HQ 556636: Applicability of partial duty exemption to book straps and duty-free treatment to packaging materials; GSP

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 556636

                          May 28, 1992

CLA-2 CO:R:C:S  556636  WAW

CATEGORY:  Classification

TARIFF NO:  9802.00.80; 9801.00.10; 6307.90.94

Mr. Victor Escamilla
Vicman Enterprises
3522 Avenue S
Galveston, TX  77550

RE:  Applicability of partial duty exemption to book straps and
     duty-free treatment to packaging materials; GSP

Dear Mr. Escamilla:

     This is in response to your letter of March 3, 1992,
addressed to the Area Director, New York Seaport, which was
forwarded to this office for a response, requesting a ruling on
the tariff status of bookstraps which are assembled in Mexico
from U.S. components.  We note that you have submitted a sample
of the merchandise for review.

FACTS:

     According to your submission, the sample is described as a
bookstrap measuring 6 by 36 inches with attaching shoulder strap. 
You state that the bookstrap will be assembled in Mexico from 100
percent U.S. components.  The strap is composed of 16 mil vinyl
which is internally reinforced with textile scrim fabric.  Sewn
onto the vinyl strap is a multicolor poly/cotton textile strap
measuring 6 by 20 inches.  Sewn onto the multicolored strap is a
double pocket made of the same multicolor material.  A two inch
wide velcro-type strip is sewn across both edges of the 36 inch
strap.  A 3/8 inch bias tape is sewn along the perimeter of the
36 inch strap and pockets.  Two stretch textile straps measuring
2 by 9 inches are attached vertically to the 36 inch strap.  Two
velcro-type fastener material strips measuring 1.5 by 2 inches
are attached at both ends of the stretch straps.  A handle made
of textile woven fabric measuring 1 by 5.75 inches with vinyl
material sewn around it is attached to the bookstrap.  A shoulder
strap of woven textile material measuring 1.5 inches wide is
attached to the bookstrap by means of metal snaps and D rings. 
Also included with the book strap components are U.S.-origin poly
bags measuring 7 by 23 inches, card board boxes for shipping,
nylon thread and header cards.

     You state that all but one component will be precut in the
U.S. before being exported to Mexico for assembly.  The only
exception is the 3/8 inch bias tape which will be sent to Mexico
in rolls and cut to length before it is sewn onto the bookstrap
as described above.

ISSUE:

     (1) Whether the foreign assembly operations constitute
acceptable assembly operations or operations incidental to the
assembly process, so as to qualify the U.S.-origin components for
a duty allowance under subheading 9802.00.80, Harmonized Tariff
Schedule of the United States (HTSUS), when returned to the U.S.
incorporated into bookstraps.

     (2) Whether the packaging materials of U.S.-origin are
entitled to duty-free treatment under HTSUS subheading
9801.00.10.

     (3) Whether the product is eligible for duty-free treatment
under the GSP.

LAW AND ANALYSIS:

1.  Eligibility of bookstraps for partial duty allowance under
HTSUS subheading 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 subheading 9802.00.80, HTSUS, is subject to
duty upon the full value of the imported assembled article less
the cost or value of the U.S. components, 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, in part, that:

     The assembly operations 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, and may be
     preceded, accompanied, or followed by operations incidental
     to the assembly as illustrated in paragraph (b) of this
     section.

     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 operation.  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
HTSUS subheading 9802.00.80 to that component.  See 19 CFR
10.16(c).

     We are satisfied from the information and sample submitted
that the U.S. components meet the requirements of HTSUS
9802.00.80, and, therefore, are entitled to the partial duty
exemption available under this tariff provision.  The operations
that entail sewing fabric onto itself using any type of stitch, 
attaching two or more components together by sewing and tacking
metal snaps and rings to fabric by sewing are considered
acceptable assembly operations.  See 19 CFR 10.16(a); L'Eggs
Products v. United States, Slip Op. 89-5, 13 CIT ___, 704 F.
Supp. 1127 (CIT 1989), which held that sewing together the end of
a pantyhose tube is considered an acceptable assembly operation
as the thread serves as a joining agent by joining the tube to
itself; and HRL 555525 dated June 5, 1990.
     
     We also are of the opinion that cutting the bias tape to
specific lengths is considered an operation incidental to the
assembly process pursuant to 19 CFR 10.16(b)(6).  

     For your information, we have enclosed a pamphlet relating
to subheading 9802.00.80, HTSUS.
 2.  Eligibility of Packing Material for duty-free treatment under
HTSUS subheading 9801.00.10

     Subheading 9801.00.10, HTSUS, provides for the free entry of
U.S. products that are exported and returned without having been
advanced in value or improved in condition by any means while
abroad, provided the documentary requirements of section 10.1,
Customs Regulations (19 CFR 10.1) (copy enclosed), 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 product render it
ineligible for duty-free entry upon return to the U.S.  See
Border Brokerage Company Inc. v. United States, 65 Cust. Ct. 50,
C.D. 4052, 314 F. Supp. 788 (1970), appeal dismissed, 58 CCPA 165
(1970).  

