CLA-2 CO:R:C:S 557659 WAS
Melvin E. Lazar, Esq.
Soller, Shayne & Horn
46 Trinity Place
New York, N.Y. 10006
RE: Applicability of the partial duty exemption available under
subheading 9802.00.50, HTSUS, to Jacquard curtain fabric
Dear Mr. Lazar:
This is in reference to your letter dated October 27, 1993,
on behalf of Bayeux Fabrics, Inc., concerning the applicability
of the partial duty exemption available under subheading
9802.00.50, Harmonized Tariff Schedule of the United States
(HTSUS), to Jacquard curtain fabric of U.S. origin. Samples of
the merchandise were also provided for our review.
FACTS:
The subject knit Jacquard fabric (Style A and B) is
manufactured in the U.S. by Bayeux at its factory in North
Carolina. It is intended to be used for sale to curtain
manufacturers, for production into completed curtains. You state
that, in its condition as exported, the subject fabric is ready
to be made into curtains. You have provided a letter from Mr.
Richard Glass, Vice President of Bayeux, which states that
approximately 95 percent of Bayeux's sales to the U.S. market
consists of fabric in "solid" form; that is, fabric which has not
undergone air brushing or hot wiring.
The U.S.-origin fabric will be sent to Mexico for air
brushing and hot wired cutting. According to Mr. Glass' letter,
air-brushing highlights decorative motifs existing in the
patterns of the fabric. During this operation, specific flowers,
leaves or other motifs already knitted in the designs are
isolated by a stencil and paint is applied to them. The purpose
of this operation is to enhance the design which is inherent in
the fabric. Hot-wire cutting traces the contours of already
existing decorative lines in the fabric to make the effect of the
lines more dramatic. You claim that both of these processes are
minor operations which are performed to enhance the fabric's
marketability upon return to the U.S.
ISSUE:
Whether fabric which is sent to Mexico for air-brushing
and/or hot-wire cutting operations qualifies for the partial duty
exemption available under subheading 9802.00.50, HTSUS, 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
subheading 9802.00.50, HTSUS, provided the foreign operation does
not destroy the identity of the exported articles or create new
or different articles through a process of manufacture. However,
entitlement to this tariff treatment is precluded where the
exported articles are incomplete for their intended use prior to
the foreign processing, 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, 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).
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 19 CFR 10.8 are satisfied.
In the above-referenced Dolliff case, certain dacron
polyester fabrics -- greige goods -- were exported and subjected
to multiple processing operations abroad, including dyeing. The
finished fabric that was returned to the U.S. was denied the
partial duty exemption for alterations abroad because it was
determined that the dyeing and numerous other processing steps
were all necessarily undertaken to produce the finished fabric.
In another alterations case, C.J. Tower & Sons of Niagara,
Inc. v. United States, C.D. 2208, 45 Cust. Ct. 111 (1960), cotton
drills -- also greige goods -- were exported and subjected to
multiple operations, including dyeing. The cotton cloth that was
returned to the U.S. was similarly denied the partial duty
exemption for alterations abroad because it was determined that
the merchandise exported was changed in color, width, length,
porosity, in the distribution of the threads in the weave, in
weight, tensile strength, texture, and suppleness as a result of
the foreign processing. In holding that the foreign processing
constituted more than an alteration, the court found that the
returned merchandise was a new and different article, having
materially different characteristics and a more limited and
specialized use.
In another alterations case which dealt with the redyeing of
fabric, the court held that the foreign processing constituted an
acceptable alteration. See Amity Fabrics, Inc. v. United States,
C.D. 2104, 43 Cust. Ct. 64, 305 F. Supp. 4 (1959). In Amity
Fabrics, unmarketable, pumpkin-colored cotton twill-back
velveteen was exported to be redyed a black color. The court
determined that the dyeing operation was a change which rendered
the fabric marketable and that this improved its condition
commercially, and that such change constituted an alteration
under the statute and Customs Regulations. As the parties had
stipulated that the redyeing in no way changed the quality,
texture, or character of the material, the court concluded that
the identity of the goods was not lost or destroyed by the dyeing
process; no new articles was created; there was no change in the
character, quality, texture, or use of the merchandise; the
fabric was merely changed in color.
In Royal Bead Novelty Co. v. United States, C.D. 4353, 68
Cust. Ct. 154, 342 F. Supp. 1394 (1972), uncoated glass beads
were exported so that they could be half-coated with an Aurora
Borealis finish which imparted a rainbow-like luster to the half-coated beads. The court found that the identity of the beads was
not lost or destroyed in the coating process and that no new
article was created. Moreover, the court noted that there was no
change in the beads' size, shape, or manner of use in the making
of jewelry (as the plaintiff testified that both uncoated and
half-coated beads were used interchangeably). The sole change
was in the finish, which did not change the quality, texture, or
character of the exported beads. Accordingly, the court
concluded that application of the Aurora Borealis finish
constituted an alteration within the intendment of item 806.20,
Tariff Schedules of the United States (TSUS) (the precursor
tariff provision to subheading 9802.00.50, HTSUS).
