HQ 559341

November 21, 1995

CLA-2 RR:TC:SM 559341 BLS

CATEGORY: Classification

TARIFF NO.: 9802.00.80

Port Director

1901 Crossbeam Drive

Charlotte, NC 28217

RE: Applicability of subheading 9802.00.80, HTSUS, to mens\' knit shirts
assembled in Guatamala; 19 CFR 10.17

Dear Sir:

This is in reference to a letter dated July 20, 1995, from Sunrise
Apparel Inc. (\"Sunrise\"), requesting a ruling that certain mens\'
cotton knit shirts imported from Guatamala will be eligible for the duty
allowance under subheading 9802.00.80, Harmonized Tariff Schedule of the
United States (HTSUS), upon importation into the U.S. We have been
informed by Sunrise that importations have commenced through your port.

FACTS:

The importer is having assembled mens\' knit shirts in Guatamala from
materials stated to be of U.S.-origin. The production of the shirts is
as follows:

1\) Fabric is purchased and sent to the facility in Concord, North
Carolina.

2\) The fabric is cut into the garment parts, including fronts, backs,
sleeves and front plackets. On the first two shipments, an interlining
is fused to the plackets prior to shipment to Guatamala

3\) After cutting, the components are shipped with the following items,
all of

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U.S.- origin:

A. Pre-knit collars

B. Pre-knit sleeve welts

C. Neck labels

D. Country of origin, fabric content, size and care labels which are
printed in the U.S.

E. Buttons

F. Thread

G. Twill shoulder tape

H. Packaging material - pins, polybags and tissues

I. One dozen prepack boxes

J. Recut material for defective cut parts

In Guatamala, the following sewing operations are performed:

1\) The cut pieces are marked.

2\) Shirts are hemmed and the placket is set on the garment.

3\) Fronts and backs are joined at the shoulder after which time the
sleeves are set on the shirt.

4\) The shirts are side seamed.

5\) Collar and collar tape are then attached to the shirt.

6\) Buttons are sewn on the garment and buttonholes are created,
followed by final inspection and packing.

Sunrise also advises that the Guatamalan assembler \"notches\" the
knit-to-shape collar to correctly set this component with the shoulder
seams. This operation involves trimming a portion of the base of the
collar, in order to achieve two notches on the component. From the
illustration submitted, the collar retains its basic shape, with the
exception of the two small notches placed equidistant from the center.

The assembler also cuts to length sleeve \"welt\" strips (ribbed pieces
of knit goods used to form the end of a sleeve to prevent unrolling or
unraveling) to form a left and right sleeve welt. The welt strip is
usually about 27\" in length.

Sunrise further states that it has on hand U.S. fabric which it
purchased for \$2.50 per linear yard, but which it now believes has a
market value of about \$.35/linear yard. This fabric is used in
producing the garment components.

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For accounting purposes, Sunrise would like to reflect the \$.35/linear
yard value on the commercial invoice and entry documents.

ISSUES:

1\) Whether the garments will be eligible for the duty allowance under
subheading 9802.00.80, HTSUS, upon return to the U.S.

2\) Whether a value different from the purchase price of the U.S. fabric
may be used in determining the value of the U.S. components for purposes
of computing the duty allowance under subheading 9802.00.80, HTSUS.

LAW AND ANALYSIS:

Subheading 9802.00.80, Harmonized Tariff Schedule of the United States
(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, lubrication, 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
value of the imported assembled article, less the cost or value of such
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)), provides 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 subject to operations incidental to the
assembly

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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 subheading 9802.00.80,
HTSUS, to the component. See 19 CFR 10.16(c).

In the instant case, we find that under the facts presented, all three
requirements of subheading 9802.00.80, HTSUS, will be satisfied. The
foreign operations that entail sewing together pre-cut pattern pieces,
which includes sewing on buttons, are acceptable assembly operations
under this provision. Hemming the shirts will also be considered an
acceptable assembly operation as the thread serves as a joining agent by
joining the fabric to itself. See L\'Eggs Products v. United States, 704
F. Supp. 1127 (CIT 1989). Notching the collar, trimming the fabric
strips to length, and buttonholing are considered operations incidental
to the assembly process. See 19 CFR 10.16(b)(4) and 10.16(b)(6) and
United States v. Oxford Industries, Inc., 517 F. Supp. 694 (1981)).

Accordingly, we find that the mens\' knit shirts will be entitled to the
duty allowance under subheading 9802.00.80, HTSUS, upon return to the
U.S.

Section 10.17, Customs Regulations (19 CFR 10.17), provides in part
that:

The value of fabricated components to be subtracted

from the full value of the assembled article, if acquired

by purchase, is the cost of the components when last

purchased, f.o.b. port of exportation or point of border

crossing as set out in the invoice and entry papers\...

However, if the appraising officer concludes that the cost

or value of the fabricated components so ascertained does

not represent a reasonable cost or value, then the value

of the components shall be determined in accordance with

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section 402 or 402a, Tariff Act of 1930, as amended (19 U.S.C.

1401a, 1402).

It is Customs opinion that the \"cost of the components when last
purchased\", refers to the price in effect at the date of exportation.
In this regard, since the exported U.S. fabric was acquired by purchase
at a price of \$2.50 per linear yard,

this value is the cost of this component \"when last purchased.\" As
noted, however, if the appraising officer concludes that the cost or
value of the components does not represent a reasonable cost or value,
then section 402 or 402a, Tariff Act of 1930, as amended, shall be used
to determine the value of the components.

HOLDING:

Based on the information submitted, the mens\' knit shirts imported from
Guatamala will be entitled to a duty allowance under subheading
9802.00.80, HTSUS, for the cost or value of the U.S. components,
provided the documentary requirements of 19 CFR 10.24 are satisfied.

Pursuant to 19 CFR 10.17, the value of the exported U.S. fabric is
\$2.50 per linear yard, the cost of the component when last purchased.
Therefore, this value shall be used in calculating the duty allowance
under subheading 9802.00.80, HTSUS, unless the appraising officer
concludes that the cost or value of the components does not represent a
reasonable cost or value, in which case section 402 or 402a, Tariff Act
of 1930, as amended, shall be used to determine the value of the
components.

Please provide a copy of this decision to Sunrise Apparel Inc., at 484
Caburrus Avenue West, Concord, North Carolina 28027.

Sincerely,

John Durant, Director

Tariff Classification Appeals

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