CLA-2 CO:R:C:S 555665 DSN
Mr. Fernando Canto
President, FC Industries, Inc.
Box 30358
65th Inf. Station
Rio Piedras, Puerto Rico 00929
RE: Tariff treatment of denim garments from the Dominican
Republic. Stonewashing; zippers, buttons, tickets, thread,
incidental assembly 19 CFR 10.16(a), (c)(4); 554939;
555008; 555686
Dear Mr. Canto:
This is in response to your letter dated May 8, 1990,
requesting a ruling concerning whether denim garments will be
eligible for a duty exemption under subheading 9802.00.80,
Harmonized Tariff Schedule of the United States (HTSUS), when
returned to the U.S. from the Dominican Republic. Samples were
submitted with your request. We regret the delay in responding.
FACTS:
FC Industries, Inc. intends to manufacture denim wearing
apparel which is produced from U.S.-origin cotton. The fabric is
cut in the U.S. and is then sent, along with elastic, buttons,
zippers, labels, thread, size tickets and other items needed for
the assembly process, to the Dominican Republic. In the
Dominican Republic, the fabric components, elastic, zippers, and
labels, are assembled by sewing, after which the garments are
stonewashed. The buttons and size tickets are then attached.
ISSUE:
Whether the denim garments will be eligible for a partial
duty exemption 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 HTSUS 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 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 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 HTSUS subheading
9802.00.80 to that component. See, 19 CFR 10.16(c). According
to 19 CFR 10.16(c)(4), the chemical treatment of components or
assembled articles to impart new characteristics, such as shower-
proofing, permapressing, sanforizing, dying or bleaching of
textiles, is not considered incidental to the assembly process.
Consistent with the above regulation, we have held that
operations such as stone-washing, acid-washing and ovenbaking are
not incidental to the assembly process and preclude HTSUS
subheading 9802.00.80 treatment to U.S. components subjected to
such an operation. See, Headquarters Ruling Letters 555686 of
July 23, 1990, 555008 of March 24, 1990, and 554939 of November
15, 1988. Therefore, the denim fabric components of the garments
in the instant case would be ineligible for a duty allowance
under subheading 9802.00.80, HTSUS. However, the various other
components such as the buttons, zippers, tickets and thread are
not impacted by the stonewashing process and would be eligible
for the duty exemption. The stonewashing process is merely
incidental to their assembly and has no effect on their intended
function.
We do note that our position with respect to stonewashing
is subject to review by this agency pending the outcome of
General Motors v. United States, No 87-03-00471. In that case,
the Court of International Trade is reviewing Customs denial of
item 807.00, Tariff Schedules of the United States (TSUS), (the
precursor provision to subheading 9802.00.80, HTSUS)
classification for a painting operation claimed to be
"incidental" to the assembly of certain trucks in Mexico.
Customs determined that the operation, which consisted of
applying several coats of enamel finish paint to the completed
trucks, was neither "minor" nor "incidental" to the assembly of
the vehicles. The case puts before the court the question of
whether a quantitative or qualitative test should be used in
determining whether an operation "of a minor nature" is
"incidental to assembly," for purposes of this tariff provision.
Until a final disposition of this case, our position remains that
stonewashing is not considered an incidental operation pursuant
to 19 CFR 10.16(c)(4).
HOLDING:
Based on the information submitted, we are of the opinion
that stonewashing is not an incidental assembly operation.
Therefore, no allowances in duty under subheading 9802.00.80,
HTSUS, is available for the cost or value of the U.S.-origin
fabric subjected to stonewashing. However, allowances may be
made under subheading 9802.00.80, HTSUS, for the cost or value of
the U.S.-origin buttons, zippers, labels, tickets and thread,
which are properly assembled into the denim garments, upon
compliance with the documentary requirements of 19 CFR 10.24.
Sincerely,
John Durant, Director
Commercial Rulings Division