Eligibility of labels for a partial duty exemption under subheading 9802.00.80, HTSUS;

HQ 561394 August 26, 1999 CLA-2 RR:CR:SM 561394 KSG CATEGORY: Classification TARIFF NO.: 9802.00.80 Larry Ordet, Esq. Sandler, Travis & Rosenberg, P.A. The Waterford 5200 Blue Lagoon Drive Miami, Florida 33126-2022 RE: Eligibility of labels for a partial duty exemption under subheading 9802.00.80, HTSUS; Dear Mr. Ordet: This is in reference to your letter dated May 11, 1999, on behalf of Paxar Corporation, asking about the eligibility of labels for a partial duty exemption under subheading 9802.00.80, of the Harmonized Tariff Schedule of the United States (HTSUS). Sample labels were submitted with your request. FACTS: This case involves labels that are sold to apparel companies operating within special export regimes (Free Trade Zones, Industrial Processing Zones and the like) in Honduras or the Dominican Republic. Blank label tapes (woven) or rolls (paper) of U.S. origin will be sent to Honduras or the Dominican Republic where they will be printed with the trademark name and logo of a company, and/or the size and care/content information. The printed labels will then be cut to length, folded (in some cases), and sold to companies that will sew the labels onto garments prior to their shipment to the U.S. The labels printed in the Dominican Republic will be affixed to garments there. The labels printed in Honduras will be affixed to garments in Honduras or another Central American country. ISSUE: Whether the labels are eligible for a partial duty exemption under subheading 9802.00.80, HTSUS. LAW AND ANALYSIS: Subheading 9802.00.80, HTSUS, provides a partial duty exemption for articles assembled abroad in whole or in part of fabricated components, the product of the U.S., 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 articles, less the cost or value of the U.S. component assembled therein, upon compliance with the documentary requirements of 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 U.S. to qualify for the exemption. Components will not lose their entitlement to the exemption by being subject 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, 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 HTSUS subheading 9802.00.80 to that component. See 19 CFR 10.16(c). In this case, the attachment of the labels to the garments by sewing is an acceptable assembly operation pursuant to 19 CFR 10.16(a). Section 10.16(b)(6), Customs Regulations (19 CFR 10.16(b)(6)) specifically allows cutting to length as an operation incidental to the assembly process. In Headquarters Ruling Letter (“HRL”) 557685, dated March 28, 1994, Customs cited C.S.D. 79-314 and held that the printing of labels was an operation incidental to the assembly of the labels to other articles. In those cases in which the foreign processing also includes folding, we find that this operation also is an operation incidental to the assembly process pursuant to 19 CFR 10.16(b)(7), which specifies “folding” as an acceptable incidental operation. Consequently, the garments may enter the U.S. under subheading 9802.00.80, HTSUS, with allowances in duty for the cost or value of the U.S.-origin labels, provided the documentary requirements of 19 CFR 10.24 are satisfied. HOLDING: Based on the information provided, the imported U.S.-origin labels assembled to garments abroad as described above are entitled to a duty allowance under subheading 9802.00.80, HTSUS, provided the documen- tary requirements of 19 CFR 10.24 are satisfied. 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