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HQ 560332

September 5, 1997

CLA-2 RR:TC:SM 560332 BLS

CATEGORY: Classification

TARIFF NO.: 9802.00.80, 9802.00.90

Jonathon M. Fee, Esq.

Grunfeld, Desiderio, Lebowitz & Silverman LLP

1201 West Peachtree Street, N.E.

Atlanta, Georgia 30309

RE: Applicability of subheadings 9802.00.80 and 9802.00.90,

HTSUS, to garments

subject to \"filling-in\" operations; tufting; wholly formed

and cut; Special Access Program; findings and

trimmings; Article 509

Dear Mr. Fee:

This is in reference to your letter dated February 20, 1997,

on behalf of the Crowntuft Division of the Kellwood Company

(\"Crowntuft\"), requesting a ruling that certain described

\"filling-in\" operations will not disqualify imported garments

from the duty exemption under subheading 9802.00.80, Harmonized

Tariff Schedule of the United States (HTSUS), and from duty-free

treatment under subheading 9802.00.90, HTSUS. You have also

orally advised this office that Crowntuft intends to enter

garments that may be imported from a participating Caribbean

country under the Special Access Program.

FACTS:

The imported articles will include bathrobes and other

garments exported from Mexico or a Caribbean country. You state

that the operations will commence in the U.S. at Crowntuft\'s

facility with the production of \"tufted\" fabric, by combining

greige cotton woven sheeting fabric with cotton or polyester

tufting yarn. You describe the production of tufted fabric as

follows:

Tufted yarn is inserted into the woven fabric with

needles similar

to sewing needles. Each time a needle passes

through the fabric,

a hook or looper holds the yarn away from the

surface of the fabric

while the needle is withdrawn, creating a protruding

loop. The loop

is cut with a blade to form a tuft. This inserting,

looping and cutting

process forms lines of tufts on the surface of the

fabric. The lines

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may be continuous or broken, and the spacing between

lines may

vary, depending on the desired decorative effect.

After the tufting process is completed, the tufted fabric

will be spread on cutting tables in the U.S. and cut into parts

of garments. These cut garments will be shipped to an assembly

factory in either Mexico or a Caribbean country. In the case of

Mexico, the cut garment parts will consist only of U.S. woven

(sheeting) fabric that is combined with tufting yarn and cut in

the U.S. In the case of the Caribbean country, the cut garment

parts will consist of either U.S. or foreign woven sheeting

fabric that is combined with tufting yarn and cut in the U.S. In

either case, the tufting yarn may be either of U.S. or foreign

origin.

In the country of assembly, the cut garment parts will be

assembled by sewing onto the bathrobes and other garments.

Foreign thread may be used to assemble the garments, and foreign

yarn may be used in the \"filling-in\" process (as described

below). In no case will the cost of the foreign thread used to

assemble the garments and the foreign yarn used in the filling-in

process exceed 25 percent of the cost of all components of the

finished garment. You state that no other operation, other than

assembly, the filling-in process (when necessary), and packing

for shipment to the U.S., will be performed in the country of

assembly.

After assembly, the garments will be packed and returned to

the U.S., where Crowntuft will perform washing, garment-dyeing,

other finishing, and packaging processes prior to shipping the

finished garments to its U.S. customers.

\"Filling-In\" Process

You describe the \"filling-in\" operation as a repair process

in which small amounts of tufting yarn are inserted by needle

into garment parts, and then cut to form tufts, to fill in

tufting defects (\"skips\"), discovered during the garment assembly

process. Skips are caused by knots or breaks in the tufting yarn

or broken tufting needles. Most skips are marked during the

original tufting process, and can be cut around during the

spreading and cutting operation in the U.S. But skips

occasionally remain unnoticed until discovered in the country of

assembly during the assembly process.

The filling-in process is performed with a standard single

needle sewing machine that has been modified by substituting a

relatively heavy tufting needle for a sewing needle and by adding

a mechanized looper and cutting blade under the sewing table to

form the protruding loop and cut it to make the tuft.

