CLA 02: RR:CR:SM 561173 MFC
Mr. Frank J. Desiderio
Grunfeld, Desiderio, Lebowitz & Silverman LLP
245 Park Avenue
33rd Floor
New York, New York 10167-3397
RE: Eligibility of embroidered women’s dresses and blouses for partial duty exemption under subheading 9802.00.80, HTSUS; classification; country of origin
Dear Mr. Desiderio:
This is in reference to your letter dated August 27, 1998, to the Director, National Commodity Specialist Division, which was forwarded to us, regarding the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to the assembly and embroidery of front panels of women’s blouses and dresses. You submitted the request on behalf of your client, Karin Stevens Inc. Samples of the merchandise were submitted for our review.
FACTS:
The subject merchandise consists of a women’s blouse and trouser outfit (“trouser set”), style number 3731, and a women’s dress, style number 3756, all constructed of 57% acetate/43% rayon. The blouse features long sleeves, a full frontal opening secured by six button closures, a single back panel and two front panels. The two front panels are fused to a 100% polyester backing and feature embroidery on the front. The trousers do not have embroidery and are not at issue. The women’s dress is constructed of a blouse top attached to a dress bottom to form a single garment. The blouse top is constructed of eight panels sewn together lengthwise (four in front and four in back) and features long sleeves without cuffs, a full frontal opening secured by three button closures and a center seam zipper opening at the center of the back. The front panels are fused to a 100% polyester backing and feature embroidery. The dress bottom features a center seam opening in the back approximately 5 1/2 inches in length.
The garments will be manufactured in the United States, Guatemala, and China, as described below:
1) In the United States, foreign fabric will be cut into panels for the blouse, trousers, and dress. The front panels of the blouse and dress will be fused to a 100% polyester backing. The garment components will then be exported to Guatemala for further assembly.
2) In Guatemala, the four front panels of the dress will be subassembled. The front panels of the dress and blouse will then be sent to China for embroidery.
3) In China, the front panels of the dress and blouse will be embroidered. Chinese origin thread will be used to machine embroider the selected design onto two layers of components. The top layer will consist of the front panel of the fused components, and the bottom layer will consist of a suitably sized piece of pellon backing. The pellon backing that is not joined by the embroidery thread will be perforated during the embroidery process in such a way that this non-essential backing material can be pulled off by hand. The embroidered panels will be sent to Guatemala for final assembly.
4) In Guatemala, the embroidered panels will be assembled with the remaining components. The finished garments will be imported into the United States.
You have asked us several questions with regard to the subject merchandise.
ISSUES:
Whether the subject merchandise is eligible for the partial duty exemption under subheading 9802.00.80, HTSUS, upon importation into the U.S.
What is the classification of the subject merchandise?
What is the country of origin of the subject merchandise?
LAW AND ANALYSIS:
Foreign Assembly of U.S. Components
The first issue is whether the fabric components in the women’s trouser set and dress are eligible for a duty exemption pursuant to 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).
First, we must establish whether the components sent to Guatemala from the United States qualify as U.S. fabricated components for purposes of subheading 9802.00.80, HTSUS. While you have not specified the origin of the fabric, we will assume for purposes of this ruling that the fabric is of foreign origin when it is imported into the U.S. In the U.S., it is cut into various panels.
On December 8, 1994, the President signed into law the Uruguay Round Agreements Act. Section 334 of that Act provides new rules of origin for textiles and apparel entered, or withdrawn from warehouse, for consumption, on and after July 1, 1996. 19 U.S.C. §3592. Section 334(b)(4)(A) of the Uruguay Round Agreements Act, 19 U.S.C. §3592(b)(4)(A), provides that:
The value of a component that is cut to shape (but not to length, width, or both) in the United States from foreign fabric and exported to another country, territory, or insular possession for assembly into an article that is then returned to the United States --
(i) shall not be included in the dutiable value of such article ...
The effect of 19 U.S.C. §3592(b)(4) is to preserve the tariff treatment afforded by subheading 9802.00.80, HTSUS. Otherwise, the section 334 origin rules and Customs regulations (19 CFR §102.21) do not consider that cutting foreign fabric to shape in the U.S. results in a “product of” the U.S.
