangate
Suite 600
Long Beach, CA 90802
RE: Classification and applicability of the duty exemption under
subheading 9802.00.80, HTSUSA, to surgical towels; country
of origin requirements; 087470; 555565.
Dear Ms. DiPietro:
This is in reference to your letter of November 29, 1990, on
behalf of your client, EnviroMed International, Inc., concerning
the classification, country of origin requirements, and the
applicability of the duty exemption under subheading 9802.00.80,
Harmonized Tariff Schedule of the United States Annotated
(HTSUSA), of surgical towels to be imported from Haiti. A sample
towel was submitted for examination.
FACTS:
Bolts of highly absorbent huck weave cotton fabric specially
manufactured in the U.S. for use in making surgical towels will
be exported to Haiti where the fabric will undergo the following
operations: (1) the fabric will be cut to width and length to
form a rectangular shape of 30 inches by 17 inches; (2) all four
sides of the cut fabric will be sewn; (3) the cut and sewn fabric
which now looks like a surgical towel will be laundered and
folded; and (4) the towels will be wrapped in a surgical inner
wrap and sent to the U.S. for final packaging and sterilization.
ISSUES:
(1) What is the tariff classification of U.S. made fabric
manufactured into surgical towels in Haiti?
(2) Whether the surgical towels will be entitled to the
partial duty exemption available under subheading 9802.00.80,
HTSUSA, when returned to the U.S.
(3) What is the country of origin applicable to the imported
surgical towels?
LAW AND ANALYSIS:
I. Tariff Classification of Surgical Towels
We have previously decided that surgical towels are properly
classified as other made up articles in heading 6307, HTSUSA.
See Headquarters Rulings Letter (HRL) 087470 dated February 1,
1991, in which Customs held that surgical towels which consist of
100% huck weave cotton are classifiable in subheading
6307.90.8710, HTSUSA. The surgical towels at issue are made of
100% huck weave fabric, and based on HRL 087470, should be
classified under subheading 6307.90.8710, HTSUSA, which provides
for other made up articles including dress patterns: other:
other: surgical towels; cotton towels of pile or tufted
construction: surgical towels, dutiable at the rate of 7% ad
valorem.
II. Applicability of Subheading 9802.00.80, HTSUSA
HTSUSA 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 HTSUSA 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 10.14(a), Customs Regulations (19 CFR 10.14(a)),
states in pertinent part that:
[t]he components must be in condition ready for
assembly without further fabrication at the time of
their exportation from the United States to qualify for
the exemption. Components will not lose their
entitlement to the exemption by being subjected to
operations incidental to the assembly either before,
during, or after their assembly with other components.
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, although they may precede, accompany or
follow the actual assembly operation. See 19 CFR 10.16(a).
Examples of operations incidental to the assembly process are
delineated at 19 CFR 10.16(b). 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 subheading
9802.00.80, HTSUSA, to that component. See 19 CFR 10.16(c).
The issue that we are asked to address in this case is
whether the cutting of the fabric both to width and length to
form the shape of surgical towels is more than an operation
incidental to the assembly process, thereby precluding
application of the exemption in subheading 9802.00.80, HTSUSA.
In C.S.D. 90-82(10), 24 Cust. Bull. ___ (1990) HRL 555565 dated
May 14, 1990, Customs determined that "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. However, 19 CFR 10.16(c)(2) provides that
cutting garment parts according to pattern from exported material
is not considered an operation incidental to assembly.
It is our position in this case that cutting the fabric to
width and length (pattern pieces) is not an acceptable assembly
operation or an operation incidental to assembly, but rather is a
further fabrication of the fabric. The cutting operations in
this case do not simply involve cutting a component to length,
but are analogous to cutting fabric to a specific pattern piece
in order to enter it into a proper assembly (i.e., sewing)
operation. See 19 CFR 10.16(c)(2).
Accordingly, based on the manufacturing processes you
described, it is our position that the U.S.-origin fabric which
has been cut both to length and width in Haiti, and which is
later subjected to hemming, washing and folding operations in
Haiti, will not qualify for the partial duty exemption available
under subheading 9802.00.80, HTSUSA.
III. Country of Origin Determination
Textile articles produced in more than one foreign country
are subject to the country of origin criteria set forth in
section 12.130, Customs Regulations (19 CFR 12.130). Generally,
the country of origin rules for textiles and textile products is
set forth in 19 CFR 12.130(b). However, there is an exception to
the general rule in cases where products of the U.S. are
involved. See 19 CFR 12.130(c). According to 19 CFR 12.130(c):
Chapter 98, Subchapter II, Note 2, HTSUSA, provides
that any product of the U.S. which is returned after
having been advanced in value or improved in condition
abroad, or assembled abroad, shall be a foreign article
for purposes of the Tariff Act of 1930, as amended . .
. merchandise which falls within the purview of Note 2
may not, upon its return to the U.S. be considered a
product of the U.S.
In the present case, the huck weave cotton fabric which is
specially manufactured in the U.S. for use in making surgical
towels will clearly be advanced in value and improved in
condition by the cutting, sewing, folding and laundering
operations, and therefore, qualify as foreign articles for
purposes of 19 CFR 12.130(c). Accordingly, since the
manufacturing processes described above are performed in Haiti,
the surgical towels will be a product of Haiti and subject to
all applicable quota and visa requirements.
HOLDING:
On the basis of the information and sample submitted, it is
our position that the operations performed to the U.S.-origin
fabric in Haiti are not considered proper assembly operations or
operations incidental to the assembly process. Therefore, the
surgical towels are not entitled to a partial duty exemption
under subheading 9802.00.80, HTSUSA. The proper classification
of the surgical towels is under subheading 6307.90.8710, HTSUSA,
which provides for other made up articles, other, other, surgical
towels, dutiable at 7% ad valorem, and falls within textile
category 369. The operations performed to the surgical towels in
Haiti advances them in value and improves them in condition.
Therefore, upon reimportation, the surgical towels are considered
products of Haiti pursuant to 19 CFR 12.130(c), and must be
marked accordingly.
Due to the changeable nature of the statistical annotation
(the ninth and tenth digits of the classification) and the
restraint (quota/visa) categories applicable to textile
merchandise, you should contact your local Customs office prior
to importation of the merchandise to determine the current status
of any import restraints or requirements.
The designated textile and apparel category may be
subdivided into parts. If so, visa and quota requirements
applicable to the subjected merchandise may be affected. Since
part categories are the result of international bilateral
agreements which are subject to frequent renegotiations and
changes, to obtain the most current information available, we
suggest that you check, close to the time of shipment, the Status
Report on Current Import Quotas (Restraint Levels), an internal
issuance of the U.S. Customs Service, which is available for
inspection at your local Customs office.
Sincerely,
John Durant, Director
Commercial Rulings Division