Based on its past experience, Crowntuft expects that

filling-in will be necessary on

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fewer than one percent of the garments. For each garment

requiring this repair,

Crowntuft estimates the cost of filling in to range from \$0.025

to \$0.070, the cost of

assembly to be approximately \$2.00 per garment, and the entered

value of each assembled garment to be approximately \$9.00.

Crowntuft estimates the time necessary to perform a single

filling-in operation consisting of a repair to a one-inch skip on

one piece of a garment is 0.14 standard allowed minutes, as

compared to 14 overall standard allowed minutes required to

assemble the garment. Crowntuft will require only one modified

sewing machine at each assembly location to perform the filling

in process. The company plans to utilize used sewing machines

for this purpose, the residual book value of which under

generally accepted accounting principles is \$50.00.

ISSUES:

1\) Whether garments subject to the \"filling-in\" operations

performed in a participating Caribbean country will be eligible

for the Special Access Program upon entry into the U.S.

2\) Whether garments subject to the \"filling-in\" operations

performed in Mexico will be eligible for duty-free treatment

under subheading 9802.00.90, HTSUS, upon entry into the U.S.

Law and Analysis

Special Access Program

To qualify for the Special Access Program, products must be

eligible for entry under subheading 9802.00.80, HTSUS. The

requirements for participating in the Special Access Program

provide that all fabric components, with the exception of

findings, trimmings and certain elastic strips not exceeding 25

percent of the cost of the components of the assembled product,

must be formed in the U.S. Such U.S. formed fabric must also be

cut to pattern or shape in the U.S. Customs Directive Number

3500-12 dated September 2, 1986 provides as follows:

\[f\]indings trimmings, and elastic components of the

finished assembled products need not be of United

States

origin. Products assembled in

participating Caribbean

countries and made of U.S. formed and cut fabric plus

findings, trimmings, and elastic of foreign origin may

enter the United States under the program. However,

the

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total value of such foreign findings,

trimmings, and

elastic components shall not exceed 25 percent of the

cost of the components of the assembled product.

Products whose foreign findings, etc., exceed 25

percent

do not qualify for the Program. Examples of findings

and

trimmings are sewing thread, hooks and eyes, snaps,

buttons, \"bow buds,\" lace trim, zippers, including

zipper

tapes, and labels.

The initial question which must be addressed is whether the

imported articles are eligible for the partial duty exemption

under subheading 9802.00.80, HTSUS. In this regard, you contend

that the \"filling-in\" operation performed in the participating

Caribbean country is either an assembly operation or an operation

incidental to assembly.

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 U.S. components

assembled therein, 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 that the 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.

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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).

With the exception of the \"filling-in\" operations, the

operations to be performed abroad are not described. However, we

will assume for purposes of this ruling that the sewing and all

other such operations performed abroad are acceptable assembly

operations or operations incidental to assembly. The question we

must now consider is whether the \"filling-in\" operations are also

assembly operations or operations incidental to assembly.

Headquarters Ruling Letter (HRL) 556672 (dated February 25,

1993), involved the production of carpeting by needle insertion

of U.S.-origin nylon yarn into backing material. In that case,

we held that these tufting operations were analogous to

sewing-type operations, and, therefore, pursuant to section

10.16(a), Customs Regulations, were acceptable assembly

operations for purposes of subheading 9802.00.80, HTSUS. In

support of this position, we cited E. Dillingham & Sons, Inc., v.

United States, 60 C.C.P.A. 40 (1970), in which the Court of

Customs and Patent Appeals held that a needling operation whereby

massed fibers and fabric were shipped to Canada where the fibers

were oiled, carded, and opened, and then needled into the fabric,

was an acceptable assembly operations under item 807.00, Tariff

Schedules of the United States (TSUS), the precursor tariff

provision to subheading 9802.00.80, HTSUS.

In the instant case, it is our opinion that the tufting

operations performed in the Caribbean countries are analogous to

the sewing operations performed in E. Dillingham and in HRL

556672, as in each case the yarn or fibers are needled into the

fabric to form the tufts. Accordingly, we find that the

\"filling-in\" operations are acceptable assembly operations. As a

result, we need not address the issue as to whether these

operations are incidental to assembly.

For purposes of entry under the Special Access Program, we

note that the tufted fabric is formed in the U.S. by the process

of inserting the tufting yarn into the woven

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sheeting fabric. The fabric is then cut into the garment parts

in the U.S., as described.

