CLA-2 RR:TC:SM 560332 BLS
Jonathon M. Fee, Esq.
Grunfeld, Desiderio, Lebowitz & Silverman LLP
1201 West Peachtree Street, N.E.
Atlanta, Georgia 30309
RE: Applicability of subheadings 9802.00.80 and 9802.00.90,
HTSUS, to garments
subject to "filling-in" operations; tufting; wholly formed
and cut; Special Access Program; findings and
trimmings; Article 509
Dear Mr. Fee:
This is in reference to your letter dated February 20, 1997,
on behalf of the Crowntuft Division of the Kellwood Company
("Crowntuft"), requesting a ruling that certain described
"filling-in" operations will not disqualify imported garments
from the duty exemption under subheading 9802.00.80, Harmonized
Tariff Schedule of the United States (HTSUS), and from duty-free
treatment under subheading 9802.00.90, HTSUS. You have also
orally advised this office that Crowntuft intends to enter
garments that may be imported from a participating Caribbean
country under the Special Access Program.
FACTS:
The imported articles will include bathrobes and other
garments exported from Mexico or a Caribbean country. You state
that the operations will commence in the U.S. at Crowntuft's
facility with the production of "tufted" fabric, by combining
greige cotton woven sheeting fabric with cotton or polyester
tufting yarn. You describe the production of tufted fabric as
follows:
Tufted yarn is inserted into the woven fabric with
needles similar
to sewing needles. Each time a needle passes
through the fabric,
a hook or looper holds the yarn away from the
surface of the fabric
while the needle is withdrawn, creating a protruding
loop. The loop
is cut with a blade to form a tuft. This inserting,
looping and cutting
process forms lines of tufts on the surface of the
fabric. The lines
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may be continuous or broken, and the spacing between
lines may
vary, depending on the desired decorative effect.
After the tufting process is completed, the tufted fabric
will be spread on cutting tables in the U.S. and cut into parts
of garments. These cut garments will be shipped to an assembly
factory in either Mexico or a Caribbean country. In the case of
Mexico, the cut garment parts will consist only of U.S. woven
(sheeting) fabric that is combined with tufting yarn and cut in
the U.S. In the case of the Caribbean country, the cut garment
parts will consist of either U.S. or foreign woven sheeting
fabric that is combined with tufting yarn and cut in the U.S. In
either case, the tufting yarn may be either of U.S. or foreign
origin.
In the country of assembly, the cut garment parts will be
assembled by sewing onto the bathrobes and other garments.
Foreign thread may be used to assemble the garments, and foreign
yarn may be used in the "filling-in" process (as described
below). In no case will the cost of the foreign thread used to
assemble the garments and the foreign yarn used in the filling-in
process exceed 25 percent of the cost of all components of the
finished garment. You state that no other operation, other than
assembly, the filling-in process (when necessary), and packing
for shipment to the U.S., will be performed in the country of
assembly.
After assembly, the garments will be packed and returned to
the U.S., where Crowntuft will perform washing, garment-dyeing,
other finishing, and packaging processes prior to shipping the
finished garments to its U.S. customers.
"Filling-In" Process
You describe the "filling-in" operation as a repair process
in which small amounts of tufting yarn are inserted by needle
into garment parts, and then cut to form tufts, to fill in
tufting defects ("skips"), discovered during the garment assembly
process. Skips are caused by knots or breaks in the tufting yarn
or broken tufting needles. Most skips are marked during the
original tufting process, and can be cut around during the
spreading and cutting operation in the U.S. But skips
occasionally remain unnoticed until discovered in the country of
assembly during the assembly process.
The filling-in process is performed with a standard single
needle sewing machine that has been modified by substituting a
relatively heavy tufting needle for a sewing needle and by adding
a mechanized looper and cutting blade under the sewing table to
form the protruding loop and cut it to make the tuft.
Based on its past experience, Crowntuft expects that
filling-in will be necessary on
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fewer than one percent of the garments. For each garment
requiring this repair,
Crowntuft estimates the cost of filling in to range from $0.025
to $0.070, the cost of
assembly to be approximately $2.00 per garment, and the entered
value of each assembled garment to be approximately $9.00.
