Applicability of partial duty exemption under TSUS item 806.20 to certain fabric processed in Canada

HQ 555124 November 1, 1988 CLA-2 CO:R:C:V 555124 GRV CATEGORY: CLASSIFICATION TARIFF NO: 9802.00.40; 806.20 Mr. Douglas A. Brook Northern Textile Association 1620 I St., N.W., Suite 716 Washington, D.C. 20006 RE: Applicability of partial duty exemption under TSUS item 806.20 to certain fabric processed in Canada Dear Mr. Brook: This is in response to your letter of September 15, 1988, on behalf of Eastland Woolen Mills, Inc. (importer), requesting a ruling on the applicability of item 806.20, Tariff Schedules of the United States (TSUS), to certain fabric to be imported from Canada after a brushing process. Samples of both the fabric to be exported to Canada and the brushed fabric to be returned to the U.S. were submitted for examination. FACTS: You state that the fabric to be exported to Canada is a fin- ished product and that it is currently sold in the U.S. market for use in making women's raincoats (specifically the outside cover). You further state that the importer is proposing to send the fabric to Canada for "an additional process" which consists of running the fabric through a wire brush to impart a slightly different appearance to the fabric, but that this process "other- wise does not change the material." You advise in this regard that, as a result of this process, the ultimate consumer will be offered a choice between a "shiny" or "more nappy-in-appearance" raincoat. ISSUE: Whether the brushed fabric qualifies for the partial duty ex- emption under TSUS item 806.20 (subheading 9802.00.40, Harmonized Tariff Schedule of the United States (HTSUS)) when imported into the U.S. LAW & ANALYSIS: Articles, returned to the U.S. after having been exported for repairs or alterations, may be classified under TSUS item 806.20 (19 U.S.C. 1202), with duty only on the value of the repairs or alterations, upon compliance with the requirements of section - 2 - 10.8, Customs Regulations (19 CFR 10.8). However, the applica- tion of this tariff provision is precluded where the foreign operation destroys the identity of the exported article or cre- ates a new or different commercial article. LeGran Manufacturing Co. v. U.S., 59 Cust. Ct. 58, C.D. 3070 (1967). Moreover, as the court stated in Dolliff & Company, Inc., v. United States, 66 CCPA 77, C.A.D. 1225, 599 F. 2d 1015 (1979), at page 1019: ... 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 the manufacture of finished articles. (Court's emphasis). Thus, "the focus is upon whether the exported article is 'incom- plete' or 'unsuitable for its intended use' prior to the foreign processing. Guardian Industries Corp. v. United States, 3 CIT 9 (1982), at page 13. In ruling letter 554945 CW (June 14, 1988), certain fabric was exported to France to undergo a "crushing" operation to im- part a permanent "crushed" or wrinkled look to fabric used in swimsuits. Finding that the fabric in its exported condition was complete for its intended use as material for swimsuits, that the identity of the fabric was not lost or destroyed by the "crushing" operation and that no new or different commercial article was created, we held that the "crushing" process consti- tuted an "alteration," as the term is used in TSUS item 806.20. In regard to this case, the fact that the fabric in its exported condition is currently marketed as material for women's raincoats, and will be marketed for the same use after the brushing process, attests to the fabric's suitability for its intended use and, therefore, its completeness prior to the foreign processing. Moreover, although the brushing process imparts a slightly different appearance to the fabric, it does not appear that this process results in any significant change in the quality, texture or character of the fabric. Given the facts in this case, it is clear that the fabric to be exported is a "completed article," that its identity will not be lost or destroyed by the foreign brushing operation, and that no new or different commercial article will be created thereby. Further, an examination of the samples submitted indicates that the fabric to be exported is in a finished state or condition. - 3 - CONCLUSION: On the basis of the information and samples presented, it is our opinion that the process of brushing the fabric in Canada constitutes an "alteration," as that term is used in TSUS item 806.20. Therefore, upon its return to the U.S. and compliance with the requirements of 19 CFR 10.8, the fabric will be entitled to classification under TSUS 806.20, with duty only on the value of the processing performed abroad. Sincerely, John Durant, Director Commercial Rulings Division CO:R:CR:V:VILDERS:GRV:9/29/88:10/12/88