CLA-02 RR:CR:SM 562941 DCC
Mr. Pete Mento
Expeditor Tradewin, LLC
1015 Third Avenue, 12th Floor
Seattle, WA 98104
RE: Applicability of HTSUS subheading 9802.00.80 to U.S.-origin cellular fabric returned from China
Dear Mr. Mento:
This is in response to your letters dated October 31, and December 5, 2003, in which you request a ruling regarding the treatment of U.S.-origin trim under 9802.00.80, Harmonized Tariff Schedule of the United States (“HTSUS”), on behalf of Springs Window Fashions LP (“Springs”). Your letter was forwarded to this office by the National Commodity Specialist Division of Customs and Border Protection (“CBP”) for a response.
FACTS:
Springs intends to assemble window blinds or shades in China from U.S.-origin fabric components. In New York Ruling Letter (“NY”) 186813, dated October 10, 2002, CBP classified the shades under subheading 6303.92.2020, HTSUS, which provides for curtains and interior blinds of synthetic fibers. The shades will be available in two lengths (48 and 72 inches) and various widths (23, 24, 26, 27, 28, 29, 30, 31, 33, 34, 35, 36, 39, 40, 45, 46, 47, 54, 58, 59, 60, 62, 70, and 72 inches).
You present two manufacturing scenarios. Under both scenarios, U.S.-origin polyester nonwoven fabric will be shipped to China for assembly. The two scenarios are described in detail below. The only difference between the two scenarios is the location of the cutting to length operation. In Scenario 1, the fabric is cut to length in China, whereas in Scenario 2 the fabric is cut to length in the United States.
Scenario 1
Processing in the United States:
U.S.-origin fabric is trimmed to a width of 97½ inches.
Fabric is marked along the edges to indicate the location of the pleats.
Fabric is pleated.
Fabric is heated to set the pleats.
Fabric is glued to form a series of one-inch single cells. The 84th pleat is not glued to indicate the point where the fabric will be cut to length.
Edges of the fabric will be sanded so that alternate cells of the fabric open.
Processing in China:
Fabric is cut to length at the 84th pleat.
Top and bottom insert slats, head rails and bottom rails are cut to width.
Holes are drilled and punched into the slats and rails, and the head rail is eyeleted.
Fabric is cut to width.
Route holes are drilled into the fabric for the draw cords.
Top and bottom slats are inserted into the top and bottom of pleat of the fabric.
Cords are cut to length and threaded into cord locks, which are inserted into the head rail.
Fabric is secured to the head rail by sliding the top cell and slat into the head rail.
Cord is inserted through route holes in the fabric and secured at the bottom with tie off washers.
Bottom rail is slid onto the bottom cell and slat.
Warning labels and end caps are added to the head and bottom rails.
Snap tassels, end tassels, and tie off washers are attached to cords extending out of the head rail cord lock.
Scenario 2
Processing in the United States:
U.S.-origin fabric is trimmed to a width of 97½ inches.
Fabric is marked along the edges to indicate the location of the pleats.
Fabric is pleated.
Fabric is heated to set the pleats.
Fabric is glued to form a series of one-inch single cells. The 84th pleat is not glued to indicate the point where the fabric will be cut to length.
Fabric is cut to length at the 84th pleat.
Edges of the fabric will be sanded so that alternate cells of the fabric open.
Processing in China:
Top and bottom insert slats, head rails and bottom rails are cut to width.
Holes are drilled and punched into the slats and rails, and the head rail is eyeleted.
Fabric is cut to width.
Route holes are drilled into the fabric for the draw cords.
Top and bottom slats are inserted into the top and bottom of pleat of the fabric.
Cords are cut to length and threaded into cord locks, which are inserted into the head rail.
Fabric is secured to the head rail by sliding the top cell and slat into the head rail.
Cord is inserted through route holes in the fabric and secured at the bottom with tie off washers.
Bottom rail is slid onto the bottom cell and slat.
Warning labels and end caps are added to the head and bottom rails.
