CLA-2 RR:CR:SM 560933 MLR
John S. Rode, Esq.
Rode & Qualey
295 Madison Avenue
New York, NY 10017
RE: Applicability of partial duty exemption under HTSUS
subheading 9802.00.80 to scarves; country of origin
marking; cutting-to-length; fringe
Dear Mr. Rode:
This is in reference to your letter dated March 17,
1998, to Customs in New York,
requesting a ruling on behalf of Amicale Industries, Inc.,
concerning the applicability of subheading 9802.00.80,
Harmonized Tariff Schedule of the United States (HTSUS), to
certain scarves, and the appropriate country of origin
marking. Samples of the article exported from and imported
into the U.S. were submitted with the request. Additional
arguments were submitted in a letter dated June 11, 1998.
FACTS:
It is stated that Amicale currently imports camel hair
into the U.S., classifiable under heading 5102, HTSUS, when
not carded or combed, and under heading 5105, HTSUS, if the
hair is carded or combed as necessary. The hair is spun
into yarn and woven into fabrics of various kinds, depending
upon the intended use of the apparel or other textile
product. In this instance, Amicale proposes to weave 100
percent camel yarn into "scarves", and to self-fringe the
ends so that the resultant product is 15 inches in width and
72 inches in length inclusive of the fringes.
Next, Amicale intends to export the articles as is to
Scotland, or alternatively, cut the articles in half
lengthwise to form two "scarves" 7 « inches in width and 72
inches in length, prior to export to Scotland. If the
cutting operation is not performed in the U.S., that
operation will be performed in Scotland. In Scotland, yarns
originating in Scotland and the United Kingdom will be hand
sewn to each "scarf" (in addition to the cutting procedure,
if not performed in the U.S.). According to the sample, the
hand sewing creates a large criss-cross decorative pattern
over the entire surface of the scarf.
ISSUES:
I. Whether the scarves with the decorative pattern and
possibly cut lengthwise in Scotland will qualify for
the partial duty exemption under HTSUS subheading
9802.00.80, when imported into the U.S.
II. What are the country of origin marking requirements of
the scarves at issue?
LAW AND ANALYSIS:
I. Subheading 9802.00.80, HTSUS
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).
It is stated that camel hair classifiable under heading
5102 or 5105, HTSUS, will be imported into the U.S., where
it is carded or combed as necessary, spun into yarn, and
woven into scarves 15 inches wide and 72 inches long. It is
claimed that this process results in scarves that are
products of the U.S.
Section 334 of the Uruguay Round Agreements Act,
codified at 19 U.S.C. 3592, provides rules of origin "for
purposes of the customs laws and the administration of
quantitative restrictions" for textiles and apparel entered,
or withdrawn from warehouse, for consumption, on and after
July 1, 1996. Section 102.21, Customs Regulations (19 CFR
102.21) implements section 334. Pursuant to 19 CFR 102.21,
the country of origin of a textile or apparel product shall
be determined by hierarchical application of the general
rules set forth in paragraphs (c)(1) through (c)(5).
Paragraph (c)(2) states that "Where the country of
origin of a textile or apparel product cannot be determined
under paragraph (c)(1) of this section, the country of
origin of the good is the single country, territory, or
insular possession in which each foreign material
incorporated in that good underwent an applicable change in
tariff classification, and/or met any other requirement,
specified for the good in paragraph (e) of this section."
It is stated that the scarves are classifiable under
subheading 6214.20.00, HTSUS. The applicable rule in 19 CFR
102.21(e) is as follows:
6213-6214 ... The country of origin of a good
classifiable under heading 6213 through 6214 is the
country, territory, or insular possession in which the
fabric comprising the good was formed by a
fabric-making process.
It is indicated that the scarf is woven from imported
camel hair classifiable under heading 5101 or 5105, which is
spun into camel hair yarn classifiable under heading 5106 or
5107, HTSUS. Therefore, since the fabric-making process
will occur in the U.S., we find that the finished article
will be a product of the U.S.