     With respect to the packaging materials in the instant case,
(i.e., poly bags, cardboard boxes, and header cards), we are of
the opinion that they will be separately entitled to duty-free
treatment under subheading 9801.00.10, HTSUS.  We held in HRL
731806 of November 18, 1988, that containers of U.S. origin are
entitled to duty-free treatment under subheading 9801.00.10,
HTSUS, when returned with their contents.  Therefore, since the
packaging materials are of U.S.-origin and have not been advanced
in value or improved in condition while abroad, they are entitled
to duty-free entry under HTSUS subheading 9801.00.10 when
returned to the U.S.

3.  Eligibility of bookstraps for duty-free treatment under the
GSP

     Under the GSP, eligible articles the growth, product, or
manufacture of a designated beneficiary developing country (BDC),
which are imported directly into the customs territory of the
U.S. from a BDC may receive duty-free treatment if the sum of (1)
the cost or value of materials produced in the BDC, plus (2) the
direct costs involved in processing the eligible article in the
BDC, is equivalent to at least 35% of the appraised value of the
article upon its entry into the U.S.  19 U.S.C. 2463(b).

     According to General Note 3(c)(ii)(A), HTSUS, Mexico is a
BDC.  In addition, based on the information provided, we believe
that the merchandise is classified in subheading 6307.90.94,
HTSUS, which provides for "Other made up articles, including
dress patterns: Other: Other," and are dutiable at 7 percent ad
valorem.  Articles classified under this provision are eligible
for duty-free treatment under the GSP provided they meet the
"product of", 35% value-content minimum and "imported directly"
requirements.

     To comply with the requirements of the GSP statute, we must
first determine whether the U.S. components imported into Mexico
become a product or manufacture of that country by being
substantially transformed there.  The courts have held that a
"substantial transformation" occurs "when an article emerges from
a manufacturing process with a name, character, or use which
differs from those of the original material subjected to the
process."  See The Torrington Co. v. United States, 764 F.2d 1563
(Fed. Cir. 1985).

     Because the article in question consists, in large part, of
textile material, section 12.130, Customs Regulations (19 CFR
12.130), is applicable.  See T.D. 90-17, 24 Cust. Bull. 11
(1990).  Section 12.130, Customs Regulations (19 CFR 12.130),
sets forth criteria for determining whether a textile or textile
product has been substantially transformed.  Pursuant to the
regulations, a textile or textile product will be considered to
have undergone a substantial transformation if it has been
transformed by means of substantial manufacturing or processing
operations into a new and different article of commerce.  See 19
CFR 12.130(b).  According to section 12.130(d)(2), the following
will be considered in determining whether merchandise has been
subjected to substantial manufacturing or processing operations: 
(1) the physical change in the material or article; (2) the time
involved; (3) the complexity of the operations; (4) the level or
degree of skill and/or technology required; and (5) the value
added to the article in each country or territory.  Any one or a
combination of these factors may be determinative and other
factors may also be considered.  19 CFR 12.130(d).  

     Examples of processes which generally will result in a
substantial transformation and those which usually will not are
set forth in 19 CFR 12.130(e).  According to 19 CFR
12.130(e)(1)(v), a substantial transformation usually will result
from the following:

     Substantial assembly by sewing and/or tailoring of all cut
     pieces of apparel articles which have been cut from fabric
     in another foreign territory or country, or insular
     possession, into a completed garment (e.g., the complete
     assembly and tailoring of all cut pieces of suit-type
     jackets, suits, and shirts).

     Based upon 19 CFR 12.130(e)(1)(v) and the information you
have provided regarding the assembly of the U.S. components into
bookstraps, we believe that the sewing operations performed in
Mexico do not substantially transform these components into
"products of" Mexico.  The sewing operation involves the simple
assembly of several pre-cut components into a finished bookstrap. 
The sewing operation is not as substantial or complex as the
assembly involved in sewing components together to create suit-
type jackets, suits, and shirts.  See e.g., HRL 083359 dated May
18, 1990; 083461 dated May 15, 1990; 082747 dated February 23,
1989 (where pants parts, cut in one country, are assembled into
non-tailored pants in a second country by nothing more than a
simple joining by machine stitching, a substantial transformation
has not occurred, and the country of origin, for quota purposes,
remains the first country where the parts were cut).  Rather, the
sewing operation simply involves the joining together of several
pre-cut components by machine feeding them into a sewing machine. 
Therefore, as the "product of" requirement is not satisfied, the
bookstrap will not qualify for duty-free treatment under the GSP.

HOLDING:

     On the basis of the information submitted, we find that the
bookstraps to be assembled in Mexico will be entitled to the
partial duty exemption under HTSUS subheading 9802.00.80. 
Therefore, allowances in duty may be made under this tariff
provision for the cost or value of the U.S. components, upon
compliance with the documentary requirements of 19 CFR 10.24.

     Moreover, as the poly bags, cardboard boxes, and header
cards of U.S.-origin will not be advanced in value or improved in
condition abroad as a result of the packaging operation in
Mexico, they are entitled to duty-free treatment under subheading
9801.00.10, HTSUS, upon compliance with the documentary
requirements of 19 CFR 10.1.

     Finally, as the sewing operation performed in Mexico does
not result in a substantial transformation of the U.S. components
into "products of" Mexico, the bookstraps are not entitled to
duty-free treatment under the GSP when imported into the U.S.

                                   Sincerely,




                                   John Durant, Director
                                   Commercial Rulings Division