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NY K84445

April 23, 2004
CLA-2-63:RR:NC:3:350 K84445


TARIFF NO.: 9802.00.80

Joy Bradley
Import/Export Manager
Standard Textile Co., Inc.
One Knollcrest Drive
Cincinnati, OH 45237

RE: Applicability of the partial duty exemption under subheading 9802.00.80, HTSUS, to single ply fenestrated surgical drapes

Dear Ms. Bradley:

In your letter dated March 19, 2004, you requested a ruling concerning the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to foreign fabric that is cut in the United States. In addition, you have also requested clarification on whether hemming is considered an assembly operation.

The merchandise under consideration is a single ply fenestrated surgical drape, style #22626022, to be assembled in Mexico. Two samples of the item were provided. One sample is of the cut fenestrated drape, unhemmed with no binding around the fenestration, which will be exported to Mexico. The other sample is of the finished surgical drape, hemmed on all four sides with a ¼ inch bias binding around the fenestration, which will be returned to the US from Mexico. The samples are being retained for training purposes.

Your letter states that the surgical drapes will be made in various sizes from foreign fabric cut in the United States and hemmed in Mexico. The surgical drapes require two cuts. The first cut forms a square and the second cut is to make the fenestration (an opening in the drape where surgeons will perform the surgical procedure.) The cut surgical drape will be sent to Mexico where it will be hemmed on all four sides and a ¼ inch bias binding will be sewn around the fenestration.

Subheading 9802.00.80, HTSUSA, provides a partial duty exemption for: Articles, except goods of heading 9802.00.90 and goods imported under provisions of subchapter XIX of this chapter and goods imported under provisions of subchapter XX, 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, HTSUSA, 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 documentation requirements of section 10.24, Customs Regulations (19 CFR 10.24).

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, laminating, 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. 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 HTSUSA subheading 9802.00.80 to that component. See 19 CFR 10.16(c).

Section 10.14(a), Customs Regulations (19 CFR 10.14(a)), provides in part that the components must be in a condition ready for assembly without further fabrication at the time of their exportation from the U.S. 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.

In L’Eggs Products Inc. v United States, 704 F. Supp. 1127 (CIT 1989), the Court of International Trade held that thread used as a binding agent to join material to itself qualified as a component and was eligible for a duty allowance under subheading 9802.00.80, HTSUS. In the instant case the hemming operation on all four sides and the operation involved in sewing the bias binding around the fenestration constitutes an acceptable assembly operation for purposes of subheading 9802.00.80, HTSUS.

For a component to be eligible for subheading 9802.00.80, HTSUSA, treatment, it must 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 or partially of foreign components or materials. If the article consists wholly or partially of foreign components or materials, the manufacturing process in the U.S. 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. Section 10.14(b), Customs Regulations (19 CFR 10.14(b)), states that a substantial transformation occurs when, as a result of manufacturing processes, a new and different article emerges, having a distinctive name, character or use which is different from that originally possessed by the article or material before being subject to the manufacturing process.

The cut fenestrated drapes used in the foreign assembly operation which were cut in the U.S. from foreign fabric are not considered “products of” the U.S. for purposes of subheading 9802.00.80, HTSUSA. In this regard, section 334(b)(4)(A) of the URAA (codified at 19 U.S.C. 3592(b)(4)), provides that:

[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, HTSUSA, that otherwise would no longer be available under the section 334 origin rules since cutting foreign fabric to shape in the U.S. no longer results in the cut fabric being considered a “product of” the U.S.

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, HTSUSA. Therefore, imported goods entitled to a duty allowance under 19 CFR 10.25 are to be entered under subheading 9802.00.8065, HTSUSA, and, solely for purposes of calculating the duty allowance under this subheading, Customs treats the textile components cut to shape in the U.S. from foreign fabric as if they were “U.S. fabricated components.”

Based on the information submitted:

1) The foreign origin fabric components of style #22626022 are considered cut to shape and they meet the requirements of 19 CFR 10.25. Accordingly, notwithstanding that the foreign fabric cut in the U.S. is not a “product of” the U.S., pursuant to 19 U.S.C. 3592(b)(4) and section 10.25, Customs Regulations, style 22626022 is entitled to the partial duty exemption provided for in subheading 9802.00.80, HTSUS, provided the documentary requirements of 19 CFR 10.24 are satisfied.

2) The hemming operation on all four sides and the operation involved in sewing the bias around the fenestration constitute an acceptable assembly operation for purposes of subheading 9802.00.80, HTSUS.

This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).

A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Deborah Walsh at 646-733-3044.


Robert B. Swierupski

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