Counsel for Amicale states that the article exported to
Scotland is a U.S. fabricated component in the form of
fringed scarves woven from camel hair yarn, will be ready
for assembly without further fabrication in Scotland, and
that the hand sewing of wool yarn to the woven camel hair
scarves is an acceptable assembly operation. As support
that an acceptable assembly process occurs in Scotland,
United States v. Baylis Brothers Co., 451 F.2d 643, 645
(CCPA 1971), is cited where the court found that a smocking
operation performed on certain dresses was an assembly since
the operation merely consisted in joining the two
components, fabric of U.S. origin and thread of foreign
origin, together according to the stencil design.
Furthermore, the court found that the thread and fabric did
not lose their physical identity by the process. E.
Dillingham and Sons, Inc. v. United States, 470 F.2d 629
(CCPA 1972), is also cited, where the court held that a
needling operation was a proper assembly, which entailed
needling fibers into a base fabric to create papermakers'
felts. HRL 556672 dated February 25, 1993, is also cited,
where a tufting operation was found to be analogous to
sewing and was an acceptable assembly operation under
subheading 9802.00.80, HTSUS.
In HRL 560201 dated May 14, 1998, Customs considered a
men's suit-type jacket, made from some shell fabric and
interlining components that were "block cut" in the U.S.
These block cut components were cut to shape but excess
material was intentionally left on the components to allow
the components to be fused together more easily. Customs
held that trimming the components after they were fused
together while abroad was not incidental to the assembly
process as the markings on the components indicated that a
significant portion of the fabric comprising the component
was removed as "excess." It was also found that such
cutting was to a specific pattern shape which was necessary
to create the finished component, and constituted a further
fabrication of the exported fabric. Customs distinguished
such cutting from other cutting performed on different
components, where only a very small amount of excess fabric
(between 1/4 to 3/4 inch) was removed from approximately 50
percent of the outer edges of the component.
In HRL 560648 dated October 27, 1997, Customs held that
"trimming" one long edge of an awning fabric to create a
decorative edge was more akin to cutting to a specific
pattern than removing a small amount of excess fabric, and
constituted a further fabrication of the fabric component.
In HRL 557503 dated November 24, 1993, pre-cut components
comprising extra-large size garments were die-cut into
smaller sizes abroad and then assembled into garments. It
was held that such cutting was a further fabrication of the
components for purposes of subheading 9802.00.80, HTSUS.
It is claimed that HRL 560201 is not applicable here
because HRL 560201 distinguished between the removal of a
"very small amount of excess fabric" and the removal of a
"significant portion" of excess material. In this case, it
is stated that Amicale exports a 15 inch wide article from
the U.S. and cuts that article in half lengthwise, which
does not entail the removal of excess material. Therefore,
it is claimed that this is analogous to the cutting in HRL
560201 where only a small amount of excess fabric was
removed. Rather, it is suggested that HRL 558816 dated
February 1, 1995, is applicable.
In HRL 558816, Customs considered footwear insoles or
"footbeds" which were molded in the U.S. as pairs. The body
was molded directly onto a piece of fabric backed with
plastic. This operation simultaneously created the footbed
bodies and bonded the fabric to the bodies. The footwear
component was then exported abroad, where the fabric was
slit to separate the footbeds and trimmed so that it covered
only the top surface of the bodies. It was held that
cutting to separate the footbeds was incidental to the
assembly process as it was similar to Texas Instruments v.
United States, 545 F.2d 739 (CCPA 1976), where scoring and
breaking a silicon slice along already marked "streets" to
separate individual transistors was incidental to the
assembly process. It is claimed that as in HRL 558816, the
15 inch wide article exported to Scotland consists of two
components produced simultaneously in the U.S., exported in
the physical form of a single unit. As the footbeds, it is
claimed that Amicale's articles are to be separated by
cutting at their mid-point. However, unlike HRL 558816
where the division of the molded product into two parts was
necessary before the assembly operations could be performed,
it is stated that it is possible to assemble the wool yarn
without cutting the article, but that the cutting is
performed to facilitate the assembly operation.
It is also stated that HRL 556982 dated January 27,
1993, allowed more complex cutting operations. HRL 556982
concerned reagent strips assembled by laminating bulk
reagent material rolls to polystyrene roll stock. The roll
stock was then sliced to form cards, and then slit into 0.2
inch wide reagent strips, followed by trimming of excess
material at each end. In HRL 557709 dated May 24, 1994,
Customs held that vinyl material cut to length and then
rolled onto a self-adhesive roller to create a window shade
qualified for subheading 9802.00.80, HTSUS, treatment.