As also noted, foreign origin sewing thread may be used abroad to

join the cut components and foreign origin yarn may be used in

the \"filling-in\" process. Sewing thread is specifically

enumerated as a finding under the Special Access Program. The

tufting yarn, however, under the described facts is not

considered to be a finding.

Based on these facts, the imported garments will be eligible

for the Special Access Program provided any findings, trimmings,

and certain elastic strips do not exceed 25 percent of the cost

of the components of the assembled garments.

Subheading 9802.00.90

Annex 300-B of the North American Free Trade Agreement

(\"NAFTA\") is applicable to textile and apparel goods. Appendix

2.4 of Annex 300-B provides that:

\[o\]n January 1, 1994, the U.S. shall eliminate customs duties on

textile and apparel

goods that are assembled in Mexico from fabrics wholly formed and

cut in the

United States and exported from and reimported into the United

States under:

\(a\) U.S. tariff item 9802.00.80.10; or

\(b\) Chapter 61, 62, or 63 if, after such

assembly, those goods

that would have qualified for treatment

under 9802.00.80.10

have been subject to bleaching, garment

dyeing, stone-washing,

acid-washing or perma-pressing.

Thereafter, the U.S. shall not adopt or maintain any customs

duty on textile or apparel goods that satisfy the requirements of

subparagraph (a) or (b) or the requirements of any successor

provision to U.S. tariff item 9802.00.80.10. (a) U.S. tariff

item 9802.00.80.10; or (b) Chapter 61, 62, or 63 if, after such

assembly, those goods that would have qualified for treatment

under 9802.00.80.10 have been subject to bleaching, garment

dyeing, stone-washing, acid-washing or perma-pressing.

Consequently, subheading 9802.00.90, HTSUS, was created to

provide for the duty-free entry of:

Textile and apparel goods, assembled in Mexico in

which all fabric

components were wholly formed and cut in the United

States,

provided that such fabric components, in whole or in

part,

\(a\) were exported in condition ready for assembly

without further

fabrication, (b) have not lost their physical identity

in such articles

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by change in form, shape or otherwise, and have not

been advanced

in value or improved in condition abroad except by

being assembled

and except by operations incidental to the assembly

process; provided

that goods classifiable in chapters 61, 62, or 63 may

have been

subject to bleaching, garment dyeing, stone-washing,

acid-washing or perma-pressing after

assembly as provided for herein.

As discussed under our analysis pertaining to the Special

Access Program, operations, we also find for purposes of

eligibility under subheading 9802.00.90 that the exported fabric

components are \"wholly formed and cut in the United States.\"

Further, as discussed in our analysis under subheading

9802.00.80, while Crowntuft has not described in detail the

operations performed abroad except for the process of \"filling-in\", we
will also assume for purposes of eligibility of the

articles for duty-free treatment under subheading 9802.00.90

that the sewing and other operations performed in Mexico will

otherwise qualify as acceptable assembly operations or operations

incidental to assembly. In this regard, our analysis of the

\"filling-in\"

operation for purposes of subheading 9802.00.80 is also

applicable for purposes of subheading 9802.00.90, i.e., such

process is an acceptable assembly operation.

Therefore, based on the information submitted, the imported

garments will be entitled to duty-free treatment under subheading

9802.00.90, HTSUS, upon entry into the U.S.

HOLDING:

A \"filling-in\" process involving the repair of garments

abroad through the use of tufted yarn is an acceptable assembly

operation. Accordingly, based upon the information provided:

1\) The completed garments exported from a participating

Caribbean country will be entitled to the partial duty exemption

under subheading 9802.00.80, HTSUS, and for the Special Access

Program when returned to the U.S. as long as, with the exception

of findings, trimmings, and elastic strips not exceeding 25

percent of the total cost of the components, all fabric

components are formed and cut to shape or pattern in the U.S.;

2\) The completed garments exported from Mexico will be

entitled to duty-free treatment under subheading 9802.00.90,

HTSUS, provided that all fabric components are formed and cut to

shape or pattern in the U.S.

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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

Tariff

Classification Appeals Division