Section 10.25, Customs Regulations (19 CFR §10.25), implements this provision and incorporates by reference the same operational, valuation, and documentation requirements applicable to goods entered under subheading 9802.00.80, HTSUS. Therefore, imported goods entitled to a duty allowance under 19 CFR §10.25 are to be entered under subheading 9802.00.80, HTSUS, and, solely for purposes of calculating the duty allowance under this subheading, Customs will treat the textile components cut to shape in the U.S. from foreign fabric as if they were “U.S. fabricated components.” See 19 CFR §10.11.
Based on the samples submitted, the cut components are a variety of panels of different shapes and sizes. While most of the components are cut to shape, certain components are produced merely by cutting to length and width. Only the components of the foreign fabric which are cut to shape in the U.S. for the trousers set and the dress satisfy the requirements of 19 CFR §10.25.
Next, we must determine whether the processing which occurs in Guatemala and/or China are proper assembly operations or operations incidental thereto. The regulations pertaining to articles assembled abroad with U.S. components are located at 19 CFR §10.11 et seq.
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 operations 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).
According to the facts as presented, the fabric components are sent to Guatemala. In Guatemala, the front panels of the dress will be subassembled. The subassembled front panels of the dress, along with the panels of the blouse, are then sent to China for embroidery. In China, Chinese origin thread will be used to embroider a design onto two layers of components, which consist of a top layer of fabric fused to the polyester backing and a piece of pellon backing. You have indicated that the non-essential backing material can be pulled off by hand after embroidery. The embroidered panels are sent back to Guatemala for final assembly. In Guatemala, the embroidered panels will be assembled with the remaining components. The finished garments are then exported to the United States.
With regard to the embroidery operations performed in China, Customs has issued several rulings in which it found an acceptable assembly operation where embroidery penetrates two or three layers. Headquarters Ruling Letter (HRL) 555625 (August 8, 1990) involved U.S. origin thread, knit fabric, and pellon backing shipped to Mexico for an embroidery operation. The pellon backing was considered necessary to the embroidery operation because it prevented the thread from becoming entangled in the embroidery machine. Additionally, the pellon backing prevented the embroidery stitch from unraveling. This embroidery operation was found acceptable because the embroidery stitch was used to join the knit fabric and the pellon backing together, even though the portion of the pellon backing not caught between the material and embroidered thread was removed after the design was complete. See also HRL 555399 (December 26, 1989) (embroidered design which penetrated two or three layers of fabric was an acceptable assembly operation) ; HRL 555625 (August 8, 1990), HRL 559107 (June 20, 1995), and HRL 557386 (August 20, 1993), which found that the embroidery of fabric components with the use of pellon backing was an acceptable assembly operation.
Although you have provided very little descriptive information concerning the operations performed in Guatemala to create the apparel articles (before and after the embroidery operations performed in China), the operations identified (joining fabric components together by sewing) qualify as proper assembly operations under 19 CFR 10.16(a).
The September 29, 1998, transmittal memorandum from the National Commodity Specialist Division raises the issue of whether the duty allowance under subheading 9802.00.80, HTSUS, extends to U.S. fabricated components which are assembled in more than one foreign country, such as in this case. In this regard, we find nothing in the wording of subheading 9802.00.80, HTSUS, U.S. Note 1, subchapter II, Chapter 98, HTSUS, or the implementing regulations which would preclude U.S. fabricated components from receiving the benefits of this tariff provision where they are exported from the U.S. and subjected to acceptable assembly operations, or operations incidental thereto, in more than one foreign country prior to their return to the U.S. as part of the assembled article. Subheading 9802.00.80 states that it applies to “[a]rticles...assembled abroad in whole or in part of fabricated components, the product of the United States....” (emphasis added). In addition, the specific restrictions on the use of this partial duty exemption set forth in U.S. Note 1, subchapter II, Chapter 98, HTSUS, and 19 CFR 10.15 include no restriction on multiple assembly operations performed on a component in more than one foreign country.
Therefore, based on the information submitted, the dress and blouse assembled in Guatemala and China may be entered under subheading 9802.00.80, HTSUS, with allowances in duty for the cost or value of the fabric components which are cut to shape in the U.S. from foreign fabric, provided the documentation requirements of 19 CFR 10.24 are satisfied.
Classification
The blouse, as described, is classifiable in subheading 6206.40.3030, HTSUS, which provides for blouses of man-made fibers, other: women’s. The rate of duty is 27.8% and the textile category designation is 641. The trousers, as described, are classifiable as 6204.69.2510. The rate of duty is 29.5% and the textile category designation is 648. The applicable subheading for the dress, as described, is 6204.44.4010, HTSUS, which provides for women’s dresses of artificial fibers. The rate of duty is 16.5% and the textile category designation is 636.
