CLA-2 CO:R:C 555535 RA
Ms. Ann M. Williams
A.N. Deringer, Inc.
30 West Service Road
Champlain, New York 12919-9703
RE: Applicability of alteration provision in subheading
9802.00.50, HTSUS, to fabrics exported to Canada for
heat transfer designs and returned
Dear Ms. Williams:
This is in response to your letter of November 30, 1989,
on behalf of Master Fabrics Ltd., in Quebec, requesting a
ruling on the applicability of subheading 9802.00.50,
Harmonized Tariff Schedule of the United States (HTSUS) to
fabrics sent to Canada where designs are applied by a heat
transfer process before being returned to the United States.
FACTS:
Two different woven fabrics in the greige of U.S.
manufacture are finished in Canada by printing with a heat
transfer. The first item consists of a cotton, polyester, and
rayon plain fabric which is printed by means of a German-made
paper by Transfertex. The second item is a fabric composed of
a nylon face and a back of polyester and cotton, which is
printed with a paper transfer of German or U.S. origin. When
completed, the first item has a multi-colored design on one
side and the second item has a pink napped surface on one
side.
ISSUE:
Are the returned printed fabrics eligible for tariff
treatment under the alterations provision in subheading
9802.00.50, HTSUS?
LAW AND ANALYSIS:
Subheading 9802.00.50, HTSUS, provides a partial duty
exemption for articles returned to the U.S. after having been
exported to be advanced in value or improved in condition by
- 2 -
means of an alteration and duty is assessed only on the cost
or value of the alteration abroad. The application of this
provision is precluded where the operations abroad result in
new or different articles or are for the purpose of finishing
them to certain specifications. Thus, intermediate processing
operations which are performed in the preparation of finished
articles do not come within the scope of the term
"alterations."
In Dolliff & Company, Inc. v. U.S., 66 CCPA 77, C.A.D.
1225 (1979), the court found that the processing steps
performed on exported greige goods were undertaken to produce
the finished fabric and could not be considered as
alterations. It was concluded that alterations are made to
completed articles and do not include processing operations
done as a matter of course in the preparation or the
manufacture of finished articles. Congress did not intend to
permit uncompleted articles to be exported and made into
finished products in the foreign country and when returned to
be subject to duties only on the cost of the so-called
alterations. U.S. v. J.D. Richardson Co., 36 CCPA 15, C.A.D.
390 (1948).
In Headquarters Ruling Letter of November 2, 1983
(071501), we held that rolls of fabric in the greige state
exported to Italy for bleaching, dyeing, and printing and
returned were dutiable on total value since the process of
producing the finished article went beyond an alteration.
Moreover, in Headquarters Ruling Letter dated February 6, 1989
(554985), we decided that socks sent to Taiwan for silk
screening with a novelty design could not be treated as merely
altered abroad because, when returned, they were decorated
socks in a finished condition.
HOLDING:
On the basis of the information and samples submitted, we
must conclude that the fabrics involved were incomplete
articles when exported to Canada and finished products when
returned which renders them ineligible for the partial duty
exemption available under subheading 9802.00.50, HTSUS.
Sincerely,
John Durant, Director
Commercial Rulings Division
6cc: A.D., NY Seaport
1cc: D.D., Champlain, NY
ARNOLD:lw 2/7/90