CLA-2 CO:R:C:V 555760 KCC
Mr. Bruce Schiller
Joseph & Schiller Inc.
8725 N.W. 18th Terrace
Suite 301
Miami, Florida 33172
RE: Tariff treatment and country of origin marking requirements
applicable to embroidered t-shirts.Alteration; 078245;
555021; 555249; 554371; country of origin; marking; 19 CFR
12.130(c)
Dear Mr. Schiller:
This is in response to your letter dated September 26, 1990,
on behalf of Chichi Castenango, requesting a ruling concerning
the applicability of subheading 9802.00.50, Harmonized Tariff
Schedule of the United States (HTSUS), to embroidered t-shirts.
Samples of the t-shirt before and after the embroidery operation
were submitted for examination.
FACTS:
Chichi Castenango will purchase U.S. manufactured blank 100%
cotton t-shirts and ship them to Guatemala. In Guatemala, a
design will be embroidered on the front of the t-shirt, after
which the t-shirt will be returned to the U.S.
Chichi Castenango proposes to label the embroidered t-shirt
"Made in U.S.A., Embroidered in Guatemala." Chichi Castenango's
estimated costs of the operation are as follows:
1. the basic cost of the U.S. manufactured t-shirt is
$2.37;
2. the cost of the operation in Guatemala, including
profit and overhead, is $2.00; and
3. the cost of shipping the blank t-shirt to Guatemala is
$0.30 per t-shirt.
ISSUE:
I. Whether the embroidered t-shirt will be eligible for
the partial duty exemption available under subheading 9802.00.50,
HTSUS, when imported into the U.S.
II. Whether country of origin marking requirements of
19 U.S.C. 1304 are applicable to the imported embroidered t-
shirts.
LAW AND ANALYSIS:
I. Applicability of subheading 9802.00.50, HTSUS
Subheading 9802.00.50, HTSUS, provides for the assessment of
duty on the value of repairs or alterations performed on articles
returned to the U.S. after having been exported for that purpose.
However, the application of this tariff provision is precluded in
circumstances where the operations performed abroad destroy the
identity of the articles or create new or commercially different
articles. See, A.F. Burstrom v. United States, 44 CCPA 27,
C.A.D. 631 (1956), aff'd, C.D. 1752, 36 Cust.Ct. 46 (1956);
Guardian Industries Corporation v. United States, 3 CIT 9 (1982),
Slip Op. 82-4 (Jan. 5, 1982). Subheading 9802.00.50, HTSUS,
treatment is also precluded where the exported articles are
incomplete for their intended use and the foreign processing
operation is a necessary step in the preparation or 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 (1979).
We have previously held in Headquarters Ruling Letter (HRL)
078245 dated June 17, 1986, that embroidery of U.S. manufactured
cotton sheets in China does not constitute a repair or alteration
under item 806.20, Tariff Schedules of the United States (TSUS)
(the precursor provision to subheading 9802.00.50, HTSUS). We
have also found that U.S. articles subjected to silk screening,
hand-painting, and painting operations abroad and then returned
to the U.S., were not eligible for subheading 9802.00.50, HTSUS,
treatment because these operations are more than an alteration.
We stated that the silk screening, hand-painting and painting
operations created a different article of commerce and
constituted a finishing step in the manufacture of the U.S.
articles. See, HRL 555021 dated July 1, 1988 (silk screening of
U.S. socks is not considered an alteration pursuant to this
tariff provision); HRL 555249 dated June 16, 1989 (silk screening
and chenilling designs on sweatshirts abroad exceeds an
alteration); and HRL 554371 dated December 10, 1986 (hand-
painting a design onto sweatshirts abroad exceeds an alteration).
With regard to the facts you have provided and based on our
previous rulings, we are of the opinion that the foreign
embroidery operation constitutes an operation that exceeds an
alteration. Although garments may be worn whether a design is
embroidered or not, embroidery like printing, silk screening and
hand-painting, is considered neither a repair nor an alteration
under the provisions of subheading 9802.00.50, HTSUS. T-shirts
which have the design, as a result of the embroidery operation,
are different from the blank t-shirts without such a design, and,
as such, the foreign embroidery operation has created a different
article with unique, specialized appeal. Furthermore, the
embroidery operation constitutes a finishing step in the
manufacture of embroidered t-shirts.
II. Applicability of country of origin marking requirements
Regarding country of origin marking requirements, section
304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304),
provides that, unless excepted, every article of foreign origin
imported into the U.S. shall be marked in a conspicuous place as
legibly, indelibly, and permanently as the nature of the article
(or its container) will permit, in such manner as to indicate to
the ultimate purchaser in the U.S. the English name of the
country of origin of the article.
Section 12.130, Customs Regulations (19 CFR 12.130),
provides country of origin requirements for textiles and textile
products. According to 19 CFR 12.130(c):
Chapter 98, Subchapter II, Note 2, HTSUS, provides that
any product of the U.S. which is returned after having
been advanced in value or improved in condition abroad,
or assembled abroad, shall be a foreign article for
purposes of the Tariff Act of 1930, as amended ...
merchandise which falls within the purview of Note 2
may not, upon its return to the U.S. be considered a
product of the U.S.
We have previously held in HRL 078245 that U.S. manufactured
cotton sheets sent to China for an embroidery operation are not
considered products of the U.S. pursuant to 19 CFR 12.130(c), as
they were advanced in value and improved in condition by the
foreign operation. The sheets are considered to be a product of
China and, therefore, are to be marked "Made in ..." or "Product
of China, U.S.A. fabric."
In the present case, the U.S. manufactured t-shirt will be
advanced in value and improved in condition by the foreign
embroidery operation. The value of the t-shirt will nearly
double with the addition of the embroidered design. Therefore,
the embroidered t-shirt is not considered a product of the U.S.
We have also considered your request to mark the t-shirt "Made in
the U.S.A., Embroidered in Guatemala". It is our view that
marking the t-shirt in such a manner is unacceptable because it
does not clearly indicate that the country of origin is
Guatemala. A label such as "Made in Guatemala, U.S.A. fabric" or
"Product of Guatemala, U.S.A. fabric" would be acceptable for
purposes of 19 U.S.C. 1304. The original "Tough Tee Belton" t-
shirt label stating that the t-shirt is "Made in the U.S.A." must
be removed, as it is an inappropriate label and would be
misleading when combined with the above described marking
requirements.
HOLDING:
On the basis of the information and samples submitted, it is
our opinion that the foreign embroidery operation may not be
considered an alteration, and, therefore, tariff treatment of the
returned goods under subheading 9802.00.50, HTSUS, is precluded.
Accordingly, the embroidered t-shirts will be dutiable on their
full value under the appropriate tariff provision.
The embroidery operation performed abroad to the U.S.
manufactured t-shirt advances it in value and improves it in
condition. Therefore, upon reimportation, the embroidered t-
shirt is considered a product of Guatemala pursuant to 19 CFR
12.130(c), and must be marked accordingly.
Sincerely,
John Durant, Director
Commercial Rulings Division