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HQ 560497

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October 9, 1997

CLA-2 RR:TC:SM 560497 JML

CATEGORY: CLASSIFICATION

TARIFF NO: 9802.00.80

Mr. Peter J. Fitch, Esq.
Fitch, King and Caffentzis
116 John Street
New York, NY 10038

RE: Eligibility of men's neckties for the partial duty exemption under subheading 9802.00.80, HTSUS; 19 CFR 10.25; 19 CFR 134.43(e).

Dear Mr. Fitch:

This is in response to your letter of June 4, 1997, in which you requested a binding ruling regarding the eligibility of men's neckties assembled in the Dominican Republic, for duty allowances under subheading 9802.00.80, Harmonized Tariff Schedule of the United States ("HTSUS"). You have provided our office with samples of the tie fabric components for review.

FACTS:

Your client, RLF Neckwear, intends to send various components of men's neckties to the Dominican republic for assembly. The neckties consist of three different types of fabric of both United States ("U.S.") and foreign origins. The different fabrics are used to form the tie body, the interlining and the tipping. The other components are woven labels, content labels, thread, and packing materials, all of U.S. origin. Most significant among the components are the fabrics, which are cut to shape in the U.S.

The fabric for the body of the ties consists of either 100% woven silk or 100% woven polyester fabric. We note that as a general matter, the woven silk fabric is classifiable in chapter 50, HTSUS (silk), and that the woven polyester fabric is classifiable in chapter 54, HTSUS (man-made filaments). The fabric is received in the U.S. in rolls of 25 to 50 yards, ranging in widths of 40" to 60". The fabric is then cut and split into a pre-engineered block format. A typical roll of fabric yields about 55 blocks. Each block contains sufficient fabric to produce two ties, each tie consisting of three pieces. The blocks are arranged into stacks of 48 or 96 to ensure uniformity in the fabric pattern. They are then cut into the three components of the ties, each specifically shaped to form a tie when assembled. An examination of the samples given indicates that the cutting operations appear to consist of more than cutting to length or width, but are shapes apparently dedicated for use as tie components.

In addition to the fabric used for the body of the ties, certain fabrics are used to make the "tipping" and the interlining of the ties. The "tipping" is the piece of fabric sewn into the bottom portion of the tie to help keep its shape. It is composed of a woven acetate fabric which is classifiable in chapter 54, HTSUS (man-made filaments). In a finished tipping, the fabric is cut into a triangular shape that when folded resembles the bottom portion of a tie. The interlining serves as the interlining of the tie around which the other fabrics are assembled. It is composed of a woven blend fabric predominately of polyester and acrylic. The interlining is generally classifiable in chapter 54 as well. A finished interlining is a knit fabric cut into the shape of a tie.
You state that the tipping is made from either domestic or foreign origin fabric. Although the interlining is currently made from U.S. origin fabric, you state that in the future that component may be produced from fabric imported into the U.S.

Upon completion of the above-stated operations, the cut components are sent to the Dominican Republic for assembly in bundles of 48 ties, along with the labels, thread and packing materials. In the Dominican Republic, the three components which form the tie body are sewn together. The tipping and interlining are then sewn to the tie. After the tie is turned and pressed, the main and content labels are sewn on. All sewing operations are performed using the U.S. origin thread. The assembled ties are then prepared for packing by affixing the hook riders, sku tickets and cardboard insert. After packing with the cardboard insert and pvc bags, they are placed in the cartons sealed with the staples and tape.

Customs also notes that the finished ties are classifiable in heading 6215, HTSUS (ties, bow ties and cravats). In contending that the finished ties qualify for a duty allowance on the cost or value of the U.S. components assembled therein, you assert that both the foreign and domestic fabric components cut to shape in the U.S. qualify as U.S. fabricated components for purposes of subheading 9802.00.80, HTSUS. Additionally, you ask for the applicable the country of origin marking requirements for the ties.

ISSUES:

1) Whether the imported ties qualify for the partial duty exemption under subheading 9802.00.80, HTSUS.

2) What are the country of origin marking requirements for the ties?

LAW AND ANALYSIS:

9802.00.80

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).

