Applicability of partial duty exemption provision and country of origin marking requirements to certain hand-painted T-shirts from China

HQ 554974 July 27, 1988 CLA-2 CO:R:C:V 554974 CW/LW CATEGORY: Classification; Marking TARIFF NO.: 9802.00.40, HTSUSA (806.20, TSUS) Ms. Nancy Fox Import and Small Business Consultant 25 Mt. Tenaya Drive San Rafael, California 94903 RE: Applicability of partial duty exemption provision and country of origin marking requirements to certain hand-painted T-shirts from China Dear Ms. Fox: This is in response to your letter of March 28, 1988, in which you request a ruling concerning the applicability of item 806.20, Tariff Schedules of the United States (TSUS), to U.S.- made T-shirts which will be sent to the People's Republic of China to be hand-painted, and then returned to the U.S. for sale. You also inquire as to the applicability of visa, quota, and country of origin marking requirements to the returned T-shirts. A sample has been submitted for examination. FACTS: You advise that the T-shirts to be purchased in the U.S. by your client will be made of 100 percent cotton and will cost approximately $2.50 each, while the cost of the hand-painting will be approximately $1.50 per shirt. You request our confirmation that item 806.20, TSUS, will apply to the returned shirts, that they will not be subject to any visa or quota requirements, and that it is acceptable for the label in each shirt to read "garment made in the U.S.A., hand-painted in China." ISSUE: Whether the described hand-painted T-shirts will be eligible for the partial exemption from duty provided for in item 806.20, TSUS (subheading 9802.00.40, Harmonized Tariff Schedule of the United States (HTSUS)), and whether, for marking purposes, the country of origin of the returned T-shirts will be the U.S. or China. - 2 - LAW AND ANALYSIS: Item 806.20, TSUS, provides for the assessment of duty on the value of repairs or alterations performed on articles that are sent abroad for that purpose. However, the application of this tariff provision is precluded where the operations performed abroad create new or different articles of commerce, or where the exported articles are incomplete for their intended use and the foreign processing operation is a necessary step in the prepara- tion or manufacture of finished articles. See Guardian Industries Corp. v. United States, USITR, 3 CIT 9 (1982), and Dolliff & Company, Inc. v. United States, 66 CCPA 77, C.A.D. 1225 (1979). We have previously held in a ruling dated December 10, 1986 (554371), that certain U.S.-made sweatshirts which are design hand-painted abroad and returned to the U.S. are not eligible for item 806.20, TSUS, treatment. We stated that the hand-painting operation creates a different article of commerce and constitutes the last step in the production of finished hand-painted sweatshirts. We believe that our holding in that case is controlling with respect to the applicability of item 806.20, TSUS, to the T-shirts under consideration here. In our opinion, the hand-painting of the exported T-shirts imparts substantially new and different characteristics to the shirts, resulting in new and different articles of commerce with unique, specialized appeal. Please be advised that upon return of the T-shirts to the U.S. from China, they will be subject to all applicable visa and quota requirements as products of China. With respect to the issue of country of origin marking, because the T-shirts are textiles subject to section 204 of the Agricultural Act of 1956, as amended (7 U.S.C. 1854), section 12.130(c), Customs Regulations (19 CFR 12.130(c)), is applicable. That section provides that, pursuant to Headnote 2, Part 1, Schedule 8, TSUS, any U.S. textile or textile product which is returned after having been advanced in value or improved in condition abroad, or assembled abroad (whether or not it has undergone a substantial transformation abroad), shall be a foreign article for the purposes of the Tariff Act of 1930, as amended. HOLDING: On the basis of the information and sample submitted, it is our opinion that the hand-painted T-shirts are not eligible for item 806.20, TSUS, treatment upon return to the U.S. - 3 - Although the T-shirts are woven and sewn in the U.S., the hand-painting in China has advanced the T-shirts in value. Thus, for country of origin marking purposes, according to 19 CFR 12.130(c), the country of origin of the returned T-shirts is China, and they must be marked accordingly. Sincerely, John Durant Director, Commercial Rulings Division