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HQ 557386

August 20, 1993

CLA-2 CO:R:C:S 557386 MLR


TARIFF NO.: 9802.00.80

Denise L. Kelly, Esq.
Sandler, Travis & Rosenberg, P.A.
The Waterford
5200 Blue Lagoon Drive
Miami, Florida 33126-2022

RE: Applicability of partial duty exemption under HTSUS subheading 9802.00.80 to garments from Mexico; embroidery

Dear Ms. Kelly:

This is in response to your letter of June 2, 1993, requesting a ruling on behalf of your client, Champion Products, Inc. ("Champion"), regarding the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to an embroidery operation performed on garment components assembled in Mexico and/or other Caribbean locations. A sample sweatshirt component was submitted with your request.


Champion plans to ship U.S.-origin cut components, including thread and pellon backing to off-shore facilities in Mexico and/or other Caribbean locations for assembly into various garments, such as shorts and T-shirts. Certain garment components will be embroidered before they are assembled to other components. The embroidery process will consist of the following operations:

1. U.S.-origin thread is used to machine embroider the "Champion" logo or a selected design onto two layers of components. The top layer will consist of a knit fabric cut component. The bottom layer will be two 3 1/2 inch x 6 1/2 inch of pellon backing.

2. Pellon backing that is not joined to the knit fabric by the thread is perforated during the embroidery process in such a way that this non-essential backing material is pulled off by hand.

Whether the garments subjected to the embroidery operation will qualify for the partial duty exemption available under subheading 9802.00.80, HTSUS, when returned to the U.S.


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).

This ruling will only address the embroidery operation. For purposes of this ruling, we will assume that the garments otherwise qualify for subheading 9802.00.80, HTSUS, treatment. In Headquarters Ruling Letter (HRL) 555625 dated August 1990, U.S.-origin thread, knit fabric, and pellon backing were shipped to Mexico for an embroidery operation. The pellon backing was considered necessary to the embroidery operation because, without the backing, the thread would become entangled in the embroidery machine, making the embroidery operation impossible. The pellon backing also prevented the embroidery stitch from unraveling. After the design was complete, the portion of the pellon backing not caught between the material and embroidered thread was removed. Based upon C.S.D. 90-28, 24 Cust. Bull. 346 (1990), (HRL 555399 dated December 26, 1989), which held that an embroidered design which penetrated two or three layers of fabric was an acceptable assembly operation, the embroidery operation in HRL 555625 was also found to be acceptable because the embroidery stitch was used to join the knit fabric and the pellon backing together. In C.S.D. 90-28, the embroidered design served as a binding agent, as it penetrated two or three layers of a slipper vamp and served to keep the center of the vamp from puckering. See, L'Eggs Products Inc. v. United States, 704 F. Supp. 1127 (CIT 1989), which held that thread used as a binding agent to join material to itself qualified as a component and was eligible for the duty exemption available under subheading 9802.00.80, HTSUS.

In HRL 555565 dated May 14, 1990, we considered the embroidery of a logo onto beach towels. This operation was not considered an acceptable assembly operation because we have previously held that embroidering a single layer of fabric does not qualify as an acceptable assembly operation for purposes of subheading 9802.00.80, HTSUS. See HRL 063098 dated June 7, 1979, and 071031 dated November 12, 1982.

In the present case, if a pellon backing is used, the embroidery operation will be used to join the garment components and the pellon backing together, which is an acceptable assembly operation as in HRL 555625. Therefore, the embroidery operation will not prevent the knit fabric components and the thread from receiving duty allowances under subheading 9802.00.80, HTSUS. However, as you indicated in your ruling request, HRL 555625 determined that the pellon backing was not eligible for the duty allowance upon import into the U.S., because nearly all of the pellon backing was removed after the assembly operation. (Section 10.16(b)(4), Customs Regulations {19 CFR 10.16(b)(4)}, considers trimming, filing, or cutting off of small amounts of excess material to be incidental operations.) Because the removal of the backing in HRL 555625 was too significant an operation to be considered incidental and was not an assembly operation, the cost or value of the pellon backing was not exempt from duty under subheading 9802.00.80, HTSUS. Therefore, if the pellon backing is removed as in HRL 555625, it will not be eligible for the duty allowance under this tariff provision.


On the basis of the information and sample submitted, the embroidery operation used to join the garment components and the pellon together is considered an acceptable assembly operation. However, the removal of the pellon backing is not incidental to the embroidery operation. Therefore, the garments subjected to the embroidery operation may be entered under subheading 9802.00.80, HTSUS, with allowances in duty for the cost or value of the U.S. components (except the pellon backing), provided the documentary requirements of 19 CFR 10.24 are satisfied and the garments otherwise qualify for subheading 9802.00.80, HTSUS, treatment.

In your letter you also requested that the sample garment component be returned. Customs normally retains samples unless arrangements are made for their return. See 19 CFR 177.2(b)(3). Please contact Monika Rice at (202) 482-6980, if you wish to make these arrangements.


John Durant, Director

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