CLA-2-05 CO:R:C:S 558935 DEC
Mr. Andrew P. Vane
Banes, Richardson & Colburn
475 Park Avenue South
New York, New York 10016
RE: Embroidery; Alteration; Reembroidery; HRL 078245; HTSUS
5810.92.0080;
HTSUS 6002.20.1000; Textile quota category 229
Dear Mr. Vane:
This is in response to your letter dated July 26, 1994, on
behalf of Asiawealth Apparel Incorporated (Asiawealth),
requesting a ruling concerning the applicability of subheading
9802.00.50, Harmonized Tariff Schedule of the United States
(HTSUS), to "reembroidered" lace. Samples of the lace before and
after the embroidery operation were submitted for examination.
FACTS:
The lace is made in France and third parties, not related to
Asiawealth, import it into the United States. These third
parties hire Asiawealth to contract with a Philippine factory to
have "rope" (thick thread), or sequins, or beads, or any
combination of rope, sequins, and beads, hand embroidered onto
the lace. This process is called "reembroidery." The owners of
the lace have the fabric "reembroidered" in order to make it more
marketable, but maintain that the lace is a totally finished
product without the "reembroidery" process and that both the lace
and the "reembroidered" lace are sold in the same channels of
trade and both are used as ornaments on women's wearing apparel.
Asiawealth supplies the rope, sequins, and beads to the
Philippine factory where the hand embroidery is performed. The
"reembroidered" lace is then exported to the United States and
entered under either Harmonized Tariff Schedule of the United
States (HTSUS) 5804.21.00 or HTSUS 5804.29.00.
ISSUE:
1. Whether the "reembroidery" operation described above
qualifies as a repair or alteration under subheading 9802.00.50,
HTSUS.
2. What is the proper tariff classification of the
unembroidered and "reembroidered" lace?
LAW AND ANALYSIS:
Subheading 9802.00.50, HTSUS, provides for the assessment of
duty on the value of repairs or alterations performed on articles
returned to the United States 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). 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). In
addition, Customs has issued ORR Ruling 75-0151, dated May 10,
1976, and ORR Ruling 76-0029, dated May 26, 1976. Both of these
ruling held that embroidering fabric was beyond the meaning of an
alteration.
In addition, Customs has also found that U.S. articles
subjected to silk screening, hand-painting, and printing
operations abroad and then returned to the United States, 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 printing operations created a
different article of commerce with unique, specialized appeal and
constituted a finishing step in the manufacture of the 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 the
above rulings, we are of the opinion that the foreign
"reembroidery" operation constitutes an operation that exceeds an
alteration. Although the lace may be used as ornament to woman's
apparel whether it has an embroidered design 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. A review of the samples submitted
reveals that the "reembroidering" process substantially changes
the appearance of the lace by imparting significant new
characteristics to the lace.
You cite HRL 088565, dated May 23, 1991, in support of your
argument that "reembroidery" is not more than an alteration
because it does not result in a substantial transformation. This
ruling letter addressed the country of origin of a textile
product. It does not address the 9802.00.50, HTSUS, issue of
whether "reembroidery" is an alteration. It is inappropriate to
apply the analysis of HRL 088565 to the facts this case presents.
With respect to HRL 557144, dated May 19, 1993 (embossing
furniture fabric qualifies as an alteration under subheading
9802.00.80, HTSUS), which you cite in your letter, we believe
that the facts in the rulings cited above are closer to the facts
presented in this case. Unlike the embossing furniture fabric
case where Customs held that the processing did not substantially
change the quality or character of the merchandise, we find that
the "reembroidering" of the lace imparts significant and unique
characteristics that exceed an "alteration."
In addition to your contention that the subject merchandise
is eligible for classification in subheading 9802.00.50, HTSUS,
you claim that for purposes of determining the duty rate to be
applied, the reembroidered lace should be classifiable as a true
lace under either subheading 5804.21.0000 or 5804.29.0090, HTSUS,
depending on the fiber content. We disagree.
Heading 5810, HTSUS, provides for, inter alia, embroidery in
the piece. The Explanatory Notes (EN) to heading 5810, at page
808, define embroidery as that which is "obtained by working with
embroidery threads on a pre-existing ground of ... knitted or
crocheted fabric, lace... ." An examination of the subject
fabric reveals that the ground material is made of multifilament
man-made fiber yarn, of a raschel warp knit construction. As the
subject merchandise consists of embroidery thread worked onto a
pre-existing ground of knitted fabric, classification is proper
within heading 5810, HTSUS. Specifically, the subject fabric is
classifiable within subheading 5810.92.0080, HTSUS, which
provides for, "[E]mbroidery in the piece, in strips or in motifs:
other embroidery: of man-made fibers.... other...," dutiable at a
rate of 16 percent ad valorem. The applicable textile quota
category is 229.
The subject fabric, in its unembroidered state, is precluded
from classification within heading 5804, HTSUS. The EN to
heading 5804, HTSUS, at page 800, specifically exclude "openwork
products of any kind produced by knitting by hand or
machine (Chapter 60)" from this heading. As stated supra, the
subject fabric is a raschel warp knit and therefore
classification is precluded from heading 5804, HTSUS. The subject
fabric, in its unembroidered state, is classifiable under
subheading 6002.20.1000, HTSUS, which provides for, "[O]ther
knitted or crocheted fabrics: other, of a width not exceeding 30
cm: open-work fabrics, warp knit...," dutiable at a rate of 16
percent ad valorem. The applicable textile quota category is
229.
HOLDING:
On the basis of the information and samples submitted, the
foreign "reembroidery" operations are not considered to be
alterations. Therefore, tariff treatment of the returned goods
under subheading 9802.00.50, HTSUS, is precluded.
The "reembroidered" fabric is classifiable within subheading
5810.92.0080, HTSUS, and the fabric in its unembroidered state is
classifiable under subheading 6002.20.1000, HTSUS.
A copy of this ruling letter should be attached to the entry
documents filed at the time this merchandise is entered. If the
documents have been filed without a copy, this ruling should be
brought to the attention of the Customs officer.
Sincerely,
John Durant
Director, Commercial Rulings
Division