CLA-2 RR:TC:SM 560409 JML
TARIFF NO: 9802.00.80
Mr. Richard Tinelli
Mastercargo Inc.
161-15 Rockaway Blvd.
Jamaica, NY 11434
RE: Applicability of partial duty exemption under subheading
9802.00.80, HTSUS,
to plastic belts assembled in the Dominican Republic from
U.S.-origin
components; United States v. Mast Industries, Inc., 1 CIT
188, 515 F. Supp. 43 (1981), aff'd, 69 CCPA 47, 668 F. 2d 501
(1981).
Dear Mr. Tinelli:
This is in response to your letter of March 18, 1997,
requesting a binding ruling for plastic belts assembled in the
Dominican Republic. Specifically, you ask if the belts are
eligible for the partial duty exemption provided for under
subheading 9802.00.80, Harmonized Tariff Schedule of the United
States ("HTSUS"). You provided our office with samples of the
belts at various stages of their production.
FACTS:
Your client, M.Y. Accessories Inc., intends to produce
plastic belts in the Dominican Republic. The belts will be
produced from United States ("U.S.")-origin fabricated components
sent to the Dominican Republic for assembly. The U.S.-origin
fabricated components consist of plastic sheeting material cut
into belt size strips in the U.S., a buckle, rivets, a plastic
belt loop (made from the same material as the strips), and thread
for stitching. You presented various scenarios depicting the
manner in which the belts will be produced:
SCENARIO 1
Country of Process Performed
Production
U.S. Plastic sheeting cut into
belt size
strips.
Dominican Republic Sizing holes will be cut
into one
end to allow buckle point
to enter
Dominican Republic Slot cut into opposite
end so that
the buckle point can
swivel.
Dominican Republic End with sizing holes cut
to a point.
Dominican Republic Belt stitched around
edges.
Dominican Republic Loop and buckle attached
by riveting.
SCENARIO 2
Country of Process Performed
Production
U.S. Plastic sheeting cut into
belt size
strips.
U.S. Sizing holes will be cut
into one
end to allow buckle point
to enter
Dominican Republic Slot cut into opposite
end so that
the buckle point can
swivel.
Dominican Republic End with sizing holes cut
to a point.
Dominican Republic Belt stitched around
edges.
Dominican Republic Loop and buckle attached.
SCENARIO 3
Country of Process Performed
Production
U.S. Plastic sheeting cut into
belt size
strips.
U.S. Sizing holes will be cut
into one
end to allow buckle point
to enter
U.S. Slot cut into opposite
end so that
the buckle point can
swivel.
Dominican Republic End with sizing holes cut
to a point.
Dominican Republic Belt stitched around
edges.
Dominican Republic Loop and buckle attached
by riveting.
SCENARIO 4
Country of Process Performed
Production
U.S. Plastic sheeting cut into
belt size
strips.
U.S. Sizing holes will be cut
into one
end to allow buckle point
to enter
U.S. Slot cut into opposite
end so that
the buckle point can
swivel.
U.S. End with sizing holes cut
to a point.
Dominican Republic Belt stitched around
edges.
Dominican Republic Loop and buckle attached
by riveting.
SCENARIO 5
Country of Process Performed
Production
U.S. Plastic sheeting cut into
belt size
strips.
U.S. Sizing holes will be cut
into one
end to allow buckle point
to enter
U.S. Slot cut into opposite
end so that
the buckle point can
swivel.
U.S. End with sizing holes cut
to a point.
U.S. Belt stitched around
edges.
Dominican Republic Loop and buckle attached
by riveting.
Under all scenarios, the completed belts will be sold to
another manufacturer in the Dominican Republic for attachment to
finished apparel products.
The total cost of the operations to be performed in the
Dominican Republic is $.075 per belt. Of that total, $.0015 is
for the pointing of the belt strap, $.002 for cutting the belt
holes, $.0015 for cutting the back slit, $.025 for the stitching,
and $.045 for attaching the buckle and the loop by riveting.
ISSUE:
Whether the assembled belts, imported attached to finished
apparel products, are eligible for the partial duty exemption
under subheading 9802.00.80, HTSUS.
