Applicability of item 807.00, TSUS, to certain chenille letters and chevrons manufactured in Haiti

HQ 555146 January 4, 1989 CLA-2 CO:R:C:V 555146 DBI CATEGORY: Classification TARIFF NO.: 9802.00.80, HTSUS (807.00, TSUS) Mr. Bruce Redman Redman's Awards, Inc. 1025 W. Territorial Road Battle Creek, Michigan 49015 RE: Applicability of item 807.00, TSUS, to certain chenille letters and chevrons manufactured in Haiti Dear Mr. Redman: This is in response to your letters dated July 9 and September 29, 1988, concerning the applicability of item 807.00, Tariff Schedules of the United States (TSUS), to certain chenille letters and chevrons manufactured in Haiti and imported by your company. FACTS: Your company purchases orlon and felt in the U.S. and ships them to Haiti. In Haiti, the orlon is put on chenille embroidery machines, sewn to the felt and cut into the shape of various letters and chevrons for individual schools. In a telephone conversation with a member of my staff, Mrs. Redman explained that you previously had the orlon and felt cut to shape in the U.S. after which the cut pieces were merely sewn together in Haiti. However, the fabric now is cut to shape and sewn in Haiti. ISSUE: Whether the chenille letters and chevrons, when returned to the U.S., are eligible for the partial duty exemption in subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS) (807.00, TSUS). LAW AND ANALYSIS: As you may be aware, the HTSUS will replace the TSUS, effective January 1, 1989. Item 807.00, TSUS, will be carried over into the HTSUS without change as subheading 9802.00.80. -2- Subheading 9802.00.80, HTSUS, applies to articles assembled abroad in whole or in part of fabricated components, the product of the U.S., with no operations performed thereon except the attachment of the components to form the imported merchandise and operations incidental thereto. An article classified under subheading 9802.00.80, HTSUS, is subject to duty upon the full appraised value of the imported article, less the cost or value of such products of the U.S. Section 10.14(a), Customs Regulations (19 CFR 10.14(a)), provides that the components must be in condition ready for assembly without further fabrication at the time of their exportation from the U.S. to qualify for the exemption. We have previously held that subheading 9802.00.80, HTSUS, does apply to materials exported in continuous lengths that are merely cut to individual lengths abroad prior to assembly. However, it does not apply to materials which are cut into specific shapes or patterns abroad prior to the assembly process. Cutting parts to pattern shape from exported material is a further fabrication and would not be considered incidental to the assembly operation under subheading 9802.00.80, HTSUS. HQ 555012 (August 26, 1988). See, section 10.16, Customs Regulations (19 CFR 10.16). For your information, we have enclosed a copy of the Customs Regulations relating to subheading 9802.00.80, HTSUS (19 CFR 10.11-10.24). We also wish to point out that U.S. Note 2, subchapter II, Chapter 98, HTSUS, provides that any product of the U.S. which is returned after having been advanced in value or improved in condition abroad by any process of manufacture or other means is treated as a foreign article for purposes of the Tariff Act of 1930, as amended. We hope that this letter and the information provided to you by telephone clarifies the difference between your previous practice of cutting the letters and chevrons to shape in the U.S. and sewing abroad, which is permitted under subheading 9802.00.80, HTSUS, and your present process of cutting the fabric to shape and sewing it in Haiti, which is not permitted under this tariff provision. -3- HOLDING: On the basis of the information submitted, it is our opinion that cutting the exported materials into the shape of letters and chevrons is not an acceptable assembly nor an operation incidental to assembly, and, therefore, no allowances in duty may be made under subheading 9802.00.80, HTSUS, for the cost or value of the orlon and felt. Sincerely, John Durant Director, Commercial Rulings Division Enclosure