CLA-2-05 RR:CR:SM 560501 CW
David J. Evan, Esq.
Grunfeld, Desiderio, Lebowitz
& Silverman LLP
245 Park Avenue
New York, New York 10167-3397
RE: Brassieres exported for decorating operations and returned;
alteration; HRL 561781; 19 CFR 102.21
Dear Mr. Evan:
This is in response to your letters dated April 25, October 30, and December 9, 1997, requesting a ruling on behalf of Atrium Buying Corp. concerning the applicability of subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), to previously-imported brassieres that are decorated abroad and returned to the U.S. You also inquire regarding the country of origin of the returned decorated brassieres. Samples of the decorated and undecorated brassieres have been submitted. We regret the delay in responding.
FACTS:
Atrium Buying Corp. (“Atrium”) has purchased certain lace brassieres which were originally manufactured in Mexico and imported into the U.S. Atrium intends to export the brassieres to China where they will be decorated by adding beads and sequins to the articles with thread. The decorated brassieres will then be returned to the U.S. The decorating process is designed to enhance the marketability of the articles. You state that the beaded and sequined brassieres will be marketed and sold at retail in the same manner as the “plain” brassieres; that is, as undergarments in underwear departments and stores. You further state that the decorated and undecorated brassieres are commercially indistinguishable, as they are both to be used as body supporting underwear garments.
ISSUES:
Whether decorating brassieres abroad as described above qualifies as a repair or alteration under subheading 9802.00.50, HTSUS.
2. What is the country of origin of the returned decorated brassieres?
LAW AND ANALYSIS:
9802.00.50
Subheading 9802.00.50, HTSUS, provides a partial duty exemption for articles exported from and returned to the United States after having been advanced in value or improved in condition abroad by repairs or alterations, provided the documentary requirements of section 10.8, Customs Regulations (19 CFR 10.8), are satisfied.
Court cases considering the applicability of subheading 9802.00.50, HTSUS, and its precursor provisions (item 806.20, Tariff Schedules of the United States (TSUS), and, before that, paragraph 1615(g), Tariff Act of 1930), have held that this tariff provision is inapplicable where: (1) 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; or (2) the operations performed abroad destroy the identity of the exported articles or create new or commercially different articles through a process of manufacture.
In Guardian Industries v. United States, 3 CIT 9 (1982), the Court of International Trade stated that, in construing “the tariff provision for repairs and alterations performed abroad, the focus is upon whether the exported article is ‘incomplete’ or ‘unsuitable for its intended use’ prior to the foreign processing.” At issue in Guardian Industries was the question of whether subjecting U.S.-produced annealed glass to a tempering process in Canada to create glass for sliding glass patio doors qualifies as an “alteration” under item 806.20, TSUS. The court noted that glass must be tempered (i.e., strengthened) for practical safety use reasons and to conform to U.S. federal regulations before it may be marketed for use in sliding glass patio doors. In concluding that the tempering process was not an “alteration”, the court stated that “the exported articles of raw annealed glass were not ‘completed articles’ since they were entirely unsuitable for their intended use” as sliding glass patio doors and required a manufacturing process to make them complete. The court further concluded that,
because the tempering of the annealed glass transformed the glass in name, use, performance characteristics and tariff classification, the operation created a new and different commercial article.
Similarly, in 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), the issue presented was whether certain U.S.-origin Dacron polyester fabrics which were exported to Canada as griege goods for heat setting, chemical scouring, dyeing, and treating with chemicals, were eligible for the partial duty exemption available under item 806.20, TSUS, when returned to the United States. The U.S. Court of Customs and Patent Appeals found that the processing steps performed on the exported greige goods were undertaken to produce finished fabric and could not be considered as alterations. The court stated (66 CCPA at 82) that:
. . . repairs and alterations are made to completed articles and do not include intermediate processing operations, which are performed as a matter of course in the preparation or manufacture of finished articles. In the instant situation, the operations performed in Canada comprise further processing steps which are performed on unfinished goods and which lead to completed articles, i.e., the finished fabrics, and, therefore, the processing cannot be considered alterations.