On December 8, 1994, the President signed into law the Uruguay Round Agreements Act ("URAA") Section 334 of the URAA (codified at 19 U.S.C. ?3592) provides new rules of origin for textiles and apparel entered, or withdrawn from warehouse, for consumption, on or after July 1, 1996. On September 5, 1995, Customs published section 102.21, Customs Regulations (19 CFR 102.21), in the Federal Register, implementing section 334. See 60 FR 46188 Thus, effective July 1, 1996, the country of origin of a textile or apparel product shall be determined by sequential application of the general rules set forth in paragraphs (c)(1) through (5) of section 102.21. Section 102.21(b)(5) provides that a textile or apparel product is any good classifiable in Chapters 50 through 63, HTSUS, and other specifically defined tariff provisions. With regard to the facts of this case, Customs notes that the foreign origin fabric components cut to shape in the U.S. -- the body fabric, the tipping fabric and the lining fabric -- are classifiable in tariff provisions within those specified by section 102.21(b)(5), chapters 50, 54 and 54 respectively.

Generally, textile components consisting of foreign origin fabric cut to shape in the U.S. will not be considered a "product of" the U.S. See URAA In such circumstances, 19 U.S.C.

[t]he 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, that otherwise would not be available under the section 334 origin rules.

Section 10.25, Customs Regulations (19 CFR 10.25), implements 19 U.S.C. ?3592(b)(4), and incorporates by reference the same operational, valuation, and documentation requirements applicable to goods entered under subheading 9802.00.80, HTSUS. That is, imported goods entitled to a duty allowance under section 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. For purposes of section 10.25, the term "textile component" and "fabric" have reference only to those goods covered by the definition of "textile or apparel product" set forth in section 102.21(b)(5), Customs Regulations (19 CFR

For purposes of this ruling request, we are presuming that the assembly operations performed in the Dominican Republic on the tie components -- sewing the three fabric components and labels together to form the tie -- conform to the requirements and examples set forth in Section 10.16, Customs Regulations (19 CFR 10.16). The issue left to be resolved is whether the processing of the foreign origin fabric in the U.S. satisfies the requirements of section 10.25, so that a reduction in the dutiable value of the completed ties will include an allowance for the cost or value of the fabric components.

In Headquarters Ruling Letter ("HRL"), dated September 16, 1996, Customs determined that by operation of section 10.25, ladies' blazers assembled in a Caribbean country using lining fabric imported from Lithuania and cut-to-shape in the U.S. qualified for the partial duty exemption available under subheading 9802.00.80, HTSUS, when returned to the U.S. Similarly, in HRL 559702, dated July 12, 1996, the presence of foreign origin fabric cut to shape in the U.S. did not preclude the application of subheading 9802.00.80, HTSUS, to trousers and pants assembled in the Dominican Republic. By contrast, in HRL 560380, dated June 17, 1997, Customs found that in the overseas assembly of sweat bands, the processing of foreign fabric in the U.S., which included cutting the fabric only to width, did not meet the requirements under section 10.25, as that provision specifically excludes from entitlement to its benefits textile components which are cut to length, width or both in the U.S. Upon importation of the completed article, the cost or value of the foreign origin sweat band liner was not excluded from the dutiable value of the sweat band.

Based upon the information submitted, Customs is of the opinion that cutting the foreign fabrics in the U.S. to shapes (not just length and width) specifically dedicated for the use as tie components meets the requirements of section 10.25, Customs Regulations. Accordingly, notwithstanding that the foreign fabrics cut in the U.S. are not a "product of" the U.S., pursuant to 19 U.S.C. ?3592(b)(4) and section 10.25, Customs Regulations, the ties made with those components in the Dominican Republic may qualify for the partial duty exemption provided for in subheading 9802.00.80, HTSUS, for the cost or value of those components, as well as the U.S. origin thread, labels, hook riders, and sku tickets.

With respect to the U.S. origin packing materials -- the cardboard insert, pvc bag, cartons, staples and tape -- subheading 9801.00.10, HTSUS, provides duty-free treatment to U.S. goods exported and returned without having been advanced in value or improved in condition abroad by any process of manufacture or other means while abroad, provided the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1), are met. While some change in the condition of the product while it is abroad is permissible, operations which either advance the value or improve the condition of the exported good render it ineligible for duty-free treatment upon return to the U.S. See Border Brokerage Company Co. v. United States, 65 Cust.Ct. 50, C.D. 4052, 314 F. Supp. 788 (1970), appeal dismissed, 58 CCPA 165 (1970).

