Applicability of alterations provision in subheading 9802.00.50, HTSUS, to boxer shorts exported to Canada and printed with designs

HQ 555363 August 25, 1989 CLA-2-CO:R:C 555363 RA CATEGORY: Classification TARIFF NOS.: 9802.00.50 and 6207.11.00, HTSUS Mr. Noel Roberts NGR Marketing 4139 Parker Street Bumaby, B.C. Canada V5C3C2 RE: Applicability of alterations provision in subheading 9802.00.50, HTSUS, to boxer shorts exported to Canada and printed with designs Dear Mr. Roberts: This is in regard to your letter of February 20, 1989, addressed to our New York office and referred to us for reply concerning the tariff treatment for cotton shorts of U.S. origin printed in Canada. FACTS: Plain colored cotton boxer shorts made in the U.S. are printed in Canada with designs by the silkscreening method and packed in a clear plastic box for return to the U.S. The printing on the submitted sample depicts various stock market results and business statements or charts relating to the financial market. ISSUE: Will the provision in subheading 9802.00.50, Harmonized Tariff Schedule of the U.S. (HTSUS), for alterations apply to the returned printed shorts? How will they be classified? LAW AND ANALYSIS: Subheading 9802.00.50, HTSUS, provides for a partial exemption from duty for articles returned to the U.S. after having been exported for alterations while abroad. The articles must be completely finished when they leave the U.S. and not undergo any intermediate processing to finish them in the foreign country. This provision allows a duty to be assessed only on the cost of the processing abroad. However, its application is precluded where the foreign operations result in commercially different articles or where they complete the manufacture began in the U.S. in order to meet pre-established specifications. Dolliff & Company, Inc. v. U.S., 66 CCPA 77, C.A.D. 1225, 599 F. 2nd 1015 (1979). In a ruling dated November 8, 1982 (067999), copy enclosed, we ruled that certain articles of wearing apparel exported to Canada for the imprinting of designs or lettering by the silkscreen method would not be eligible for tariff treatment under the alterations provision when returned to the U.S. The printing of words or designs was considered to create a different article of commerce offered for sale as a novelty item in different markets and to different classes of buyers. Moreover, the printing operation was the final step in the manufacture of a printed garment ready for marketing as a novelty item and, therefore, exceeded an alteration. Cotton woven underwear shorts printed in Canada are classifiable under the provision for men's underpants, briefs, of cotton in subheading 6207.11.00, HTSUS, with duty at the rate of 5.8 percent ad valorem. HOLDING: The provision for alterations made abroad in subheading 9802.00.50, HTSUS, does not apply in the case where U.S.-made shorts are printed with designs or words in Canada and the shorts would be classifiable under subheading 6207.11.00, HTSUS. Sincerely, John Durant, Director Commercial Rulings Division Enclosure