CLA-2 CO:R:C:S 557733 MLR
Ms. Silvia Perez
M.G. Maher & Company, Inc.
One Canal Place
Suite 2100
New Orleans, LA 70130
RE: Applicability of partial duty exemption under HTSUS
subheading 9802.00.80 to woven shirts from Costa Rica;
embroidery; pellon backing
Dear Ms. Perez:
This is in response to your letter of June 2, 1993, to the
District Director of Customs, New Orleans, Louisiana, which was
forwarded to our office, requesting a ruling on behalf of Todd
Uniform, Inc. ("Todd"), regarding the applicability of subheading
9802.00.80, Harmonized Tariff Schedule of the United States
(HTSUS), to an embroidery operation performed on woven shirts
assembled in Costa Rica. A sample shirt and tear-away pellon
were submitted with your request.
FACTS:
Todd exports cut-to-shape pellon, thread and shirt
components, all of U.S. origin, to Costa Rica. In Costa Rica,
the thread is used to join the pellon and front panel of the
shirt together. The sample shirt has the word "U-HAUL"
embroidered and underlined in embroidery above the left breast
pocket. On the reverse side of the shirt, underneath the
embroidered design, pellon backing is visible. You state that
the pellon backing is a necessary part of the assembly operation
because it secures and stabilizes the embroidery.
ISSUE:
Whether the shirts subjected to the embroidery operation
will qualify for the partial duty exemption available under
subheading 9802.00.80, HTSUS, when returned to the U.S.
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).
This ruling will only address the embroidery operation. For
purposes of this ruling, we will assume that the shirts otherwise
qualify for subheading 9802.00.80, HTSUS, treatment. In
Headquarters Ruling Letter (HRL) 555625 dated August 1990, U.S.-
origin thread, knit fabric, and pellon backing were shipped to
Mexico for an embroidery operation. The pellon backing was
considered necessary to the embroidery operation because, without
the backing, the thread would become entangled in the embroidery
machine, making the embroidery operation impossible. The pellon
backing also prevented the embroidery stitch from unraveling.
After the design was complete, the portion of the pellon backing
not caught between the material and embroidered thread was
removed. Based upon C.S.D. 90-28, 24 Cust. Bull. 346 (1990),
(HRL 555399 dated December 26, 1989), which held that an
embroidered design which penetrated two or three layers of fabric
was an acceptable assembly operation, the embroidery operation in
HRL 555625 was also found to be acceptable because the embroidery
stitch was used to join the knit fabric and the pellon backing
together. In C.S.D. 90-28, 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, 704 F. Supp. 1127
(CIT 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. See also HRL 557386 dated August 20, 1993, where we
considered the embroidery of sweatshirt components with the use
of pellon backing. It was held that because a pellon backing was
used, the embroidery operation which joined the garment
components and the pellon backing together was an acceptable
assembly operation.
By contrast, in HRL 555565 dated May 14, 1990, we considered
the embroidery of a logo onto beach towels. This operation was
not considered an acceptable assembly operation because we have
previously held that embroidering a single layer of fabric does
not qualify as an acceptable assembly operation for purposes of
subheading 9802.00.80, HTSUS. See HRL 063098 dated June 7, 1979,
and 071031 dated November 12, 1982.
In the present case, because the embroidery operation will
be used to join the shirt components and the pellon backing
together, it is an acceptable assembly operation within the
meaning of subheading 9802.00.80, HTSUS, as in HRL 555625, and
HRL 557386. Therefore, the embroidery operation will not prevent
the shirt components and the thread from receiving duty
allowances under subheading 9802.00.80, HTSUS. However, the
pellon backing is not eligible for the duty allowance upon import
into the U.S. because nearly all of it is removed after the
assembly operation. (Section 10.16(b)(4), Customs Regulations
{19 CFR 10.16(b)(4)}, considers trimming, filing, or cutting off
of small amounts of excess material to be incidental operations.)
HOLDING:
On the basis of the information and samples submitted, the
embroidery operation used to join the shirt components and the
pellon together is considered an acceptable assembly operation.
However, the removal of the pellon backing is not incidental to
the embroidery operation. Therefore, the woven shirts subjected
to the embroidery operation may be entered under subheading
9802.00.80, HTSUS, with allowances in duty for the cost or value
of the U.S. components (except the pellon backing), provided the
documentary requirements of 19 CFR 10.24 are satisfied and the
shirts otherwise qualify for subheading 9802.00.80, HTSUS,
treatment.
Sincerely,
John Durant, Director
Commercial Rulings Division
cc: Chief, Wearing Apparel Branch