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, lubrication, 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 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 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. 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)
With respect to scenario one, Customs considers the U.S.-origin belt size strips exported to the Dominican Republic as
fabricated components in condition ready for assembly. Attaching
the U.S.-origin loop and buckle to the belt strips by riveting
are the type of operations contemplated by subheading 9802.00.80,
HTSUS. The buckle and the loop are components in condition ready
for assembly upon their exportation to the Dominican Republic and
will not undergo any further fabrication abroad. Section
10.16(a), Customs Regulations, expressly states that riveting
together components is a permissible form of assembly under
subheading 9802.00.80, HTSUS. Similarly, Customs is of the
opinion that stitching around the edges of the belt is an
acceptable assembly operation for purposes of that subheading as
it involves the joinder of the thread and the belt strip. See
Peg Bandage v. United States, 17 CIT 1337 (1993).
In regard to cutting sizing holes, a buckle slit and an end
point into the belt strips, Customs is of the opinion that while
those operations are not acceptable assembly operations for
purposes of subheading 9802.00.80, HTSUS, they are operations
incidental to the assembly process. In United States v. Mast
Industries, Inc., 1 CIT 188, 515 F. Supp. 43 (1981), aff'd, 69
CCPA 47, 668 F. 2d 501 (1981), the court considered the
legislative history of the phrase "incidental to the assembly
process," and found that Congress intended a balancing of all
relevant factors to ascertain whether an operation of a "minor
nature" was incidental to the assembly process. The court stated
that relevant factors included:
(1) the relative cost and time of the operation;
(2) whether the operation is necessary to the assembly
process;
(3) whether the operation is so related to the assembly that
it is logically performed during assembly;
and,
(4) whether economic or other practical considerations
dictate that the
operation be performed concurrently with assembly.
In Oxford Industries, Inc. v. United States, 1 CIT 230, 517
F. Supp 694 (1981), aff'd, 668 F. 2d 507 (CCPA 1981), a case
which involved buttonholing U.S.-origin men's shirts in Mexico,
the court, applying the Mast factors, determined that
buttonholing was incidental to assembly and did not disqualify
the shirts from receiving the partial duty exemption accorded
under item 807.00, TSUS (the precursor to subheading 9802.00.80,
HTSUS). In making its decision, the court noted that the cost of
performing the buttonholing was between 8% and 11% of the cost of
the components. In addition, the court examined the time
required to perform the buttonholing and concluded that both
factors were so relatively minor that the buttonholing should be
considered a minor operation incidental to assembly.
Consistent with the above, Customs is of the opinion that
the cutting of sizing holes, a buckle slot and an end point into
the belt strips are operations which are minor in nature and do
not constitute further fabrication of the belt strips. Applying
the Mast factors, the relative cost of cutting the holes and
buckle slit into the belt strips each represents 3% of the cost
of the assembly operations and the cutting of the belt point
represents 4%. Thus, based on the information presented, Customs
is of the opinion that the cutting of sizing holes, a buckle slit
and an end point into the belt strips are minor operations
incidental to the assembly of the finished belts.
Customs is of the opinion that under the facts presented in
regard to scenario one, all three requirements of subheading
9802.00.80, HTSUS, are satisfied. The assembled belts are made
from fabricated components exported in condition ready for
assembly. The foreign operations that entail riveting the U.S.-origin buckle and loops to the belts strips and stitching around
the edges are acceptable assembly operations under this
provision. The processes of cutting sizing holes and a buckle
slot into the belt strips, and cutting the belt end to a point
are minor operations incidental to the assembly of the belts
abroad.
As scenarios two through five all involve the same
operations as in scenario one (except that many of the above
described incidental to assembly operations are performed in the
U.S.), the belts produced pursuant to the remaining scenarios
also will be entitled to subheading 9802.00.80, HTSUS, treatment,
possibly even without having to satisfy the Mast factors.
HOLDING:
On the basis of the information provided, the imported belts
assembled in the Dominican Republic under all scenarios presented
will be eligible for the partial duty exemption under subheading
9802.00.80, HTSUS, provided the documentary requirements of 19
CFR 10.24 are satisfied.
A copy of this ruling letter should be attached to the entry
documents at the time this merchandise is entered. If the
documents have been filed without a copy, this ruling should be
brought to the attention of the Customs officer handling the
transaction.
Sincerely,
John Durant, Director
Tariff
Classification Appeals Division