In Headquarters Ruling Letter (HRL) 555124 dated November
11, 1988, a finished fabric for use in making women's raincoats
was sent to Canada for an additional process which consisted of
running the fabric through a wire brush. In that case, we stated
that the fact that the fabric in its exported condition was
currently marketed as material for women's raincoats, and would
be marketed for the same use after the brushing operation,
attested to the fabric's suitability for its intended use and,
therefore, its completion prior to foreign processing. Moreover,
we found that, while the brushing process imparted a slightly
different appearance to the fabric, it did not appear to
significantly change the quality, texture, or character of the
fabric. Accordingly, we held that the brushing operation
constituted an "alteration" within the meaning of subheading
9802.00.50, HTSUS.
Additionally, in HRL 554945 dated June 14, 1988, we held
that the process of "crushing" fabric abroad constituted an
"alteration" within the meaning of item 806.20, TSUS. In HRL
554945, fabric was exported to France where it was subjected to a
processing operation designed to impart a permanent "crushed" or
wrinkled look to the fabric, before being returned to the U.S.
for use in producing women's swimsuits. We held that the
identity of the fabric was not lost or destroyed by the
"crushing" operation and that this process did not result in the
creation of a new and different commercial article. The
"crushing" process also did not appear to result in any
significant change in the quality, texture, or character of the
fabric. See also HRL 557144 dated May 19, 1993 (holding that
embossing fabric abroad to enhance its marketability is an
acceptable alteration for purposes of subheading 9802.00.50,
HTSUS).
We have previously held that cutting an article to shorter
material lengths constitutes an acceptable alteration within the
meaning of subheading 9802.00.50, HTSUS. See HRL 553843 dated
October 1, 1985 (holding that cutting bow ribbon material to
length constitutes an alteration within the meaning of item
806.20, TSUS; HRL 554534 dated September 24, 1985 (holding that
the foreign cutting of exported random length steel rebars to
shorter lengths constitutes an "alteration" within the meaning of
item 806.20, TSUS.
However, in a case involving the application of TSUS item
806.20, (HRL 071475 dated September 20, 1983), we held that:
. . . where rolls of material are exported and finished
goods are returned merely by cutting to length, this cutting
constitutes a finishing step in the manufacture of the
goods, converting large rolls of raw material to finished,
usable sheets. The conversion from material lengths to
finished products exceeds the meaning of the term
"alterations" under this tariff provision.
In the present case, we believe that the air-brushing and
hot-wire cutting the fabric abroad, like the dyeing in Amity
Fabric, the application of the coating material in Royal Bead,
the brushing in HRL 555124, and the crushing operation in HRL
554945, constitute acceptable alterations of the fabric for
purposes of subheading 9802.00.50, HTSUS. Unlike the rolls of
material exported in HRL 071475, the record before us indicates
that the curtain fabric in this case is suitable for its intended
use before the processing in Mexico. The fact that the fabric in
its exported condition is currently marketed as fabric for
curtains, and is marketed for the same use after the air brushing
and hot-wire cutting operations, show that the fabric is suitable
for its intended use, and that it is exported in its completed
condition. In fact, you state that approximately 95 percent of
your sales to the U.S. market consist of fabric in its exported
condition. The air-brushing and hot-wire cutting operations are
not intermediate operations which are performed as a matter of
course in the manufacture of the finished article. The foreign
processing is neither essential to the fabric's intended use
after return to the U.S., nor does it change the identity of the
fabric.
Moreover, although the air-brushing and hot-wire cutting
slightly change the appearance of the fabric, these operations do
not significantly change the quality, character or performance
characteristics of the fabric. As in Amity, we believe that
these operations simply render the fabric more marketable; they
do not change the durability or strength of the fabric. The
information and samples submitted indicate that, as was the case
with respect to the beads in Royal Bead, the air-brushing and
hot-wire cutting operations do not destroy the identity of the
exported article or create a new or different article of
commerce. Accordingly, we find that the air-brushing and hot-wire cutting operations constitute acceptable "alterations"
within the meaning of subheading 9802.00.50, HTSUS.
HOLDING:
Based on the information and samples provided, we are of the
opinion that air-brushing and hot-wire cutting the curtain fabric
(Style A and B) in Mexico constitute an "alteration," as that
term is used in subheading 9802.00.50, HTSUS, and, therefore, the
returned fabric should be subject to duty only upon the value of
the foreign alterations, assuming compliance with the
documentation requirements of 19 CFR 10.8.
Sincerely,
John Durant, Director
Commercial Rulings Division