In Amity Fabrics, Inc. v. United States, 43 Cust. Ct. 64, C.D. 2104 (1959), "pumpkin" colored fabrics were exported to Italy to be redyed black since the pumpkin color had gone out of fashion and black was a consistently good seller. The court held that the identity of the goods was not lost or destroyed by the dyeing process, that no new article was created since there was no change in the character, quality, texture, or use of the merchandise; it was merely changed in color. The court found that such change constituted an alteration for purposes of paragraph 1615(g) of the Tariff Act of 1930.
Pursuant to 19 U.S.C. 1625(c)(1), a notice was published in the CUSTOMS BULLETIN on October 4, 2000, Vol. 34, No. 40, advising interested persons that Customs was modifying one ruling and revoking four rulings relating to the applicability of subheading 9802.00.50, HTSUS, to certain articles that were exported for decorating operations and returned to the U.S. The notice further advised that Customs was revoking any treatment previously accorded by Customs to substantially identical transactions.
Among the rulings that were modified or revoked pursuant to the above-referenced notice was HRL 558935 dated January 31, 1995. That case involved previously-imported lace which was exported for a “reembroidery” process, described as the attachment of rope (thick thread), sequins, or beads (or any combination thereof) to the lace with thread. The “reembroidery” operation was performed to improve the marketability of the lace. However, the importer stated that the lace was a totally finished product without the “reembroidery” process and that both the decorated and undecorated lace was sold in the same channels of trade for the same use – as ornamentation on women’s wearing apparel. Customs held in HRL 558935 that the returned “reembroidered” lace was ineligible for subheading 9802.00.50, HTSUS, treatment because the foreign decorating process “substantially changed the appearance of the product by imparting significant new characteristics to the lace.”
However, the above holding was determined to be incorrect. Accordingly, HRL 561781 dated September 19, 2000, modified HRL 558935, holding that the “reembroidery” process constituted a qualifying alteration within the meaning of subheading 9802.00.50, HTSUS. In support, Customs stated that information in the record indicating that both the decorated and undecorated lace was sold in the same channels of trade for use as ornamentation on women’s apparel was persuasive evidence that the lace in its exported condition was complete for its intended use. Customs further stated that, while the “reembroidery” process clearly imparted new decorative characteristics to the lace, it did not significantly change the quality, character or performance characteristics of the product.
Also pertinent to the instant case is HRL 560325 dated January 27, 1998, which concerned the eligibility for subheading 9802.00.50, HTSUS, treatment of U.S.-origin glass stemware which was decorated by a silkscreening process with a pictorial winter scene abroad and returned. The stemware was offered for sale both in its decorated and undecorated state. In holding that the decorating process constituted an alteration, Customs stated that:
. . . the processing abroad results only in a change
to the appearance of the stemware, and does not alter
the function, character or identity of the exported
articles. The merchandise sent is finished white wine
stemware, marketable in the condition exported, and what
is returned is the same merchandise, available to the
same class of customers, albeit enhanced in appearance
by a decorative winter scene.
We also note HRL 557659 dated January 27, 1994, which concerned whether U.S.-origin Jacquard curtain fabric which was exported to Mexico for processing described as “air brushing and hot-wire cutting” qualified for subheading 9802.00.50 treatment when returned to the U.S. During the air brushing operation, a stencil isolated decorative motifs existing in the pattern of the fabric (such as flowers, leaves, etc.) and paint was applied to them. This enhanced the design, which was inherent in the fabric. Hot-wire cutting traced the contours of already existing decorative lines in the fabric to make the effect of the lines more dramatic. The record before Customs in the case indicated that 95% of the Jacquard curtain fabric was sold in the U.S. without the air brushing or hot-wire cutting operations.
Customs stated in HRL 557659 that the fact that the fabric in its exported condition was marketed as fabric for curtains, and was marketed for the same use after the air brushing and hot-wire cutting operations, showed that the fabric before the processing was suitable for its intended use and that it was exported in a completed condition. We further stated that, although the foreign operations slightly changed the appearance of the fabric, they did not significantly change the quality, character or performance characteristics of the fabric. Accordingly, Customs found that the air brushing and hot-wire cutting constituted acceptable alterations under subheading 9802.00.50, HTSUS.