As with all imported merchandise, the General Rules of Interpretation ("GRIs") govern classification of goods in the HTSUS. Specifically, GRI 5(b) states that, "packing materials and containers entered with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provision does not apply when such packing materials or packing containers are clearly suitable for repetitive use." Thus, the value of non-reusable containers or packing materials normally used for packaging goods is considered a part of the value of its contents. However, Customs has held that upon submission of satisfactory proof that packing materials are of U.S. origin and that they are returned without having been advanced in value or improved in condition while abroad, they entitled to duty-free treatment under subheading 9801.00.10, HTSUS. See Headquarters Ruling Letter ("HRL") 731806, dated November 18, 1988 Further, the act of being filled with its contents is not considered to constitute an advancement in value or improvement in condition. Id. In HRL 555144, dated April 9, 1990, Customs held that filling U.S.-origin polyethylene bags abroad with their contents and stapling or heat sealing them closed was not considered an advancement in value or improvement in condition for purposes of entitlement to duty-free treatment under subheading 9801.00. 10, HTSUS. Consistent with the above, the carton, pvc bag, cardboard insert, tape and staples will be entitled to duty treatment under subheading 9801.00.10, HTSUS, upon entry into the U.S., assuming compliance with the documentary requirements of section 10.1, Customs Regulations.

MARKING

The marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. ?1304), provides that unless excepted, every article of foreign origin imported in 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.

For textile articles, such as the ties in question, the general rules set forth in paragraphs (c)(1) through (5) of section 102.21, Customs Regulations, which implement section 334 of the Uruguay Round Agreements Act, will be used to determine the country of origin for marking purposes. See 60 FR 46188 (September 5, 1995). Section 102.21(c)(1), Customs Regulations (19 CFR 102.21(c)(1)) provides that "[t]he 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." Because the ties in this case are assembled in the Dominican Republic from components of U.S. and foreign origin, they are not wholly obtained or produced in a single country, territory, or insular possession. Thus, section 102.21(c)(1) is not applicable.

Section 102.21(c)(2), Customs Regulations (19 CFR 102.21(c)(2)), provides:

[w]here 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.

The applicable rule under 102.21(e), Customs Regulations (19 CFR 102.21(e)), for the imported ties classifiable under heading 6215 is:

6215-6217 (1) If the good consists of two or more component parts, a change to an assembled good of heading
6215 through
6217 from unassembled components, provided that the change is the result of being wholly assembled in a single country, territory or insular possession.

Because the ties are wholly assembled in the Dominican Republic from two or more component parts, the terms of the rule are satisfied. Accordingly, the country of origin of the finished ties is the Dominican Republic.

In that regard, section 134.43(e), Customs Regulations (19 CFR 134.43(e)), provides that:

[w]here an article is produced as a result of an assembly operation and the country of origin of such article is determined under this chapter to be the country in which the article was finally assembled, such article may be marked, as appropriate, in a manner such as the following:

(1) Assembled in (country of final assembly); (2) Assembled in (country of final assembly) from components of (name of country or countries of origin of all components); or
(3) Made in, or product of, (country of final assembly).

See 61 FR 28936 and 28957. Therefore, since the ties will be produced as a result of an assembly operation and their country of origin is determined under section 102.21 to be the Dominican Republic, the ties may be marked in any manner consistent with section 134.43(e). Please note, however, any fabric cut to shape in the U.S. will not be considered a U.S. component, and cannot be identified as such in any labels or marking on the imported ties

HOLDING:

Based upon the information submitted, the men's neckties assembled in the Dominican Republic using foreign fabric components cut to shape in the U.S. are eligible for a duty exemption under subheading 9802.00.80, HTSUS. The packing materials are eligible for duty free treatment under subheading 9801.00.10, HTSUS, assuming compliance with the documentary requirements of section 10.1, Customs Regulations. To the extent they are wholly assembled in the Dominican Republic, the ties may be marked with their country of origin in any manner consistent with section 134.43(e), Customs Regulations.

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

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See also:

• Tariff No.: 9801.00.10 - U.S. goods returned without having been advanced in value or improved in condition while abroad
• Tariff No.: 9802.00.80 - U.S. articles assembled abroad, which have not lost their physical identity or have not advanced in value or improved in condition abroad