We agree that based on the foregoing, the operation of
pulling wool yarn over and under the scarf fabric is a
proper assembly operation akin to sewing, as the scarf
fabric and wool are being joined together. As in Baylis,
though this operation creates a decorative design, this fact
alone does not indicate further fabrication.
With regard to the cutting operation, 19 CFR
10.16(b)(6) provides that cutting to length wire, thread,
tape, foil, or similar products exported in continuous
lengths is an acceptable incidental operation. In this
case, it is our opinion that while a smaller scarf is
created by a straight cut, and, therefore, may be considered
a cutting to shape, cutting from continuous rolls of fabric
would create the same result. Furthermore, we find that the
cutting is not as extensive as in HRL 560201 (cutting of
garment shape) or HRL 560648 (cutting of decorative awning
edge). Therefore, we find that cutting the article to width
in Scotland is an operation incidental to assembly.
II. Country of Origin Marking
The marking statute, section 304, Tariff Act of 1930,
as amended (19 U.S.C. 1304), provides that unless excepted,
every article of foreign origin imported in the U.S. shall
be marked in a conspicuous place as legibly, indelibly, and
permanently as the nature of the article (or its container)
will permit, in such a manner as to indicate to the ultimate
purchaser in the U.S. the English name of the country of
origin of the article.
As indicated above, the general rules set forth in 19
CFR 102.21(c)(1) - (5), which implement section 334 of the
Uruguay Round Agreements Act will be used to determine the
country of origin of the finished scarves for country of
origin marking purposes. The country of origin is the
country in which the fabric comprising the good was formed
by a fabric-making process. As determined above, the
country where the fabric-making process of the scarves
occurs is the U.S.
However, 19 CFR 12.130(c) is applicable, which provides
in part that:
... notwithstanding paragraph (b), merchandise which
falls within the purview of Chapter 98, Subchapter II,
Note 2, Harmonized Tariff Schedule of the United
States, may not, upon its return to the U.S., be
considered a product of the U.S.
According to T.D. 90-17, published in the Federal Register
on March 1, 1990 (55 FR 7303), the principles of country of
origin for textiles and textile products contained in 19 CFR
12.130 are applicable to such merchandise for all purposes,
including duty and marking. Therefore, 19 CFR 12.130(c)
must be applied to determine the country of origin marking
requirements for the imported scarves. As the scarves will
be eligible for subheading 9802.00.80, HTSUS, which falls
within the purview of Chapter 98, Subchapter II, Note 2,
HTSUS, the scarves may not be considered a product of the
U.S. Rather, the scarves shall be considered a product of
Scotland.
Since the scarves are produced as a result of an
assembly operation, pursuant to 19 CFR 134.43(e), the
scarves may be marked "Assembled in Scotland", or "Made in
Scotland". However, as it is indicated that yarns
originating in Scotland and the United Kingdom will be hand
sewn to the scarf as part of the assembly process, we find
that it will not be acceptable to mark the scarves
"Assembled in Scotland from components of U.S. origin", but
rather would have to be marked "Assembled in Scotland from
components of U.S. and foreign origin." Please note that on
June 15, 1998, Customs published a notice in the Federal
Register, 63 F.R. 32697, soliciting comments concerning the
country of origin marking rules for textiles advanced in
value, improved in condition, or assembled abroad. If this
proposal becomes a final rule, the marking of the returned
scarf would be different.
HOLDING:
On the basis of the information and samples submitted,
we find that the scarves are exported in a condition ready
for assembly, the hand sewing operation performed in
Scotland is a proper assembly, and that cutting the scarves
to width in Scotland is an acceptable operation 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 fabricated components of U.S. origin
incorporated into the scarves, provided the documentary
requirements of 19 CFR 10.24 are satisfied. Furthermore, we
find that pursuant to 102.21(c)(2) and 19 CFR 12.130(c), the
country of origin of the scarves for marking purposes will
be Scotland and the scarves may be marked "Assembled in
Scotland", "Made in Scotland", or "Assembled in Scotland
from components of U.S. and foreign origin".
A copy of this ruling letter should be attached to the
entry documents filed at the time the goods are 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
Commercial Rulings Division