HQ 556774: Applicability of duty exemption under subheading 9802.00.80, HTSUS, to strips of leather exported to Mexico and braided into belts Dear Mr. Millelstaedt:

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 556774

                        October 13, 1992

CLA-2 CO:R:C:S 556774 RAH

CATEGORY:  Classification

TARIFF NO.: 9802.00.80

Mr. Ted Mittelstaedt
Mittelstaedt, Galaviz & Mylin
Customs House Brokers
450 Sansome St., Suite 200
San Francisco, California  94111-3310

RE:  Applicability of duty exemption under subheading 9802.00.80,
     HTSUS, to strips of leather exported to Mexico and braided
     into belts
     
Dear Mr. Millelstaedt:

     This is in response to your submission of June 11, 1992, on
behalf of Circa Corporation, requesting reconsideration of
Headquarters Ruling Letter (HRL) 556627 dated June 3, 1992.  

FACTS:

     Based on the facts in HRL 556627, supra, your client
manufactures belts in the United States and also purchases belts
from a Mexican manufacturer.  In the latter instance, the leather
used in the manufacturing process is of U.S. origin and is sent
to Mexico for cutting, braiding and finishing.  You state that in
the past the belts qualified for "GSP" treatment because the
"...manufacturer in Mexico represented 45 to 55% of the actual
FOB valuation...."

     Your client wants to change their process so that the "raw"
manufacturing (cutting, trimming, etc.) would be accomplished in
the United States.  The strips of leather would then be exported
to Mexico and braided into belts.   You indicate that the cost of
Mexican labor would be 18 to 23% of the total "FOB" value of the
final product.  You inquire whether the belts would be free of
duty under chapter 98, Harmonized Tariff Schedule of the United
States (HTSUS), as U.S. components. 

     Your June 11, 1992, letter forwarded more detailed
information concerning the processing to be performed in the U.S.
and Mexico.  In the United States, leather hides are cut into
leather blocks.  The leather blocks are cut into strips and
packed in bags, boxed and sent to Mexico.  Tabs are cut out of
extra leather pieces and packed.  Long strands of leather are cut
out of extra leather pieces to make loops and packed.  Metal
buckles and thread are counted, packed and all the components are
sent to Mexico.  

     In Mexico, the process is described as follows:  

     1.  Take two strands, match
     2.  Hand braid
     3.  Stitch loop, cut loop to size, staple
     4.  assemble: braid with loop, buckle and tab--then sew
         together
     5.  Trim excess thread
     6.  Paint to match colors between the loop, tab, braid and
         do final quality control check

     You ask whether, in view of this additional information, the
opinion expressed in HRL 556627 regarding the eligibility of the
belt for subheading 9802.00.80, HTSUS, would remain the same.

     In HRL 556627 dated June 3, 1992, we held that braiding
U.S.-origin leather into belts in Mexico does not constitute an
acceptable assembly operation under subheading 9802.00.80, HTSUS. 
Moreover, we held that although the belts would be considered
"products of" Mexico for purposes of the Generalized System of
Preference (GSP) they would not be entitled to duty-free
treatment under that program because the 35 percent value content
requirement would not be satisfied.  Accordingly, since the GSP
issue was already discussed in HRL 556627 and no additional cost
information has been submitted, we will not address it in this
ruling. 

ISSUE:

     Whether U.S.-origin leather, thread, and buckles exported to
Mexico to be made into belts qualifies for a duty allowance under
subheading 9802.00.80, HTSUS, when imported into the United
States.

LAW AND ANALYSIS:
  
     The provisions governing the dutiable status of U.S.        
products which are exported to a foreign country for processing
and then returned to the United States are set forth in Chapter
98, HTSUS.  U.S. Note 2(a), subchapter II, Chapter 98, HTSUS,
provides that, except as otherwise prescribed in this subchapter,
products of the U.S. which are returned after having been
advanced in value or improved in condition abroad by any process
of manufacture or other means, shall be dutiable on its full
value.   

     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 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).

     Under the facts presented, we affirm our decision in HRL
556627, supra, that braiding the leather strips together exceeds
an assembly operation.  In HRL 554531 dated May 29, 1987, we held
that passing yarn through braiding machines to produce braided
rope and cordage is analogous to weaving fabrics from spun yarn,
and is considered a manufacturing rather than an assembly
process.  See also, HRL 553953 dated December 23, 1985 (braiding
3-ply nylon rope yarn into 8 strand plaited rope does not
constitute an acceptable assembly operation). 

     You should be aware, however, that we have held that sewing
pre-braided materials together and feeding it through a buckle
and sewing it together constitutes an assembly.  HRL 555650,
citing L'Eggs Products v. United  States, 704 F.Supp. 1127 (CIT
1989).  The instant case is different in that the unbraided
leather strips are not exported to Mexico in (pre-braided)
condition ready for assembly. 

     In L'Eggs, the court held that sewing together U.S.-origin,
pre-cut fabric pieces, zippers, buttons, thread, hem ribbon and
interfacing in Costa Rica to women's pleated skirts and sewing
fabric onto itself constitutes acceptable assembly operations.  
We have also held that sewing closing out/finishing stitches onto
the edges of single ply fabric is an operation incidental to the
assembly of quilted bedspreads and will not preclude the U.S.
fabric pieces from receiving the duty exemption available under
subheading 9802.00.80, HTSUS.  HRL 555734, dated March 20, 1991. 
 

Moreover, it is well established that cutting to length (but not
to shape) is incidental to assembly.  See, HRL 555201 date April
11, 1990. 
 
     Therefore in view of the foregoing, we find that cutting the
leather loop to size (length) and sewing the loop, buckle and tab
to the braided strips constitute acceptable assembly operations
or operations incidental thereto.  Furthermore, stitching the
edges of the loop is an operation incidental to the assembly
operation.  Accordingly, a duty allowance may be made for the
cost of the U.S. leather loops, tabs, buckles and thread. 
However, no duty allowance may be made for the U.S. leather
strips which are braided together in Mexico, as that operation
exceeds an assembly.

HOLDING:

     Braiding U.S.-origin leather strips into belts in Mexico
does not constitute an acceptable assembly operation under
subheading 9802.00.80, HTSUS.  However, stitching the edges of
the leather loop, cutting the loop to size (length) and sewing
the loop, buckle and tab to the braided strips constitute
acceptable assembly operations or operations incidental thereto. 
Accordingly, the cost of the U.S.-origin loops, tabs, buckle and
thread will be entitled to a duty allowance under subheading
9802.00.80, HTSUS, when returned as part of the finished belts,
upon compliance with the documentation requirements of 19 CFR
10.24. 

                              Sincerely,



                              John Durant, Director
                              Commercial Operations Division