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HQ 557231


June 4, 1993

CLA-2 CO:R:C:S 557231 MLR

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Mr. Michael G. Teeter
Michael Teeter & Associates Inc.
275 Slater Street
Suite 1067
Ottawa, Canada K1P 5H9

RE: Applicability of partial duty exemption under HTSUS subheading 9802.00.80 to insulation material for apparel; U.S.-origin fabric; stitching; trimming; cutting-to-length

Dear Mr. Teeter:

This is in response to your letter of March 30, 1993, requesting a ruling on behalf of your client, regarding the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to insulation material for the apparel trade.

FACTS:

Your Canadian-based client is a converter of fabrics, and a manufacturer of insulation materials for the apparel trade. The insulation material at issue consists of a Canadian-origin non- woven wadding which is sandwiched between fabric on each side. This insulation material is used to make various types of apparel. Your client's U.S. customers wish to supply the fabric in bolts that is used to cover the wadding. The fabric may be manufactured in the U.S. or may be imported into the U.S. with duty paid.

In Canada, approximately 1/4 inch will be trimmed off each selvage (edge of fabric) in order to fit the fabric on the assembly line. (It is also indicated that it is possible to cut the 1/4 inch selvage in the U.S. prior to shipment to Canada.) The fabric will then be stitched to the wadding. The insulation material is then rolled-up and shipped to the U.S. However, in a telephone conversation with a member of my staff, you indicated that the insulation material may be cut-to-length, because the length of the supplied bolt of fabric may not be the same as the length of the finished insulation roll. You also indicated that in some instances, your client may only affix its fabrics to one side of the wadding.

ISSUE:

Whether the insulation material will qualify for the partial duty exemption available under subheading 9802.00.80, HTSUS, when returned to the U.S.

LAW AND ANALYSIS:

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 appraised 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).

For a component to be eligible for subheading 9802.00.80, HTSUS, treatment, it must first be a "product of the United States." According to section 10.12(e), Customs Regulations {19 CFR 10.12(e)}, a "product of the United States" is an article manufactured within the Customs territory of the U.S. and may consist wholly of U.S. components or materials, of U.S. and foreign components or materials, or wholly of foreign components or materials. If the article consists wholly or partially of foreign components or materials, the manufacturing process must be such that the foreign components or materials have been substantially transformed into a new and different article, or have been merged into a new and different article.

Because the fabric that is imported into the U.S. will not be substantially transformed into a product of the U.S. before it is sent to Canada, it will not be eligible for subheading 9802.00.80, HTSUS, treatment. Furthermore, the fact that duty is paid on the imported fabric does not change its eligibility under this tariff provision pursuant to U.S. Note 2, Chapter 98, HTSUS, which provides that "in the absence of a specific provision to the contrary, the tariff status of an article is not affected by the fact that it was previously imported into the customs territory of the U.S. and cleared through customs whether or not duty was paid upon such previous importation." Therefore, only the fabric manufactured in the U.S. is eligible for the duty allowance under subheading 9802.00.80, HTSUS, provided acceptable assembly and incidental operations are performed in Canada.

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).

In this case, stitching the U.S.-origin fabric to the Canadian wadding is considered an acceptable assembly operation pursuant to 19 CFR 10.16(a), because two solid components are being joined (i.e., sewn) together. Whether or not one or two sides of the wadding is covered with U.S.-origin fabric is irrelevant, provided the fabric is stitched to the wadding.

Cutting the insulation material to length is considered an acceptable operation incidental to the assembly process pursuant to 19 CFR 10.16(b)(6). This conclusion was reached in Headquarters Ruling Letter (HRL) 067089, dated February 20, 1981, where textile fabrics exported in continuous-length rolls, which were joined by lamination to a foreign-made plastic-layered component and cut into shorter lengths, were not precluded from the application of item 807.00, Tariff Schedules of the United States (TSUS) (now subheading 9802.00.80, HTSUS). Trimming 1/4 inch off each selvage is also considered an acceptable operation incidental to assembly pursuant to 19 CFR 10.16(b)(4), which states that trimming, filing, or cutting off of small amounts of excess materials is an acceptable incidental operation. The trimming operation is only performed to fit the fabric on the assembly line, and does not constitute a change in the shape of the fabric or a further fabrication of the fabric by cutting it to length and width. We, therefore, find that the insulation material is eligible for the duty allowance under subheading 9802.00.80, HTSUS.

HOLDING:

On the basis of the information submitted, it is our opinion that stitching the U.S.-origin fabric to the Canadian-origin wadding to create the insulation material is considered a proper assembly operation. Furthermore, trimming 1/4 inch off each selvage and cutting the fabric to length are acceptable incidental operations. Therefore, the insulation material may be entered under subheading 9802.00.80, HTSUS, with allowances in duty for the cost or value of the U.S.-origin fabric, provided the documentary requirements of 19 CFR 10.24 are satisfied.

Sincerely,

John Durant, Director

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