CLA-2 CO:R:C:V 555478 GRV
Area Director of Customs
Newark, New Jersey 07114
RE: Internal Advice Request No. 40/89; applicability of HTSUS
subheading 9802.00.50 to greige linen woven fabric from
Czechoslovakia imported into the U.S., exported to Belgium
for dyeing, and then returned to the U.S.;Textile product;
alterations;incomplete goods;intermediate processing
Dear Sir:
This is in response to your memorandum of July 11, 1989,
forwarding the above-referenced internal advice request from
Amerpol International, Inc., on behalf of Hamilton Adams Imports,
concerning the applicability of HTSUS subheading 9802.00.50,
Harmonized Tariff Schedule of the United States (HTSUS), to
greige linen woven fabric from Czechoslovakia returned to the
U.S. from Belgium after dyeing operations. There appears to be
no dispute that the applicable HTSUS column 2 rate of duty
applies to the returned fabric.
A memorandum dated August 31, 1989, from the Chief, National
Import Specialist, Branch 3, New York Seaport, was also
considered in connection with this ruling.
FACTS:
No sample of the merchandise was submitted for examination.
However, based on the information contained in an Entry Summary
(Customs Form 7501) submitted by the broker in this matter, it
appears that linen woven fabric in a greige state is imported
from Czechoslovakia. The fabric is then exported to Belgium for
dyeing and returned to the U.S. The broker claims that this
dyeing operation constitutes an alteration, as it advances the
value of the merchandise, thus, rendering the returned merchan-
dise eligible for the duty exemption under HTSUS subheading
9802.00.50. In your opinion, the duty exemption does not apply
to this transaction because the dyeing of the subject fabric
constitutes an intermediate operation in order to achieve a
finished fabric. You state that alterations are made only to
completed articles and do not include intermediate operations
performed in the manufacture of finished articles. In support of
your position, you cite Dolliff & Company, Inc. v. United States,
C.D. 4755, 81 Cust.Ct. 1, 455 F.Supp. 618 (1978), aff'd, C.A.D.
1225, 66 CCPA 77, 599 F.2d 1015 (1979). The National Import
Specialist supports your determination in this matter and
references numerous Headquarters Ruling Letters (HRLs) which have
held that the duty exemption under this tariff provision is
inapplicable to incomplete goods exported for finishing
operations. The HRLs cited include 016733 (January 14, 1972),
049002 (February 23, 1977), 058055 (April 4, 1978), 067745
(April 21, 1982), 071501 (November 2, 1983), and 077529 (February
12, 1986).
Upon return of the linen fabric, your office assessed the
applicable column 2 rate of duty against the full value of the
merchandise, since, for country of origin purposes, it was not
substantially transformed by the dyeing operation in Belgium, but
remained a product of Czechoslovakia.
ISSUE:
Whether the greige fabric is a completed product when
exported from the U.S., and, therefore, eligible for the partial
duty exemption under HTSUS subheading 9802.00.50 when returned to
the U.S.
LAW AND ANALYSIS:
Articles returned to the U.S. after having been exported to
be advanced in value or improved in condition by repairs or
alterations may qualify for the partial duty exemption under
HTSUS subheading 9802.00.50, provided the foreign operation does
not destroy the identity of the exported articles or create new
or different articles. Press Wireless, Inc. v. United States,
C.D. 438, 6 Cust.Ct. 102 (1941). However, entitlement to this
tariff treatment is precluded where the exported articles are
incomplete for their intended use prior to the foreign process-
ing, Guardian Industries Corp. v. United States, 3 CIT 9 (1982),
or where the foreign operation constitutes an intermediate
processing operation, which is performed as a matter of course in
the preparation or the manufacture of finished articles. Dolliff
& Company, Inc., v. United States, 81 Cust.Ct. 1, C.D. 4755, 455
F.Supp. 618 (1978), aff'd, 66 CCPA 77, C.A.D. 1225, 599 F.2d
1015, 1019 (1979). Articles entitled to this partial duty
exemption are dutiable only upon the cost or value of the foreign
repairs or alterations when returned to the U.S., provided the
documentary requirements of section 10.8, Customs Regulations (19
CFR 10.8), are satisfied.
We have consistently held that the initial dyeing of greige
goods constitutes a finishing operation--a step in the manufac-
ture of finished textile goods--which exceeds the meaning of the
term "alteration" under this tariff provision. (In addition to
the HRLs already cited as authority for this position, see also
HRLs 058175 (April 21, 1978) and 554035/816196 (April 14, 1986),
and T.D. 56462(2), abstracted at 100 Treas.Dec. 356, 357 (1965)).
Accordingly, we find in this case that the greige linen woven
fabric from Czechoslovakia is an incomplete article when exported
from the U.S. to Belgium, and, therefore, is ineligible for the
partial duty exemption under HTSUS subheading 9802.00.50.
HOLDING:
On the basis of the information presented and our consistent
position that the initial dyeing of greige fabric constitutes a
step in the manufacture of finished textile goods, it is our
opinion that the greige linen woven fabric exported to Belgium
for dyeing operations is not a finished product. Therefore, the
greige fabric is ineligible for the duty exemption under HTSUS
subheading 9802.00.50.
Sincerely,
John Durant, Director
Commercial Rulings Division
cc: Asst. Area Dir., NIS
Dir, CIE