Snap tassels, end tassels, and tie off washers are attached to cords extending out of the head rail cord lock.
You claim the finished blinds are entitled to a partial duty allowance under subheading 9802.00.80, HTSUS, for the cost or value of the U.S.-origin fabric.
ISSUE:
Whether the fabric described above is entitled to a partial exemption from duty under subheading 9802.00.80, HTSUS.
LAW & ANALYSIS:
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 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 19 C.F.R. § 10.24.
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. Examples of operations incidental to the assembly process include trimming, filing, or cutting off of small amounts of excess materials, and cutting to length of wire, thread, tape, foil and similar products exported in continuous length. See 19 C.F.R. § 10.16(b)(4) and (b)(6).
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. According to section 10.16(c)(2), cutting of garment parts according to pattern from exported fabric is not an operation that is incidental to the assembly process.
In Headquarters Ruling Letter (“HRL”) 555394, dated August 15, 1989, CBP considered the applicability of subheading 9802.00.80, HTSUS, to U.S.-origin nonwoven fabric exported for assembly into blinds. In that ruling, the U.S.-origin fabric measuring 3½ inches in width was exported in rolls of various lengths for further processing in Taiwan or Thailand. The foreign processing included measuring and cutting the rolled fabric to length; creating pockets at the top and bottom of the fabric; punching a ½ inch hole in the upper pocket for insertion of a plastic hangar; and gluing the ends of the pocket in a manner to ensure proper position of a plastic insert card. The fabric was then packaged with an aluminum head rail and nylon cord weight to complete the blind system and returned to the United States. CBP determined that the returned fabric was eligible for a partial duty exemption under HTSUS subheading 9802.00.80. In particular, CBP noted that the fabric did not lose its physical identity in the assembly operation, and that it was not otherwise advanced in value or improved in condition except by the assembly operations or operations incidental to the assembly.
In another ruling, HRL 088053, dated January 30, 1991, CBP considered whether comforter shells made from U.S.-origin cotton and polyester fabric were entitled to a partial duty exemption under HTSUS subheading 9802.00.80. In that case, bolts of fabric were exported to Haiti where the fabric was cut to length and width to form the top and back components of the comforter shell. CBP found that the cutting to length and width constituted a fabrication of the components abroad. Therefore, no allowance in duty was allowed for the cost or value of the U.S.-origin fabric when the comforter shells were imported into the United States.
In support of your claim that the returned fabric shades are entitled to a partial duty exemption under subheading 9802.00.80, HTSUS, you cite HRL 557672, dated April 29, 1994. You note that HRL 557672 states that, “Cutting [the imported Pakistani] fabric lengthwise and cutting out 8” squares at each of the four corners involves straight line cuts and does not rise to the complexity of cutting shaped pattern pieces for wearing apparel.” You then assert that the cutting operations in the present case are comparable to those in HRL 557672 and, therefore, do not represent a substantial manufacturing or processing operation resulting in a substantial transformation of the imported fabric.
We disagree with your interpretation of HRL 557672. That ruling involved Pakistani fabric that was imported into Puerto Rico where it was cut to length and width before being exported to the Dominican Republic where it was further processed. The issue in that case was whether the Pakistani fabric was substantially transformed by the cutting operations in Puerto Rico causing the fabric to become a product of the United States. CBP determined that the Puerto Rican cutting operation did not substantially transform the imported fabric. Consequently, the fabric never became a product of the United States so it was not eligible for a partial duty exemption under HTSUS subheading 9802.00.80. Furthermore, the CBP Regulations specifically state that whether or not a processing operation results in a substantial transformation of an article is not determinative of whether that operation is incidental to the assembly process. See 19 C.F.R. § 10.16(c).
You also cite HRL 562686, dated May 21, 2003, in support of your claim. That case reviewed whether, under HTSUS subheading 9802.00.50, fully functional venetian blinds were eligible for a duty full or partial exemption. Under HTSUS subheading 9802.00.50, goods may be entitled to a duty exemption when they are exported for repairs or alterations. Because the eligibility requirements for HTSUS subheadings 9802.00.50 and 9802.00.80 are different, the analysis in that ruling is not relevant to the present case.
