CLA-2 CO:R:C:V 555708 KCC
David C. Williams, Esq.
Neville, Peterson & Williams
39 Broadway
New York, New York 10006
RE: Tariff treatment of thread and yarn wound around spools, cut
to length and packaged in a variety of colors. Alteration;
555411; 078034; C.I.E. 1113/65; packaging; 731806
Dear Mr. Williams:
This is in response to your letter dated August 3, 1990, and
telephone call on September 19, 1990, on behalf of Coats & Clark,
requesting a ruling concerning the applicability of subheading
9802.00.50, Harmonized Tariff Schedule of the United States
(HTSUS), to thread and yarn imported into the U.S.
FACTS:
Coats & Clark will ship U.S.-origin thread and yarn which
is wound on "dye tubes" to Taiwan. In the U.S., the thread and
yarn are dyed to the proper color, are given the proper twist and
tension, and are lubricated for handling purposes. In Taiwan,
the tubes of thread and yarn will be placed on machinery which
will despool the thread and yarn from the tubes and rewind the
thread and yarn onto small plastic spools. The spools may or may
not be products of the U.S. Once the plastic spool is full, the
thread is cut and a new spool is inserted for the despooling and
rewinding operations.
After the despooling and rewinding operations are complete,
a number of spools in a variety of colors will be packaged in a
blister pack to be marked as a sewing thread assortment. The
blister packaging material may be of Taiwanese or U.S. origin.
Thereafter, the packaged sewing thread assortment will be
imported into the U.S.
ISSUE:
Whether the thread and yarn will be eligible for the partial
duty exemption under subheading 9802.00.50, HTSUS, when imported
into the U.S.
LAW AND ANALYSIS:
HTSUS subheading 9802.00.50 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 CPU 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), 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. Dolliff & Company, Inc. v. United States, 81 Cust.Ct.
1, C.D. 4755, 455 F.Supp. 618 (1978), aff'd, 66 CPU 77, C.A.D.
1225, 599 F.2d 1015 (1979).
We have previously held in Headquarters Ruling Letter (HRL)
555411 dated August 11, 1989, that cutting to length rolls of
U.S. wire and placing it on spools was an alteration and entitled
the returned wire to the partial duty exemption available under
subheading 9802.00.50, HTSUS. See also, C.I.E. 1113/65 dated
August 3, 1965 (T.D. 56448) (American yarn wound on large spools
and sent abroad to be rewound onto small wooden rolls was an
alteration); and HRL 078034 dated September 9, 1986 (fabric sent
abroad in rolls and rewound into smaller rolls of the same width
after being cut into shorter lengths had merely been altered).
In the instant case, despooling, cutting to length, and
rewinding the U.S.-origin thread and yarn from the tubes onto
small plastic spools is considered an alteration under subheading
9802.00.50.
Subheading 9801.00.10, HTSUS, provides for the free entry of
products of the U.S. that are exported and returned without
having been advanced in value or improved in condition by any
process of manufacture or other means while abroad, provided the
documentary requirements of section 10.1, Customs Regulations (19
CFR 10.1), are met. Only the materials of U.S.-origin used in
packaging the thread and yarn will be entitled to free entry
under subheading 9801.00.10, HTSUS, if they are returned without
having been advanced in value or improved in condition while
abroad. See, HRL 731806 dated November 18, 1988 (duty-free
treatment provided by subheading 9801.00.10, HTSUS, extends to an
American-made container which is exported and then reimported
with its contents, provided that it meets all of the criteria for
classification within that subheading).
HOLDING:
On the basis of the information submitted, it is our opinion
that the operations performed abroad are considered alterations.
Therefore, the imported thread and yarn may be entered under
subheading 9802.00.50, HTSUS, with duty only on the value of the
foreign processing, upon compliance with the documentary
requirements of section 10.8, Customs Regulations (19 CFR 10.8).
Additionally, packaging material of U.S.-origin may be
accorded duty-free treatment under subheading 9801.00.10, HTSUS,
upon compliance with the documentary requirements of 19 CFR 10.1.
Sincerely,
John Durant, Director
Commercial Rulings Division