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HQ 557194 September 9, 1993 CLA-2 CO:R:C:S 557194 BLS CATEGORY: Classification TARIFF NO.: 9802.00.80 District Director U.S. Customs Service 10 Causeway Street Boston, Mass. 02222-1059 RE: Application for Further Review of Protest No. 0401-92-100268; subheading 9802.00.80, HTSUS; substantial transformation; fox tails; fox trim collar Dear Sir: This is in reference to your memorandum dated February 26, 1993, forwarding an Application for Further Review of Protest No. 0401-92-100268, filed on behalf of Forecaster of Boston ("Forecaster"). The importer is seeking a duty allowance under subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), for the value of a fox trim collar, a component of the imported women's anorak jackets. Samples of the collar have been submitted. FACTS: Forecaster places orders for fox trim collars with O. Hantman & Sons, New York, to be exported to the Dominican Republic for assembly into anorak jackets. In turn, Hantman purchases foreign- sourced fox tails from domestic sources, and subjects the fox tails to various processes in the U.S. resulting in the creation of the fox trim collars as follows: The fox tails are dyed the appropriate color, and then soaked in a solution overnight to make the leather soft and pliable. The tails are then stretched to the desired length, split and sewn. Because of the natural variations in the length of the fox tails, situations commonly arise where the fox tails supplied are incapable of being stretched to the required lengths. In these circumstances, two or more fox tails will be spliced together to obtain the specified length necessary for the garment. A textile fabric base is then attached to the length of leather side of the split fox tail by means of sewing. The fox trim collars are then ironed and brushed before being sent to the Dominican Republic for assembly into the anorak jackets. The operations performed abroad - 2 - are as follows: 1. Welts Attach filler to welts, sew out, trim, turn and topstitch. 2. Fronts Sew front panels together, cut pockets and set with pocket flaps. Set breast zipper pockets. Topstitch fronts. Notch out armhole area to eliminate puckering for sleeve set and topstitch. 3. Cuff Attach filler to cuff, sew out, trim, turn and topstitch. 4. Hood Seam hood pieces together and topstitch. Attach hood strip and sew fur piece to half of the strip, then close with drawstring inserted by topstitch and edgestitch all around hood. Mark and buttonhole hood. 5. Label Bag Sew out, trim turn and attach label. Will be attached to neck piece on facing set. 6. Backs Join back seams, topstitch, sew in vent and tack. Attach back yoke. Join fronts to back and topstitch. Tack shoulder pads covered with selicia. 7. Sleeves Set sleeves and topstitch, attach cuffs. 8. Shell Close side seam and topstitch. Set outside collar. attach zipper halves to each front. Attach filler to facings and collar and set to front. Set lining. Finish sleeve and bottom of coat, turn and topstitch collar, fronts and bottom. - 3 - 9. Finish Brake press. Mark for buttons at neck and snaps. Neck wrap, tag and bag for shipment. ISSUE: Whether the foreign-origin foxtails are substantially transformed into U.S. fabricated components before they are exported to the Dominican Republic for assembly into anorak jackets. LAW AND ANALYSIS: 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 10.12(e), Customs Regulations (19 CFR 10.12(e)), provides generally that an article wholly or partially of foreign components or materials, may be a "product of the United States" if such components or materials are "substantially transformed" by a process of manufacture into a new and different article, or are merged into a new or different article. Section 10.14(b) provides that a "substantial transformation" occurs when, as a result of manufacturing processes, a new and different article emerges, having a distinctive name, character, or use, which is different than that originally possessed by the article or material before being subject to the menufacturing process. If the manufacturing or combining process is merely a minor one which leaves the identity of the article intact, a substantial transformation has not occurred. See, Belcrest Linens v. United States, 573 F. Supp. 1149 (CIT 1983), 741 F.2d 1368 (1984). One of the factors used by the courts to determine whether there has been a change in character - 4 - and use, is whether the processing transforms the article from a producer's good to a consumer's good. See Midwood Industries v. United States, 313 F. Supp. 951 (1970). In the instant case, the fox tail is a producer good which is subjected to a manufacturing process in the U.S., which includes dyeing, soaking, stretching, perhaps splicing, and attaching to a fabric base. The finished product, the fox trim collar, has a character and commercial identity distinct from the raw material from which it was produced, and has been transformed by the U.S. processing to a consumer good, ready to be assembled with other components to create a jacket or coat, as the case may be. As a result, the fox tail has undergone a substantial transformation, and therefore is considered a fabricated product of the U.S., for purposes of subheading 9802.00.80, HTSUS. We also find that the processing in the Dominican Republic constitutes acceptable assembly operations or operations incidental to the assembly process pursuant to this provision. HOLDING: Foreign sourced fox tails are substantially transformed into fox trim collars by operations which include dyeing, soaking, stretching, splicing and attaching to a fabric base. As a result, the exported fox trim collars are considered fabricated products of the U.S. Since the processing abroad constitutes acceptable assembly operations, or operations incidental to assembly, the imported anorak jackets are entitled to entry under subheading 9802.00.80, HTSUS, with allowances in duty for the cost or value of the fox trim collars. Accordingly, the protest should be granted. A copy of this decision should be attached to the Form 19, Notice of Action, to be sent to the protestant. Sincerely, John Durant, Director Commercial Rulings Division |