Crowntuft estimates the time necessary to perform a single
filling-in operation consisting of a repair to a one-inch skip on
one piece of a garment is 0.14 standard allowed minutes, as
compared to 14 overall standard allowed minutes required to
assemble the garment. Crowntuft will require only one modified
sewing machine at each assembly location to perform the filling
in process. The company plans to utilize used sewing machines
for this purpose, the residual book value of which under
generally accepted accounting principles is $50.00.
ISSUES:
1) Whether garments subject to the "filling-in" operations
performed in a participating Caribbean country will be eligible
for the Special Access Program upon entry into the U.S.
2) Whether garments subject to the "filling-in" operations
performed in Mexico will be eligible for duty-free treatment
under subheading 9802.00.90, HTSUS, upon entry into the U.S.
Law and Analysis
Special Access Program
To qualify for the Special Access Program, products must be
eligible for entry under subheading 9802.00.80, HTSUS. The
requirements for participating in the Special Access Program
provide that all fabric components, with the exception of
findings, trimmings and certain elastic strips not exceeding 25
percent of the cost of the components of the assembled product,
must be formed in the U.S. Such U.S. formed fabric must also be
cut to pattern or shape in the U.S. Customs Directive Number
3500-12 dated September 2, 1986 provides as follows:
[f]indings trimmings, and elastic components of the
finished assembled products need not be of United
States
origin. Products assembled in
participating Caribbean
countries and made of U.S. formed and cut fabric plus
findings, trimmings, and elastic of foreign origin may
enter the United States under the program. However,
the
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total value of such foreign findings,
trimmings, and
elastic components shall not exceed 25 percent of the
cost of the components of the assembled product.
Products whose foreign findings, etc., exceed 25
percent
do not qualify for the Program. Examples of findings
and
trimmings are sewing thread, hooks and eyes, snaps,
buttons, "bow buds," lace trim, zippers, including
zipper
tapes, and labels.
The initial question which must be addressed is whether the
imported articles are eligible for the partial duty exemption
under subheading 9802.00.80, HTSUS. In this regard, you contend
that the "filling-in" operation performed in the participating
Caribbean country is either an assembly operation or an operation
incidental to assembly.
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 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)),
provides that the 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.
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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 the
component. See 19 CFR 10.16(c).
With the exception of the "filling-in" operations, the
operations to be performed abroad are not described. However, we
will assume for purposes of this ruling that the sewing and all
other such operations performed abroad are acceptable assembly
operations or operations incidental to assembly. The question we
must now consider is whether the "filling-in" operations are also
assembly operations or operations incidental to assembly.
Headquarters Ruling Letter (HRL) 556672 (dated February 25,
1993), involved the production of carpeting by needle insertion
of U.S.-origin nylon yarn into backing material. In that case,
we held that these tufting operations were analogous to
sewing-type operations, and, therefore, pursuant to section
10.16(a), Customs Regulations, were acceptable assembly
operations for purposes of subheading 9802.00.80, HTSUS. In
support of this position, we cited E. Dillingham & Sons, Inc., v.
United States, 60 C.C.P.A. 40 (1970), in which the Court of
Customs and Patent Appeals held that a needling operation whereby
massed fibers and fabric were shipped to Canada where the fibers
were oiled, carded, and opened, and then needled into the fabric,
was an acceptable assembly operations under item 807.00, Tariff
Schedules of the United States (TSUS), the precursor tariff
provision to subheading 9802.00.80, HTSUS.
In the instant case, it is our opinion that the tufting
operations performed in the Caribbean countries are analogous to
the sewing operations performed in E. Dillingham and in HRL
556672, as in each case the yarn or fibers are needled into the
fabric to form the tufts. Accordingly, we find that the
"filling-in" operations are acceptable assembly operations. As a
result, we need not address the issue as to whether these
operations are incidental to assembly.
For purposes of entry under the Special Access Program, we
note that the tufted fabric is formed in the U.S. by the process
of inserting the tufting yarn into the woven
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sheeting fabric. The fabric is then cut into the garment parts
in the U.S., as described.
