CLA-2 CO:R:C:S 555766 KCC
Ms. Ann Williams
A.N. Deringer, Inc.
30 West Service Road
Champlain, New York 12919-9703
RE: Fabric from Canada.Coating; cutting; advanced in value;
improved in condition; alteration; 554883; assembly; 555499;
554357; 554416; 554577; 067533
Dear Ms. Williams:
This is in response to your letter dated October 18, 1990,
on behalf of Victor Woolen Mills, requesting a ruling concerning
the tariff classification and applicability of subheading
9801.00.10, subheading 9802.00.50 or subheading 9802.00.80,
Harmonized Tariff Schedule of the United States (HTSUS), to
fabric imported from Canada. Samples of the fabric were
submitted for examination. Your request for the tariff
classification of the fabric will be answered by the Textile
Classification Branch under separate cover.
FACTS:
Victor Woolen intends to ship fabric to Canada which is
woven in the U.S. from filament yarn and spun yarn purchased in
the U.S. The fabric to be exported to Canada may have an acrylic
coating on one side for use as upholstery fabric, an acrylic
coating on both sides for eventual use as vertical blinds, or
with no coating. Four variations of the fabric will be returned
to the U.S. They are:
(1) coated or uncoated fabric will be returned in the same
condition as exported to Canada;
(2) uncoated fabric exported to Canada will be coated on
one side with acrylic and returned to the U.S.;
(3) uncoated fabric exported to Canada will be coated with
acrylic on both sides, cut into 3 1/2 inch strips for
vertical blinds, and returned to the U.S.; and
(4) fabric exported to Canada with acrylic coating on both
sides will be cut into 3 1/2 inch strips and returned
to the U.S.
ISSUE:
Whether the fabric is eligible for the duty exemption
available under subheading 9801.00.10, 9802.00.50 or 9802.00.80,
HTSUS, when imported into the U.S.
LAW AND ANALYSIS:
Fabric which is woven in the U.S. is considered a product of
the U.S. See, section 12.130(e)(1)(ii), Customs Regulations (19
CFR 12.130(e)(1)(ii)), which states that an article or material
usually will be a product of a particular country when it has
undergone weaving, knitting or other operation which form
fabric.
Subheading 9801.00.10, HTSUS, provides for duty free entry
of U.S. products that are exported and returned without having
been advanced in value or improved in condition by any means
while abroad. Articles satisfying the above conditions of the
statute will be afforded duty free treatment, provided the
documentary requirements of section 10.1, Customs Regulations (19
CFR 10.1), are met.
We are of the opinion that the fabric which has not
undergone any foreign processing, but is returned to the U.S in
the same condition as originally exported will be eligible for
duty free treatment under subheading 9801.00.10, HTSUS. However,
fabric which has been advanced in value and improved in condition
by the coating and/or cutting operations will not be entitled to
duty-free treatment under this tariff provision.
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); and
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. See, 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). Articles entitled
to this partial duty exemption are dutiable only upon the cost or
value of the foreign repairs or alterations, provided the
documentary requirements of section 10.8, Customs Regulations (19
CFR 10.8), are satisfied.
We have previously held that coating operations which create
a new or different article exceed an alteration. See,
Headquarters Ruling Letter (HRL) 554883 dated June 16, 1989,
which held that coating polypropylene film with acrylic or saran
creates a new article with a different use, thereby precluding
eligibility for the duty exemption available under subheading
9802.00.50, HTSUS.
In this case, the foreign coating and cutting operations do
not constitute alterations within the meaning of subheading
9802.00.50, HTSUS. Coating the fabric changes its
characteristics and use. The coated fabric, which is stronger
and more durable than uncoated fabric, is intended for use in
furniture upholstery and in vertical blinds. Furthermore, the
fabric is not complete for its intended use but is subjected to
acrylic coating and/or cutting processes in Canada which are
necessary to produce the required product utilized in the
upholstery and the vertical blind industries. Therefore, the
fabric subjected to coating and/or cutting operations will not be
entitled to the duty exemption available under subheading
9802.00.50, HTSUS.
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, lubrication, 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 imported assembled article,
less the 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 10.16(a), Customs Regulations (19 CFR 10.16(a)),
provides that the assembly operation performed abroad may consist
of any method used to join or fit together solid components, such
as welding, soldering, riveting, force fitting, gluing,
laminating, sewing, or the use of fasteners. However, the mixing
or combining of liquids, gases, chemicals, food ingredients, and
amorphous solids with each other or with solid components is not
regarded as an assembly.
We have previously held that coating operations are not
acceptable assembly operations. See, HRL 555499 dated June 6,
1990 (extruding xanthate cellulose solution over U.S. origin
paper which regenerates into a cellulose coating is not an
acceptable assembly operation, but is actually a mere coating
operation); HRL 554357 dated December 3, 1986, HRL 554416 dated
March 6, 1987, and HRL 554577 dated June 25, 1987 (merely
coating wire with plastic cannot be characterized as an
acceptable assembly or joinder of separate solid components); and
HRL 067533 dated October 30, 1981 (coating a glove liner with
latex is not an acceptable assembly of solid components).
In the instant case, we find that acrylic coating of the
fabric does not constitute an acceptable assembly operation for
the purposes of subheading 9802.00.80, HTSUS. The application of
the acrylic does not involve the joinder of two solid components,
but actually involves the application of the liquid acrylic by
spraying onto the solid fabric or dipping the fabric into a bath
of liquid acrylic.
HOLDING:
Based on the information and samples submitted, we are of
the opinion that the fabric returned in the same condition as
originally exported has not been advanced in value or improved
in condition, and therefore, will be entitled to the duty
exemption available under subheading 9801.00.10, HTSUS, upon
compliance with the documentary requirements of 19 CFR 10.1.
However, the fabric subjected to coating and/or cutting
operations has been advanced in value and improved in condition
by operations which exceed an alteration and are not acceptable
assembly operations. Therefore, this fabric is not entitled to
the partial duty exemption available under subheading 9802.00.50
or subheading 9802.00.80, HTSUS, but is dutiable on its full
value.
Sincerely,
John Durant, Director
Commercial Rulings Division