We believe that the holdings in HRLs 561781, 560325, and 557659 are controlling with respect to the facts in the instant case. Lace brassieres are exported to China where they are decorated with beads and sequins to enhance their marketability. Information in the record indicates that the “plain” brassieres purchased by Atrium were originally designed and produced to be marketed in that condition. In fact, we are advised that both the decorated and undecorated brassieres are sold at retail for the same use – as body supporting undergarments. Accordingly, we are satisfied that the foreign decorating process is not a necessary step in the preparation or manufacture of finished brassieres as they are complete for their intended use at the time of export. Moreover, while sewing beads and sequins to the brassieres clearly imparts new decorative characteristics to the product, this change in the appearance of the article clearly does not result in the loss of the good’s identity or the creation of a new article with a different commercial use. The foreign processing does not significantly change the quality, character or performance characteristics of the brassiere. Therefore, we find that the foreign decorating operation constitutes an alteration within the meaning of subheading 9802.00.50, HTSUS.
Country of Origin
Section 304 of the Tariff Act of 1930 (19 U.S.C. 1304), as amended, 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 a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article.
Section 334 of the Uruguay Round Agreements Act (“section 334”) provides rules of origin for textiles and apparel entered, or withdrawn from warehouse, for consumption, on and after July 1, 1996. Section 102.21, Customs Regulations (19 CFR 102.21) implements section 334. Pursuant to 19 CFR 102.21, the country of origin of a textile or apparel product is determined by sequential application of the general rules set forth in paragraphs (c)(1) through (c)(5).
Paragraph (c)(1) states that “The country of origin of a textile or apparel product is the single country, territory, or insular possession in which the good was wholly obtained or produced.” As the merchandise involved here is not wholly obtained or produced in a single country, territory or insular possession, paragraph (c)(1) is inapplicable.
Paragraph (c)(2) states that “Where the country of origin of a textile or apparel product cannot be determined under paragraph (c)(1) of this section, the country of origin of the good is the single country, territory or insular possession in which each foreign material incorporated in that good underwent an applicable change in tariff classification, and/or met any other requirement specified for the good in paragraph (e) of this section.”
The National Commodity Specialist Division has advised this office that the returned decorated brassiere is classified in subheading 6212.10.50, HSTSUS. The rule set forth in section 102.21(e) for this subheading provides, in pertinent part:
(1) If the good consists of two or more component parts, a change to an assembled good of heading 6210 through 6212 from unassembled components, provided that the change is the result of the good being wholly assembled in a single country, territory, or insular possession.
According to section 102.21(b)(6), the term “wholly assembled”
...means that all components, of which there must be at least two, preexisted in essentially the same condition as found in the finished good and were combined to form the finished good in a single country, territory, or insular possession. Minor attachments and minor embellishments (for example, appliques, beads, spangles, embroidery, buttons) not appreciably affecting the identity of the good, and minor subassemblies (for example, collars, cuffs, plackets, pockets), will not affect the status of a good as “wholly assembled” in a single country, territory, or insular possession.
In this case, the brassieres (which consist of two or more component parts) meet the above tariff shift rule by virtue of being wholly assembled in Mexico. We find that the beads and sequins added to the articles in China are minor attachments or embellishments which do not appreciably affect the identity of the good and will not affect the status of the good as being wholly assembled in Mexico. Therefore, the country of origin of the brassieres by application of 19 CFR 102.21 is Mexico and they must be marked accordingly.
HOLDING:
On the basis of the information presented, we find that adding beads and sequins to the exported lace brassieres qualifies as an alteration under subheading 9802.00.50, HSTSUS. Therefore, the returned decorated articles are entitled to the partial duty exemption under this tariff provision, provided the documentation requirements of 19 CFR 10.8 are met.
The country of origin of the imported decorated brassieres by application of the rules of origin set forth in 19 CFR 102.21 is Mexico. They must be marked accordingly.
A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.
Sincerely,
John Durant, Director
Commercial Rulings Division