As also noted, foreign origin sewing thread may be used abroad to
join the cut components and foreign origin yarn may be used in
the "filling-in" process. Sewing thread is specifically
enumerated as a finding under the Special Access Program. The
tufting yarn, however, under the described facts is not
considered to be a finding.
Based on these facts, the imported garments will be eligible
for the Special Access Program provided any findings, trimmings,
and certain elastic strips do not exceed 25 percent of the cost
of the components of the assembled garments.
Subheading 9802.00.90
Annex 300-B of the North American Free Trade Agreement
("NAFTA") is applicable to textile and apparel goods. Appendix
2.4 of Annex 300-B provides that:
[o]n January 1, 1994, the U.S. shall eliminate customs duties on
textile and apparel
goods that are assembled in Mexico from fabrics wholly formed and
cut in the
United States and exported from and reimported into the United
States under:
(a) U.S. tariff item 9802.00.80.10; or
(b) Chapter 61, 62, or 63 if, after such
assembly, those goods
that would have qualified for treatment
under 9802.00.80.10
have been subject to bleaching, garment
dyeing, stone-washing,
acid-washing or perma-pressing.
Thereafter, the U.S. shall not adopt or maintain any customs
duty on textile or apparel goods that satisfy the requirements of
subparagraph (a) or (b) or the requirements of any successor
provision to U.S. tariff item 9802.00.80.10. (a) U.S. tariff
item 9802.00.80.10; or (b) Chapter 61, 62, or 63 if, after such
assembly, those goods that would have qualified for treatment
under 9802.00.80.10 have been subject to bleaching, garment
dyeing, stone-washing, acid-washing or perma-pressing.
Consequently, subheading 9802.00.90, HTSUS, was created to
provide for the duty-free entry of:
Textile and apparel goods, assembled in Mexico in
which all fabric
components were wholly formed and cut in the United
States,
provided that such fabric components, in whole or in
part,
(a) were exported in condition ready for assembly
without further
fabrication, (b) have not lost their physical identity
in such articles
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by change in form, shape or otherwise, and have not
been advanced
in value or improved in condition abroad except by
being assembled
and except by operations incidental to the assembly
process; provided
that goods classifiable in chapters 61, 62, or 63 may
have been
subject to bleaching, garment dyeing, stone-washing,
acid-washing or perma-pressing after
assembly as provided for herein.
As discussed under our analysis pertaining to the Special
Access Program, operations, we also find for purposes of
eligibility under subheading 9802.00.90 that the exported fabric
components are "wholly formed and cut in the United States."
Further, as discussed in our analysis under subheading
9802.00.80, while Crowntuft has not described in detail the
operations performed abroad except for the process of "filling-in", we will also assume for purposes of eligibility of the
articles for duty-free treatment under subheading 9802.00.90
that the sewing and other operations performed in Mexico will
otherwise qualify as acceptable assembly operations or operations
incidental to assembly. In this regard, our analysis of the
"filling-in"
operation for purposes of subheading 9802.00.80 is also
applicable for purposes of subheading 9802.00.90, i.e., such
process is an acceptable assembly operation.
Therefore, based on the information submitted, the imported
garments will be entitled to duty-free treatment under subheading
9802.00.90, HTSUS, upon entry into the U.S.
HOLDING:
A "filling-in" process involving the repair of garments
abroad through the use of tufted yarn is an acceptable assembly
operation. Accordingly, based upon the information provided:
1) The completed garments exported from a participating
Caribbean country will be entitled to the partial duty exemption
under subheading 9802.00.80, HTSUS, and for the Special Access
Program when returned to the U.S. as long as, with the exception
of findings, trimmings, and elastic strips not exceeding 25
percent of the total cost of the components, all fabric
components are formed and cut to shape or pattern in the U.S.;
2) The completed garments exported from Mexico will be
entitled to duty-free treatment under subheading 9802.00.90,
HTSUS, provided that all fabric components are formed and cut to
shape or pattern in the U.S.
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A copy of this ruling letter should be attached to the entry
documents filed 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