Finally, you cite HRL 555671, dated March 15, 1991. That case considered whether wooden venetian blinds assembled in Mexico from U.S.-origin components were eligible for a duty exemption under HTSUS subheading 9802.00.50. Although both HRL 555671 and the instant case involve window blinds, the materials and assembly processes used to produce the blinds in the two cases is different. In the present case, the blinds are made of a nonwoven polyester fabric which is cut to width in China and cut to length in the United States or China. Because the blinds in HRL 555671 were made of wooden slats, however, there was only one cutting operation that determined the size of the blinds; the width of the blinds was determined by cutting slats but the length of the blinds was determined by adjusting the number of wooden slats. Consequently, HRL 555671 only involved one cutting operation to determine the size of the blinds, whereas the blinds in the present case require two.
The CBP Regulations distinguish between cutting operations that are deemed incidental to the assembly process from those that are more significant. Cutting to length material that is exported in continuous rolls and trimming or cutting off excess materials are cutting processes that are incidental to the assembly. See 19 C.F.R. § 10.16(b)(4) and (b)(4). By contrast, the Regulations state that cutting exported fabric to pattern is not incidental to the assembly process. See 19 C.F.R. § 10.16(c)(2).
In the instant case, we find that the foreign cutting operations described under Scenario 1 are not incidental to the assembly process. In this scenario, the fabric is cut to length and width in China. The combination of these two cutting operations determines the finished dimension of the fabric component and is therefore comparable to cutting the fabric to shape. As such, the cutting to length and width is a significant operation whose primary purpose is the fabrication of the fabric component. Consequently, window shades assembled under Scenario 1 are not eligible for a duty allowance under HTSUS subheading 9802.00.80 for the cost or value of the nonwoven fabric. See HRL 088053 (cutting U.S.-origin fabric to length and width constituted an unacceptable fabrication of the components abroad).
Under Scenario 2, the fabric is cut to length in the United States but cut to width in China. In this scenario, the foreign cutting operation merely determines the width of the finished shade. Consequently, we find the cutting to width operation a minor process that is incidental to the assembly of the shades.
In addition to the cutting to width operation described under Scenario 2, the fabric and other components are subjected to additional processing in China to create the shades. Consistent with previous rulings, we find that those operations performed that result in joining the various components by inserting the slats into fabric pleats, threading the draw cord through the various components and attaching tassels and washers to the cord are acceptable assembly operations pursuant to 19 C.F.R. § 10.16(a). See HRL 555671 (joinder of various components to form venetian blinds is an acceptable assembly operation).
Finally, we find that drilling the route holes into the fabric for the draw cords is an operation incidental to the assembly process. CBP has ruled previously that drilling or punching holes in various components is an operation incidental to assembly where the operation is not substantial and is necessary for the assembly process. See HRL 555671 (drilling or punching holes in various components is an operation incidental to the assembly where the drilling or punching operation is not substantial), and HRL 061429, dated March 28, 1980 (drilling and punching holes through plastic cabinet, wood decal, and oscillator shield to accommodate locks and coil were deemed to be incidental to assembly). Because drilling the route holes through the fabric and rails is a minor process we determine that this operation is incidental to the assembly of the finished article. Therefore, an allowance in duty may be made under HTSUS subheading 9802.00.80 for the cost or value of the nonwoven fabric when it is cut to length in the United States and cut to width in China.
HOLDING:
On the basis of the information and sample provided, and assuming that the documentation requirements of 19 C.F.R. § 10.24 are met, the shades may be entered under subheading 9802.00.80, HTSUS, with allowances in duty for the cost or value of the U.S.-origin fabric when such fabric is cut to length in the United States and cut to width in China. No allowance in duty may be made under this tariff provision for the cost or value of the fabric when it is cut to length and width in China.
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 CBP officer handling the transaction.
Sincerely,
Myles B. Harmon, Director
Commercial Rulings Division