Applicability of subheading 9801.00.10 or 9802.00.50, HTSUS, to embroidered rosebuds from Mexico; 555481

HQ 555633 February 25, 1991 CLA-2 CO:R:C:S 555633 RA CATEGORY: Classification TARIFF NOS.: 9801.00.10, 9802.00.50 Mr. Richard G. Seley Rudolph Miles & Sons Inc. P.O. Box 144 El Paso, Texas 79942 RE: Applicability of subheading 9801.00.10 or 9802.00.50, HTSUS, to embroidered rosebuds from Mexico; 555481 Dear Mr. Seley: This is in response to your letter of April 2, 1990, for a ruling on behalf of the Conso Products Company regarding the applicability of subheading 9801.00.10 or 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), to certain embroidered rosebuds of U.S. origin which are exported to Mexico for packaging and, in some cases, the removal of a thread before being returned to the U.S. We regret the delay in responding. FACTS: Embroidered minature rosebuds made in the U.S. by machine weaving rayon thread are exported to Mexico glued to cheese cloth. At the Mexico plant, the tiny rosebuds are removed from the cheese cloth, inspected, and packaged in a plastic bag holding two gross. Approximately 6% of the rosebuds have a hanging thread which must be snipped off prior to packaging. ISSUE: Whether the packaged rosebuds to be returned to the U.S. are entitled to duty-free treatment under subheading 9801.00.10, HTSUS, or to a partial duty exemption under subheading 9802.00.50, HTSUS. LAW AND ANALYSIS: Subheading 9801.00.10, HTSUS, provides for the duty-free entry of products of the U.S. which are returned without having been advanced in value or improved in condition while - 2 - abroad. Absent some alteration or change in the U.S. product itself, the mere repackaging of the item, even for the purpose of resale to the ultimate consumer, is not sufficient to preclude the merchandise from receiving the benefits of this tariff provision. See United States v. John V. Carr & Son, Inc., 61 CCPA 52, C.A.D. 1118 (1974). Accordingly, the rose- buds which are merely removed from the cheese cloth and packed in plastic bags would qualify for duty-free treatment under subheading 9801.00.10, HTSUS, upon compliance with the documentation requirements of section 10.1, Customs Regulations (19 CFR 10.1). In those instances in which a hanging thread is snipped from the rosebuds prior to packaging, an advancement in value and improvement in condition results. Therefore, duty-free treatment under subheading 9801.00.10, HTSUS, for rosebuds subjected to this cutting operation is precluded. See Headquarters Ruling Letter 555481 dated October 24, 1989. Subheading 9802.00.50, HTSUS, provides for a duty only on the cost or value of repairs or alterations made on articles returned to the U.S. after having been exported for that purpose. However, the articles must be complete for their intended use at the time of their exportation from the U.S., and the foreign operation must not destroy the identity of the exported articles or create new or different articles. Dollill & Company, Inc. v.U.S., 66 CCPA 77, 599 F.2d 1015, C.A.D. 1225 (1979). You state that the "purpose of cutting off a long thread is purely aesthetic, having nothing to do with the function or stability of the product." Moreover, you advise that, while Conso's customers in the U.S. could cut off any loose threads at the time that they sew the rosebuds to their products, Conso prefers to perform this operation before the rosebuds are sold so that they will appear as attractive as possible. Under these circumstances, it is our opinion that the embroidered rosebuds are complete products suitable for their intended use when exported from that U.S., and that the snipping of a loose thread from approximately 6% of the products clearly does not destroy the identity of the article or create a new or different article. Therefore, we find that the cutting of a hanging thread from the completed rosebuds is an operation within the scope of the term repair or alteration under subheading 9802.00.50, HTSUS. Classification under this tariff provision, with duty - 3 - only on the cost or value of the foreign processing operation, requires compliance with the documentation requirements of section 10.8, Customs Regulations (19 CFR 10.8). To obtain the benefits of subheading 9801.00.10, HTSUS, for those rosebuds which are merely packaged abroad, and subheading 9802.00.50, HTSUS, for those items from which a hanging thread is removed, it will be necessary for the importer to substantiate to the satisfaction of the district director of Customs at the port of entry the precise quantity of rosebuds which are entitled to each tariff provision on an entry-by-entry basis. HOLDING: Embroidered rosebuds composed of rayon thread which are exported to Mexico for separation from a cheese cloth carrier and packaged in plastic bags may be returned free of duty under subheading 9801.00.10, HTSUS, upon compliance with the documentation requirements of 19 CFR 10.1. Those rosebuds which have hanging threads removed before packaging are entitled to the partial duty exemption under subheading 9802.00.50, provided the documentation requirements of 19 CFR 10.8 are satisfied. Sincerely, John Durant, Director Commercial Rulings Division