Applicability of partial duty exemption of item 806.20, TSUS, to socks exported to Taiwan for silk screening

HQ 555021 July 1, 1988 CLA-2 CO:R:C:V 555021 DBI CATEGORY: Classification TARIFF NO.: 9802.00.40; 806.20 Mr. William Brady Salamander 220-C Benito Avenue Santa Cruz, CA 95062 RE: Applicability of partial duty exemption of item 806.20, TSUS, to socks exported to Taiwan for silk screening Dear Mr. Brady: This is in response to your letter of May 10, 1988, in which you request a ruling concerning the applicability of item 806.20, Tariff Schedules of the United States (TSUS), to socks made in the U.S., exported to Taiwan for silk screening, and then returned to the U.S. for sale. You also inquire as to the applicability of quota and visa requirements of the returned socks. A sample has been submitted for examination. FACTS: You state that the socks are made in the U.S. of 80% cotton and 20% nylon fibers and that your company plans to ship them to Taiwan to silk screen a design onto the socks. The socks are valued at 80 cents per pair and the silk screening that will be done in Taiwan will be valued at 15 cents per pair. ISSUE: Whether U.S.-made socks which are exported to Taiwan for silk screening will be eligible for the partial exemption from duty provided for in item 806.20, TSUS, and whether these socks will be subject to any quota or visa requirements upon their return to the U.S. LAW AND ANALYSIS: Generally, all merchandise imported into the United States is subject to duty on full value and total quantity unless specifically exempted. The provisions of law affording American goods returned a full or partial exemption from duty are found in items 800.00 through 807.00, Tariff Schedules of the United States (TSUS). - 2 - Item 806.20, TSUS, provides for the assessment of duty on the value of repairs or alterations on articles returned to the U.S. after having been exported to be advanced in value or improved in condition by any process of manufacture or other means. 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 (1957); Guardian Industries Corporation v. United States, USITR, 3 CIT 9, Slip Op 82-4 (Jan. 5, 1982). Item 806.20, TSUS, 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 and Company, Inc. v. United States, 66 CCPA 77, CAD 1225, 599 F.2d 1015 (1979). We have previously held in a ruling dated December 10, 1986 (554371) that certain U.S. sweatshirts, hand-painted abroad and returned to the U.S., were not eligible for item 806.20, TSUS, treatment because the hand-painting was more than a mere alteration. We stated that the foreign hand-painting created a different article of commerce and constituted a finishing step in the total process of producing the hand-painted sweatshirts. With regard to the facts you have provided, based on our previous ruling, we believe that the foreign silk screening process constitutes an operation that exceeds an alteration. Although garments may be worn whether a design is imprinted by silk screening or not, silk screening, like printing and hand- painting, is considered neither a repair nor an alteration under the provisions of item 806.20, TSUS. Socks which have a design as a result of a silk screening process are different from socks without such a design, and, as such, the foreign silk screening process has created a different article of commerce. Furthermore, the silk screening process constitutes a finishing step in the manufacture of the socks. In response to your inquiry about the applicability of quota and visa requirements to the socks, we refer you to section 12.130(c), Customs Regulations (19 CFR 12.130(c)), which states the following: "Headnote 2, Part 1, Schedule 8, TSUS, provides that any product of the U.S. which is returned after having been advanced in value or improved in condition abroad, or assembled abroad, shall be a foreign article for the purposes of the Tariff Act of 1930, as amended. In order to have a single definition of the term 'product of' and, therefore, a single country of origin for a textile or textile product, notwithstanding paragraph (b), merchandise which falls within the purview of Headnote 2, Part 1, Schedule 8, TSUS, may not, upon its return to the U.S., be considered a product of the U.S." - 3 - Therefore, under section 12.130(c), the socks will not be considered a product of the U.S. and will be subject to all applicable quota and visa requirements. HOLDING: On the basis of information and sample submitted, it is our opinion that the foreign silk screening process may not be considered an alteration as that term is used in item 806.20, TSUS, and, therefore, precludes tariff treatment of the returned goods under the provision of item 806.20, TSUS. Sincerely, John Durant Director, Commercial Ruling Division 1cc: CO:R:C:V:DIZZO:LDC:6/27/88 Mr. William Brady Slamander 220-C Benito Avenue Santa Cruz, CA 95062