CLA-2 CO:R:C:S 556608 SER
Samuel J. Tamkin, Esq.
Two Prudential Plaza
Suite 1680
Chicago, IL 60601
RE: Various hair bows; Generalized System of Preferences;
9802.00.80; HRLs 555357, 071450, 553674, 554965, 554943
Dear Mr. Tamkin:
This is in reference to your letter of March 3, 1992, on
behalf of Gold Coast Bows, Inc., concerning a binding ruling
request for various hair bows produced in Mexico. Your request
concerns the eligibility of the articles at issue under the
Generalized System of Preferences (GSP)(19 U.S.C. 2461-2466), and
subheading 9802.00.80, Harmonized Tariff Schedule of the United
States Annotated (HTSUSA).
FACTS:
The hair bows will be produced from U.S.-origin polyester
ribbon, nylon, cotton thread, glue, velcro patches, and a regular
barrette (metal clip). Alternatively, some bows will be produced
with "automatic lock barrettes" (metal clips) from Asia, or
France.
The ribbon will be sent to Mexico either in spools or precut
to the proper lengths; the thread will be sent to Mexico in
spools; the glue will be sent in its packaged form; the velcro
patch will be sent in sections for attachment to the barrettes
(metal clips); and the barrettes will be shipped in their
condition as received by Gold Coast.
In Mexico, the ribbon (if not precut) will be cut to the
proper lengths, the velcro patch will be glued to the barrettes,
and the ribbon will be glued or sewn to the barrette in the form
of a bow. The Mexican company will then label the bows and ship
them to the U.S. in shipments of various quantities.
n -2-
ISSUES:
1. Whether the hair bows are eligible for duty-free treatment
under the GSP.
2. Whether the hair bows are entitled to the partial duty
exemption under subheading 9802.00.80, HTSUSA.
LAW AND ANALYSIS:
1. Generalized System of Preferences
Under 19 U.S.C. 2463, as amended, a GSP eligible article may
receive duty-free treatment if it is either wholly the growth,
product, or manufacture of a designated beneficiary developing
country (BDC) or a new or different article of commerce which has
been grown, produced, or manufactured in the BDC. Accordingly,
where, as in this case, materials are imported into a BDC from a
non-BDC, those materials must be substantially transformed into a
new and different article of commerce, the product of the BDC.
As provided in General Note 3(c)(ii)(A), HTSUSA, Mexico is a
BDC. In addition, the tariff provision under which the hair bows
are classified, subheading 9615.19.6010, HTSUSA, is a GSP
eligible provision.
The process of producing the hair bows, especially when the
ribbons will be pre-cut in the U.S., primarily involves assembly-
type operations. Customs has previously ruled on whether
assembly operations constitute a substantial transformation. In
C.S.D. 85-25 dated September 25, 1984 (Headquarters Ruling Letter
(HRL) 071827), we considered the issue of whether the assembly of
components onto a printed circuit board (PCB) resulted in a
substantial transformation of the materials. In that decision,
Customs held that an assembly process will not constitute a
substantial transformation unless the operation is "complex and
meaningful." Whether an operation is "complex and meaningful"
depends on the nature of the operation, including the number of
components assembled, number of different operations, time, skill
level required by the operation, attention to detail and quality
control, and the benefit to the BDC from the standpoint of both
the value added to each PCB and the overall employment generated
thereby. In C.S.D. 85-25, it was stated that the factors which
determine if a substantial transformation occurs should be
applied on a case-by-case basis.
n -3-
The focus of C.S.D. 85-25 was a PCBA produced by assembling
in excess of 50 discrete fabricated components (e.g., resistors,
capacitors, diodes, transistors, integrated circuits, sockets,
connectors) onto a PCB. Customs determined that the assembly of
the PCBA involved a large number of components and a significant
number of different operations, required a relatively significant
period of time as well as skill, attention to detail, and quality
control.
Using the standards defined in C.S.D. 85-25, it is our
opinion that the production of the bows is not a complex and
meaningful assembly operation and, therefore, does not result in
a substantial transformation. In addition, we believe that no
substantial transformation results in those situations in which
the ribbon is cut to length prior to assembly. In HRL 555878
dated June 19, 1991, Customs held that cutting fabric to length
and width did not constitute a substantial transformation. Since
the bows do not undergo a substantial transformation in Mexico,
they would not be considered "products of" Mexico, and,
therefore, are ineligible for duty-free treatment under the GSP.
2. Eligibility under subheading 9802.00.80. HTSUSA.
Subheading 9802.00.80, HTSUSA, 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 subheading 9802.00.80, HTSUSA, 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 gluing, laminating, welding, soldering, riveting, force
fitting, sewing, or the use of fasteners. n-4-
Operations incidental to the assembly process are not
considered further fabrication operations, as they as 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 subheading
9802.00.80, HTSUSA, to that component. See, section 10.16(c),
Customs Regulations (19 CFR 10.16(c)).
It is our position that a duty allowance may be made for the
cost or value of the U.S.-origin materials. We have previously
held that cutting U.S. ribbon to appropriate lengths abroad,
forming one or more pieces of ribbon into the shape of a bow,and
securing the bow's shape by tinsel wire or some other object
constitute an acceptable assembly or operation incidental to
assembly under subheading 9802.00.80, HTSUSA, and its precursor
provision, item 807.00, Tariff Schedules of the United States
(TSUS). See, HRL 071450 dated September 8, 1983, 553674 dated
June 14, 1985, 554956 dated April 6, 1988, and 554943 dated April
18, 1988. Furthermore, 19 CFR 10.16(b)(6) specifically allows
cutting to length as an operation incidental to the assembly
process. In addition, the attachment of the velcro by gluing and
the attachment of the ribbon to the barrettes by gluing and/or
sewing, is specifically allowed as an acceptable assembly
operation pursuant to 19 CFR section 10.16(a).
HOLDING:
The production of the hair ribbons and bows in Mexico would
not constitute a substantial transformation, and, therefore,
these articles would not be considered "products of" Mexico.
Accordingly, they are ineligible for duty-free treatment under
the GSP.
On the basis of the information presented, an allowance in
duty may be made under subheading 9802.00.80, HTSUSA, for the
cost or value of the U.S.-origin components used in the assembly
of the ribbons and bows, provided that the documentation
requirements of 19 CFR 10.24 are satisfied.
Sincerely,
John Durant, Director