HQ 556594: Applicability for duty-free treatment under subheading 9801.00.10, HTSUSA, and partial duty exemption under subheading 9802.00.80, HTSUSA, to shipping bag containers.

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 556594      
                       July 24, 1992     

CLA-2 CO:R:C:S 556594 SER

CATEGORY: Classification

TARIFF NO.: 9801.00.10, 9802.00.80

Mr. Daniel B. Hoch
President
Hifort Company
303 Wells Fargo
Suite 7
Houston, TX  77090

RE:  Applicability for duty-free treatment under subheading
     9801.00.10, HTSUSA, and partial duty exemption under
     subheading 9802.00.80, HTSUSA, to shipping bag containers.

Dear Mr. Hoch:

     This is in reference to your letter of February 14, 1992,
addressed to the Area Director of the New York Seaport,
concerning the eligibility of shipping bag containers from Mexico
for a complete or partial duty exemption under subheading
9801.00.10, Harmonized Tariff Schedule of the United States
Annotated (HTSUSA), or 9802.00.80, HTSUSA.  Your request was
forwarded to this office for a response.  Two samples were
provided with your request.

FACTS:

     The articles at issue consist of several styles of bag
containers which are used in the shipping industry.  They are
described as flexible, semi-bulk containers.  The bags are made
of woven polypropylene strips and come in different sizes and
configurations; one style of bag has fill spouts for easier
loading of materials to be shipped, another has discharge spouts,
another has both fill and discharge spouts, and the last has a
closed bottom with a open top.  The bags have seat belt webbing
which, when attached to the bags, forms the lifting loops which
allow the bags to be moved by forklifts.

     In Mexico, all of the bags will have a polyethylene liner of
U.S.-origin inserted to function as a moisture barrier.  There
are four different situations involving the insertion of the
liners.  In situation A, completed, already separated liners are
shipped to Mexico from the U.S.  The liners are placed over a jig
and the woven outer bags are placed on top of the jig.  The liner
is then cuffed over the top lip of the bag.n-2-

     In situation B, the liners are shipped to Mexico in large
rolls.  An operator rolls out the required length of liner, and
cuts it to the length needed, depending on the height of the
bags.  The liner is then secured at the bottom by a wire tie, to
form a "bag" which is then placed in the woven outer bags.

     In situation C, the liners are also shipped to Mexico in
large rolls where they are cut to the desired lengths.  The cut-
to-length liners are then placed in and pulled down through the
woven outer bags through the discharge spouts.  The discharge
spout with liner is then tied off by a wire tie.

     In situation D, the liners are shipped to Mexico in rolls
with serrated lines at even lengths.  Each liner is separated
along the serrated line, placed in the woven outer bags and
pulled down and through the discharge spout.  The spout and liner
are then tied off by a wire tie.

     The U.S.-made seat belt webbing, in 36 inch lengths is
attached to the bags using two lines of double chain stitching. 
A patch of polypropylene fabric is then placed over the attached
ends and another double line of stitching affixes the patch to
the webbing and bag body.  Several situations are also described
in the processing of the webbing.  In situation 1, the webbing is
shipped to Mexico in long rolls, where it is cut to 36 inch
lengths and attached to the bags.

     In situation 2, pre-cut webbing packaged loosely in boxes in
various lengths, is purchased in the U.S. by Hifort. The longer
pieces are cut to 36 inch lengths in the U.S.  The shorter pieces
are not used.  The cut-to-length pieces are then shipped to
Mexico where they are attached to the bags.

     In situation 3, the pre-cut webbing also purchased by Hifort
as described in situation B, is shipped to Mexico where the
longer pieces are cut to 36 inch lengths.  The cut-to-length
pieces are then attached to the bags. The unusable portions are
not returned to the U.S.

ISSUE:

     What is the dutiable status of the bags when returned to the
U.S.?

LAW AND ANALYSIS:

     Subheading 9801.00.10, HTSUSA, provides for the free entry
of products of the U.S. that have been exported and returned
without having been advanced in value or improved in 
condition 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.  Some change in then-3-


 
condition of the product while it is abroad is permissible. 
However, operations which either advance the value or improve the
condition of the exported product render it ineligible for duty-
free treatment upon return to the U.S.  Border Brokerage Company,
Inc. v. U.S., 314 F.Supp. 788 (1970), appeal dismissed, 58 CCPA
165 (1970).

     Subheading 9802.00.80, HTSUSA, 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,
     lubrication, 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 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).

     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 gluing, laminating, welding, soldering, riveting, force
fitting, 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.  Examples of operations which are
incidental to the assembly process include cutting to length of
wire, thread, tape, foil, and adjustments in the shape or form of
a component to the extent required by the assembly being
performed abroad.  See, section 10.16(b), Customs Regulations (19
CFR 10.16(b)).  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 subheading
9802.00.80, HTSUSA, to that component.  See, section 10.16(c),
Customs Regulations (19 CFR 10.16(c)).
n                              -4-

     In situation A, the pre-separated liners are merely inserted
into the bags.  This operation clearly does not advance the value
or improve the condition of the liners by a process of
manufacture or other means.  Therefore, the liners used in
situation A are eligible for duty-free treatment under subheading
9801.00.10, HTSUSA, upon compliance with the documentary
requirements of 19 CFR 10.1.

     The liners in situations B, C, and D, whereby they are cut
to length or separated along serrated lines, and tied off by
wire, are advanced in value and improved in condition. 
Therefore, the liners would be precluded from receiving duty-
free treatment under subheading 9801.00.10, HTSUSA.  However, it
is our position that the liners would be entitled to a duty
allowance under subheading 9802.00.80, HTSUSA.  Attaching the
wire tie to the bottom of the liner in situation B and to the
discharge spout of the bag with liner protruding in situation C
and D constitute acceptable assembly operations under 19 CFR
10.16(a) as they are analogous to force fitting or the use of
fasteners.  In addition, 19 CFR 10.16(b), allows cutting to
length as an operation incidental to the assembly process. 
Therefore, an allowance in duty may be made for the cost or value
of the U.S.-origin liners.

     Attaching the webbing to the woven bags to form the lift
loops also would be considered an acceptable assembly operation
under subheading 9802.00.80, HTSUSA as 19 CFR 10.16(a) allows the
joining of components by means of sewing.  In addition, the
cutting of the webbing to length in Mexico is incidental to
assembly pursuant to 19 CFR 10.16(b).  Therefore, an allowance in
duty may also be made under this tariff provision for the U.S.-
origin webbing.

HOLDING:

     The liners of U.S.-origin, which are exported to Mexico
already separated where they are merely inserted into bag
containers (situation A), are eligible for duty free treatment
under subheading 9801.00.10, HTSUSA, upon compliance with the
documentation requirements of 19 CFR 10.1.

     The U.S.-origin liners used in situations B, C, and D
described above, and the U.S.-origin webbing, are eligible for
duty allowances under subheading 9802.00.80, HTSUSA, provided
that the documentation requirements of 19 CFR 10.24 are
satisfied.

                                   Sincerely,


                                   John Durant, Director