CLA-2 RR:CR:SM 562158 KSG
TARIFF NOS.: 9801.00.10; 9802.00.80
Maribeth Vanderford
Customs Compliance, Senior Manager
Fruit of the Loom
One Fruit of the Loom Drive
P.O. Box 90015
Bowling Green, KY 42102-9015
RE: Eligibility of printed stickers and J-boards for a duty exemption under subheading 9801.00.10; 9802.00.80
Dear Ms. Vanderford:
This is in response to your letter of June 12, 2001, requesting a binding ruling regarding the eligibility of printed stickers and J-boards for a duty exemption under subheading 9801.00.10 of the Harmonized Tariff Schedule of the United States ("HTSUS") or subheading 9802.00.80, HTSUS. You submitted samples for our examination.
FACTS:
1. Stickers
Beyer Graphics purchases U.S.-origin rolls of adhesive stickers (paper) and U.S.-origin ink. The paper and ink are shipped to Honduras, where the paper is printed, the rolls of paper are cut into strips and the strips are re-rolled.
Fruit of the Loom purchases the stickers and places the stickers on polypropylene bags used to package finished garments in Honduras or El Salvador. The goods are then shipped back to the U.S.
2. J-boards
J-boards are printed paper products used to display the company logo and describe a packaged finished garment produced by Fruit of the Loom. Beyer Graphics ships U.S.-origin paper and ink to Honduras where the paper is printed with various product information, including the size and style, and cut to width and length to make J-boards. Fruit of the Loom purchases the J-boards from Beyer and ships them to a location in Honduras or El Salvador, where they are placed around finished garments. The finished garments are then packaged in polybags and shipped to the U.S.
ISSUES:
Are the printed stickers and J-boards eligible for duty free status under subheading 9801.00.10, HTSUS, upon importation into the U.S.?
Are the stickers and J-boards eligible for a partial duty exemption under subheading 9802.00.80, HTSUS?
LAW AND ANALYSIS:
I. Subheading 9801.00.10, HTSUS
Subheading 9801.00.10, HTSUS, provides that products of the United States when returned after having been exported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad can be entered duty free provided the documentary requirements of 19 CFR 10.1 are satisfied.
The court held in Border Brokerage Company, Inc. v. United States, 314 F. Supp. 788 (1970), that tomatoes of American origin were entitled to duty free entry under item 800.00, Tariff Schedules of the United States (TSUS) (the predecessor to subheading 9801.00.10, HTSUS). The tomatoes were shipped to Canada where they were unloaded, unpacked, sorted, graded by color and size, and repacked. The court stated that the test to be applied in item 800.00 cases is whether the merchandise of American origin has itself (apart from its container) been the object of advancement in value or improvement in condition while abroad.
In Headquarters Ruling Letter ("HRL") 557685, dated March 28, 1994, Customs held that U.S.-origin labels sent abroad with U.S.-origin ink to be printed were not advanced in value or improved in condition. Printing with a bar code, content information, style designation, size and the country of assembly information did not advance the value of the product. See also HRL 560775, dated February 20, 1998, involving U.S. origin ribbons sent abroad for printing and HRL 557071, dated April 2, 1993, involving U.S.-origin bottles sent abroad for silk-screening with the company name, identifying data, instructions and the bottle's capacity.
Similarly, in the instant case, printing information on the rolls of adhesive stickers abroad with the size or style of a product will not improve the condition or advance the value of the product. However, Customs held in HRL 555239, dated May 14,1990, that clear plastic shrinkable tubing cut to length for use in batteries was advanced in value and improved in condition, and, therefore, ineligible for subheading 9801.00.10, HTSUS, treatment. Therefore, in this case, although printing the stickers and J-boards does not preclude subheading 9801.00.10, HTSUS, treatment, cutting the stickers into strips and J-boards to length and to width improves the condition and advances the value of the stickers and J-boards. Further, affixing the stickers to polypropylene bags advances the value and improves the condition of the stickers by an assembly process, thereby precluding subheading 9801.00.10, HTSUS, treatment.
II. Subheading 9802.00.80, HTSUS
Subheading 9802.00.80, HTSUS, provides a partial duty exemption for:
articles...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 value of the imported article, less the cost or value of the U.S. components, upon compliance with the documentary requirements of 19 CFR 10.24.
Section 10.14(a), Customs Regulation (19 CFR 10.14(a)), states in part 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.
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, and may be preceded, accompanied, or followed by operations incidental to the assembly.
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).
Customs stated in HRL 557685, that affixing U.S.-origin printed labels to U.S.-origin plastic bags or J-boards was considered an acceptable assembly operation pursuant to 19 CFR 10.16(a), and the labels which were printed and affixed to bags abroad would be entitled to subheading 9802.00.80, HTSUS, treatment. Furthermore, in HRL 555239, the plastic tubing cut to length and heat shrunk around the battery cell was eligible for subheading 9802.00.80, HTSUS treatment. However,
19 CFR 10.16(c)(2) provides that cutting of garment parts to pattern is not considered incidental to the assembly and precludes subheading 9802.00.80 treatment. Only cutting to length of wire, thread, tape, foil, and similar products in continuous length are considered operations incidental to the assembly process. See 19 CFR 10.16(b)(6).
In this case, the U.S.-origin stickers are cut into strips and re-rolled and affixed to U.S.-origin plastic bags abroad. As the stickers are cut once into strips and affixed to plastic bags, they are eligible for subheading 9802.00.80, HTSUS, treatment as they are only subjected to acceptable assembly operations and operations incidental to assembly. Because cutting to length and width is precluded by 19 CFR 10.16(c), the J-boards are ineligible for subheading 9802.00.80 treatment.
HOLDING:
The J-boards and stickers are not entitled to subheading
9801.00.10, HTSUS, treatment because they are improved in condition and advanced in value by cutting and assembly to the polypropylene bags.
The U.S.-origin stickers are eligible for subheading 9802.00.80 treatment because they are only subjected to acceptable assembly operations and operations incidental to assembly. The J-boards are not entitled to a duty exemption under subheading 9802.00.80, HTSUS, because cutting to shape is not considered an operation incidental to the assembly process.
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
Commercial Rulings Division