CLA-2 CO:R:C:S 556982 MLR
Mr. Robert E. Burke, Esq.
Barnes, Richardson & Colburn
200 East Randolph Drive
Suite 7920
Chicago, IL 60601
RE: Applicability of partial duty exemption under HTSUS
subheading 9802.00.80 to diagnostic reagent strips;
laminating; cutting
Dear Mr. Burke:
This is in reference to your letter of September 30, 1992,
on behalf of your client, requesting a ruling regarding the
applicability of subheading 9802.00.80, Harmonized Tariff
Schedule of the United States (HTSUS), to diagnostic reagent
strips. Samples were submitted with your request.
FACTS:
Your client produces diagnostic reagent strips. In the
United States, chemicals are mixed in a solution and impregnated
several times into bulk rolls of a paper "carrier matrix"
material. After the last time the chemicals are impregnated and
dried, a double sided adhesive with a carrier backing is
laminated onto one side of the carrier matrix material. The bulk
reagent material rolls which are usually over 100 meters in
length are slit lengthwise into bulk ribbons (typically .2 inches
wide) for export on large spools to a reagent strip assembly site
overseas.
Abroad, several different spools of reagent material are
simultaneously placed on equipment which removes the adhesive
carrier backing from the ribbons and pressure laminates the
various ribbons onto 3 1/4 inches wide polystyrene roll stock.
The chemical composition of the reagent strips is not changed or
altered.
The reagent strips are sold either in bottle form or in
individual foil wrappings. When the reagent strips are sold in
bottle form, within moments after the ribbon is laminated onto
the polystyrene roll stock, the roll stock is sliced at
approximately ten inch intervals to form cards. The cards are
then placed on a cutting machine where a multiple blade "knife"
slits the cards into .2 inch wide reagent strips and trims off
excess material at each end of the card. Next, the strips slide
down a ramp into retail bottles.
When the reagent strips are sold in individual foil
wrappings, the reagent/polystyrene combination is not cut into
individual cards, but remains in roll form. The rolls are placed
on foiling equipment where .2 inch wide strips are sliced and
individually sealed between two layers of foil. The reagent
strips are then imported at the ports of Chicago and New York.
ISSUE:
Whether the diagnostic reagent strips will qualify for the
partial duty exemption available under subheading 9802.00.80,
HTSUS, when returned to the United States.
LAW AND ANALYSIS:
Subheading 9802.00.80, HTSUS, 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,
lubricating and painting.
All three requirements of subheading 9802.00.80, HTSUS, 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 10.14(a), Customs Regulations {19 CFR 10.14(a)},
states in 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,
lamination, 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. See 19 CFR 10.16(a). 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, HTSUS, to that component. See 19 CFR
10.16(c).
The operation of removing the adhesive carrier backing from
the ribbons and pressure laminating the various ribbons onto 3
1/4 inches wide polystyrene roll stock is considered an
acceptable assembly operation pursuant to 19 CFR 10.16(a) for
purposes of subheading 9802.00.80, HTSUS. After the ribbons are
joined with the polystyrene roll stock, the cutting of the
polystyrene to length, whether performed once (in the case of
sealing the strips in foil) or twice (in the case of cutting the
polystyrene in ten inch pieces and then again into .2 inch wide
strips), is considered an acceptable operation incidental to the
assembly process under 19 CFR 10.16(b)(6). This conclusion was
followed by Headquarters Ruling 067089, dated February 20, 1981,
where textile fabrics exported in continuous-length rolls, joined
by lamination to a foreign-made plastic-layered component, and
cut into shorter lengths did not preclude application of the
assembly provision of item 807.00, Tariff Schedules of the United
States (TSUS) (now subheading 9802.00.80, HTSUS). As stated in
United States v. Baylis Brothers Co., 451 F.2d 643, 646, 59 CCPA
9, C.A.D. 1026 (1971), "Congress did not intend to exclude
articles from item 807.00 merely because the American components
had undergone some change of form or shape. The test specified
in item 807.00 is whether the components have been changed in
form, shape, or otherwise to such an extent that they have lost
their physical identity in the assembled article." It is our
opinion that the assembly process conducted abroad does not
change the chemical composition of the reagent material.
Furthermore, in General Instrument Corp. v. United States, 480
F.2d 1402, 1406, 60 CCPA 178, C.A.D. 1106 (1973), it was
determined that, whether the articles were cut before or after
assembly, they would be subject to the same treatment.
Trimming the ends of the polystyrene cards of excess
material is considered an acceptable operation incidental to
assembly pursuant to 19 CFR 10.16(b)(4), which states that
trimming, filing, or cutting off of small amounts of excess
materials is an acceptable incidental operation.
HOLDING:
On the basis of the information and samples submitted, it is
our opinion that the operations performed abroad to create the
diagnostic reagent strips are considered proper assembly
operations or operations incidental to the assembly process.
Therefore, allowances in duty may be made under subheading
9802.00.80, HTSUS, for the cost or value of the U.S. fabricated
components incorporated into the diagnostic reagent strips when
they are returned to the United States, provided the documentary
requirements of 19 CFR 10.24 are satisfied.
Sincerely,
John Durant, Director