Allowance in duty for ribbon bows assembled in China from United States-made materials under subheading 9802.00.80 or 9802.00.50, HTSUS

HQ 555425 October 17,1989 CLA-2-CO:R:C 555425 RA CATEGORY: Classification TARIFF NOS.: 9802.00.80 and 9802.00.50, HTSUS James A. Geraghty, Esq. Donohue and Donohue 26 Broadway, Suite 1111 New York, New York 10004 RE: Allowance in duty for ribbon bows assembled in China from United States-made materials under subheading 9802.00.80 or 9802.00.50, HTSUS Dear Mr. Geraghty: This is in response to your letters of June 12, and September 6, 1989 (your file 1228-01), requesting a ruling on a partial exemption from duty for so-called "quick bows" made in China from ribbons exported from the U.S. FACTS: The ribbon made of acetate material in this country is processed in the Chinese factory by cutting to length, die trimming, and assembling with drawstrings and clips. The trimming consists of cutting notches by machine in the ribbon at precise intervals. A drawstring runs lengthwise through the center of the notched ribbon and a bow is formed in one motion when the ribbon is pushed downward on the drawstring. ISSUE: Can the processing in the foreign country be considered a valid assembly operation under the provision in subheading 9802.00.80, HTSUS, or an alteration under subheading 9802.00.50, HTSUS? LAW AND ANALYSIS: Subheading 9802.00.80, HTSUS, provides for an allowance in duty for the cost or value of U.S.-made components assembled abroad by the attachment of the various components to form the imported merchandise. The assembly abroad may consist of a joinder of two or more components and include operations incidental thereto. Section 10.16(a), Customs Regulations (19 CFR 10.16(a)), states that the assembly operations may consist of any method used to join or fit together solid components and may be preceded, accompanied, or followed by operations incidental to the assembly. However, section 10.16(c), Customs Regulations (19 CFR 10.16(c)), provides that any significant process, operation, or treatment other than assembly whose primary purpose is the fabrication, completion, or physical improvement of a component shall not be regarded as incidental to the assembly and shall preclude the application of the exemption to such article. A process cannot be considered incidental to assembly where it does more than adjust the article and results in the creation of the component to be assembled, the essence of which is its configuration. Samsonite Corporation v. U.S., Slip. Op. 88-166, 702 F. Supp. 908 CIT (1988). The court in that case concluded that the statute and regulations do not cover a process which was as necessary to the fabrication of the component as it was to subsequent assembly thereof. Applying this principle to the instant case, it is clear that the notching of the exported ribbon to a narrow width where the plastic clip and drawstring are attached constitutes the creation of a component prior to its assembly. The assembly cannot take place until the ribbon material has been cut to width into an hour glass configuration. This operation is more than a trimming of excess material. You compare the cutting operation on the ribbon to that which was allowed in the cases of Rudolph Miles v. U.S. 65 CCPA 32, C.A.D. 1202, 567 F. 2d 979 (1978), and U.S. v. Mast Industries Inc., 99 CCPA 47, 668 F.2d 501 (1981). However, in those cases, the components to be assembled were complete and nothing new had to be created before assembly could be completed. Unlike the tipping operation performed on the gloves in Zwicker Knitting Mills v. U.S., 67 CCPA 87, C.A.D. 1240 (1980), the cutting was not necessary to enable the components to enter the assembly process and they were ready to be joined without further fabrication. In your case, the ribbon must be notched or cut to shape before any assembly with the clip and drawstring can take place. This cutting amounts to a further fabrication, as it results in the creation of a the component, and exceeds an operation incidental to assembly. Therefore, no allowance can be made for the exported ribbon material under subheading 9802.00.80, HTSUS. Subheading 9802.00.50, HTSUS, provides for a partial duty exemption for articles returned after having been exported for alterations. The articles must be completely finished when exported from the U.S. and not undergo any intermediate processing operations to finish them while abroad. This provision allows the duty to be assessed only on the cost of the foreign processing. However, its application is precluded where the processing results in completing the manufacture which began in the U.S. Dolliff & Company, Inc. v. U.S., 66 CCPA 77, C.A.D. 1225, 599 F.2d 1015 (1979). The ribbon material exported from the U.S. is not a finished article and must be cut and assembled before it becomes a complete ribbon bow. The ribbon involved in the October 1, 1985 (553843) ruling cited by you was already notched when exported from the U.S. and only had to be cut to length abroad. Therefore, we held in that case that the foreign cutting operation did not exceed an alteration. We are of the opinion that the cutting of your ribbon material abroad and subsequent assembly are essential to finish the end product and, therefore, the foreign processing exceeds an alteration under the provisions of subheading 9802.00.50, HTSUS. HOLDING: The notching or cutting to shape of exported ribbon material in order to produce ribbon bows constitutes a further fabrication of the ribbon component, thereby precluding an allowance in duty for the ribbon under subheading 9802.00.80, HTSUS. Moreover, as the cutting and assembly of the ribbon material are essential to make it into the imported bows, this foreign processing exceeds an alteration under subheading 9802.00.50, HTSUS. Sincerely, John Durant, Director Commercial Rulings Division