CON-9-04-CO:R:C:E 222106 JR
District Director of Customs
1 Virginia Avenue
Wilmington, North Carolina 28401
RE: Request for Internal Advice (FILE ADM-9-DD, dated January
22, 1990); Temporary Importation Under Bond; 9813.00.05, HTSUS;
Airline Seat Covers manufactured with imported customer-owned and
specially woven dress fabric; C.S.D. 81-32
Dear Sir:
This is in response to your request for our advice on the
Jepson Burns Corporation's desire to import temporarily free of
duty under bond woven dress fabric to be made into airline seat
covers under subheading 9813.00.05, Harmonized Tariff Schedule of
the United States (HTSUS).
The Jepson Burns Corporation, a manufacturer of commercial
aircraft seating, will be the importer of record of the customer-
owned dress fabric which has been specially woven to the
customer's (the foreign airline's) specifications. Jepson Burns
cuts and sews the customer-furnished material into dress covers
for the aircraft seating they manufacture. After the processing
is completed, Jepson Burns either (1) exports the seating
directly to the non-U.S. customer in order to be placed in
aircraft abroad, i.e., by Airbus Industry, or (2) delivers the
seating, as per the terms of its contract with the non-U.S.
customer, to Boeing or McDonnell Douglas for installation in an
aircraft which will be subsequently exported to the non-U.S.
customer (Boeing and McDonnell Douglas have a separate
manufacturing contract with the non-U.S. customer).
With respect to the second situation, Jepson Burns states
that it obtains a certificate of export from Boeing or McDonnell
Douglas which tracks the seats including the covers out of the
country. See C.S.D. 81-32 (aircraft that departs from the U.S.
empty or in revenue service is "exported" for purposes of
cancelling a TIB). Of course, it is clear that the company
relies on these third parties (Boeing or McDonnell Douglas) to
export the seats within the time limitations of U.S. Note 1(a) to
Chapter 98, Subchapter XIII, HTSUS, set out infra. The company
states that any scraps of fabric left over after fabrication of
the seat covers are retained for inspection and then destroyed,
and we assume that they are destroyed as articles of commerce.
See U.S. Note 2(b). The balance of the fabric is incorporated
into the seats and either exported directly by them or
subsequently when the aircraft is exported in compliance with the
applicable law.
Your office is concerned that because the Jepson Burns
Corporation sells the finished seats to the airlines who supplied
the fabric at no cost, subheading 9813.00.05, HTSUS, would not
apply.
Subheading 9813.00.05, HTSUS, provides for the importation
into the United States temporarily free of duty under bond (TIB),
of articles to be repaired, altered or processed (including
processes which result in articles manufactured or produced in
the United States). U.S. Note 1(a) to Chapter 98, Subchapter
XIII, HTSUS, provides in part that merchandise imported under TIB
procedures may not be imported for sale or sale on approval.
Further, U.S. Note 1(a) allows the initial TIB period, one year
from date of importation, to be extended, upon application to the
district director, for one or more further periods which, when
added to the initial one year, shall not exceed a total of three
years.
We are of the opinion that the construction of seat covers
from fabric furnished at no cost for incorporation into aircraft
seats which are subsequently sold to the supplier of the fabric
does not fall into the category of a sale which is impermissible
under U.S. Note 1(a), Chapter 98, Subchapter XIII, HTSUS. From
the facts presented, it appears that the Jepson Burns selling of
the finished seats they manufacture to the non-U.S. customer does
not amount to a sale of the seat covers since the company does
not include the price of the fabric, the article which is
imported and processed, into the finished seats. When Jepson
Burns sells the finished seats to the foreign airline, it is not
selling the seat covers which cover the seats but sells the
actual seats themselves. The foreign airline pays only for the
labor of the cutting and sewing of the fabric into seat covers
and is not billed for the imported fabric as it was customer-
furnished. We do not view this process of sewing the imported
customer-owned fabric into seat covers as a sale.
In the instant case, Jepson Burns states that it maintains
complete traceability of all the component parts that are
installed in the seats as is required by the Federal Aviation
Administration. As such, a particular tracking number or "sales
order" number is provided to the customer-furnished fabric.
Jepson Burns is able to trace the fabric to specific seats, thus
maintaining controls over the fabric temporarily imported under
bond.
Please note that the imported fabric may be subject to a
quota. Any merchandise subject to a quota which has been filled
cannot be released under a temporary importation bond. See T.D.
54802(53) and (54). If the quota is open, the merchandise may be
entered under TIB procedures, but there will be a charge against
the quota.
To summarize, Jepson Burn's cutting and sewing of airline
seat covers with imported fabric provided by its customer is a
process within the meaning of subheading 9813.00.05, HTSUS. As
the imported fabric which is made into seat covers is not sold
(there is a charge only for the cutting and sewing) but rather
incorporated into the finished seats which are sold to the
airline furnishing the fabric, there is no sale per se of the
seat covers manufactured from the imported fabric furnished by
the customer carrier.
Sincerely,
Jerry Laderberg, Acting Director
Commercial Rulings Division