Country of Origin
Section 304 of the Tariff Act of 1930 (19 U.S.C. §1304), provides that unless excepted, every article of foreign origin imported into 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. The primary purpose of the country of origin marking statute is to “mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will.” United States v. Friedlaender & Co., 27 C.C.P.A. 297, 302 (C.C.P.A. 1940). Part 134 of the Customs Regulations (19 CFR Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. §1304.
Section 134.1(b) of the Customs Regulations (19 CFR §134.1(b)) defines country of origin as:
the country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the “country of origin”....
As noted above, section 334 of the Uruguay Round Agreements Act, codified at 19 U.S.C. §3592, provided new rules of origin for textiles and apparel entered, or withdrawn from warehouse, for consumption on or after July 1, 1996. Customs regulations which implement the statute and determine the country of origin of textile or apparel products are published at 19 CFR §102.21. Thus, the country of origin of a textile or apparel product is determined by sequential application of the general rules set forth in paragraphs (c)(1) through (5) of section 102.21.
Paragraph (c)(1) states that "The country of origin of a textile or apparel product is the single country, territory, or insular possession in which the good was wholly obtained or produced." As the subject merchandise is not wholly obtained or produced in a single country, territory or insular possession, paragraph (c)(1) of section 102.21 is not applicable.
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".
Paragraph (e) states that "The following rules shall apply for purposes of determining the country of origin of a textile or apparel product under paragraph (c)(2) of this section":
6201 6208 (1) If the good consists of two or more component parts, a change to an assembled good of heading 6201 through 6208 from unassembled components, provided that the change is the result of the good being wholly assembled in a single country, territory, or insular possession.
As noted above, the blouse is classifiable in subheading 6206.40.3030, HTSUS; the trousers are classifiable in subheading 6204.69.2510; and the dress is classifiable in subheading 6204.44.4010, HTSUS. As such, the garments satisfy the tariff shift rule. Section 102.21(b)(6) defines “wholly assembled” to mean that all components, of which there must be at least two, preexisted in essentially the same condition as found in the finished good and were combined to form the finished good in a single country, territory, or insular possession. Minor attachments and minor embellishments (for example, appliques, beads, spangles, embroidery, buttons) not appreciably affecting the identity of the good, and minor subassemblies (for example, collars, cuffs, plackets, pockets), will not affect the status of a good as "wholly assembled" in a single country, territory, or insular possession.
In the case of the subject merchandise, the embroidery performed in China is considered a minor embellishment pursuant to 19 CFR §102.21(b)(6) and will not affect the status of the blouse and dress as "wholly assembled" in Guatemala. Accordingly, the country of origin of the dress, blouse and trousers is Guatemala.
HOLDING:
On the basis of the information and sample submitted, the subject merchandise may be entered under subheading 9802.00.80, HTSUS, with allowances in duty for the cost or value of the fabric components which are cut to shape in the U.S., provided the documentary requirements of 19 CFR §10.24 are satisfied.
We confirm that the blouse, as described, is classifiable in subheading 6206.40.3030, HTSUS, with a duty rate of 27.8% and the textile category designation is 641. The trousers, as described, are classifiable in subheading 6204.69.2510, HTSUS, with a duty rate of 29.5% and the textile category designation is 648. The applicable subheading for the dress, as described, is classifiable in subheading 6204.44.3040, HTSUS, with a duty rate of 16.5% and the textile category designation is 636.
The holding set forth above applies only to the specific factual situation and merchandise identified in the ruling request. This position is clearly set forth in 19 CFR §177.9(b)(1). This section states that a ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect.
Should it be subsequently determined that the information furnished is not complete and does not comply with 19 CFR §177.9(b)(1), the ruling will be subject to modification or revocation. In the event there is a change in the facts previously furnished, this may affect the determination of country of origin. Accordingly, if there is any change in the facts submitted to Customs, it is recommended that a new ruling request be submitted in accordance with 19 CFR §177.2.
Due to the changeable nature of the statistical annotation (the ninth and tenth digits of the classification) and the restraint (quota/visa) categories, you should contact your local Customs office prior to importation of this merchandise to determine the current status of any import restraints or requirements.
A copy of this ruling 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
Commercial Rulings Division