Applicability of subheading 9802.00.50, HTSUS to belted jeans and pants returned from Mexico

HQ 562952 March 29, 2004 CLA-02 RR:CR:SM 562952 DCC CATEGORY: CLASSIFICATION TARIFF NO.: 9802.00.50 Mr. Arthur W. Bodek Grunfeld, Desiderio, Lebowitz, Silerman & Klestadt LLP 399 Park Avenue, 25th Floor New York, NY 10022-4877 RE: Applicability of subheading 9802.00.50, HTSUS to belted jeans and pants returned from Mexico Dear Mr. Bodek: This is in response to your request for a binding ruling dated January 12, 2004, on behalf of LEI Division of Jones Apparel of Texas, Ltd. (“LEI”). Your ruling request concerns the applicability of subheading 9802.00.50, Harmonized Tariff Schedule of the United States (“HTSUS”), to belted jeans and pants that are exported from the United States to Mexico for inspection and tagging operations, after which the garments are returned to the United States. FACTS: Denim jeans or similar pants are manufactured abroad, where they are belted with a foreign-origin belt. The belt may be made of either a textile or non-textile material. LEI imports these belted garments into the United States, pays all applicable duties, and then ships the garments to Mexico. In Mexico, the belted garments are inspected and hang tags and price tags are added to each garment. The garments are then returned to the United States. ISSUE: Whether the previously-imported and duty-paid foreign-origin belted jeans and pants, which are tagged in Mexico, are entitled to the partial duty exemption under subheading 9802.00.50, HTSUS, when returned to the United States. LAW AND ANALYSIS: Subheading 9802.00.50, HTSUS, provides a partial or complete duty exemption for articles exported from and returned to the United States after having been advanced in value or improved in condition in Mexico or Canada by repairs or alterations, provided the documentary requirements of section 181.64(c), Customs and Border Protection (“CBP”) Regulations (19 C.F.R. § 181.64(c)), are satisfied. Section 181.64(a), CBP Regulations, (19 C.F.R. § 181.64(a)), states that: ‘Repairs or alterations’ means restoration, addition, renovation, redyeing, cleaning, resterilizing, or other treatment which does not destroy the essential characteristics of, or create a new and commercially different good from, the good exported from the United States. Court cases considering the applicability of subheading 9802.00.50, HTSUS, and its precursor provisions (item 806.20, Tariff Schedules of the United States (“TSUS”), and, before that, paragraph 1615(g), Tariff Act of 1930), have held that this tariff provision is inapplicable where: (1) 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; or (2) the operations performed abroad destroy the identity of the exported articles or create new or commercially different articles through a process of manufacture. See Guardian Indus. v. United States, 3 CIT 9 (1982) (holding that U.S.-origin glass for use in sliding doors exported to Canada for annealing was incomplete for intended use when the glass failed to conform to U.S. federal regulations prior to the Canadian processing), and Dolliff & Co. v. United States, 455 F. Supp. 618 (Cust. Ct. 1978), aff’d 599 F.2d 1015 (C.C.P.A. 1979) (ruling that foreign heat-setting, chemical-scouring, dyeing, and chemical treatment of U.S.-origin greige fabrics produced finished goods such that the foreign processing could not be considered an alteration for purposes of item 806.20, TSUS). With regard to the tagging operations you intend to conduct in Mexico, CBP has held that marking or affixing a label to a product constitutes an alteration. See HRL 071159, dated March 2, 1983 (diodes exported to Mexico for marking and packaging operations were entitled to treatment under item 806.20, TSUS, as the printing operation had no more significance than a label for identification purposes). See also HRL 554996, dated June 30, 1988 (sunglasses exported for inspection, temple adjustment and retagging were entitled to partial duty exemption under item 806.20, TSUS). Consistent with the above rulings, we find that the proposed inspection and tagging operations constitute acceptable “alterations” for purposes of subheading 9802.00.50, HTSUS. Thus, upon return to the United States the belted jeans and pants are entitled to a duty exemption under subheading 9802.00.50, HTSUS, provided the documentary requirements of 19 C.F.R. § 181.64(c) are satisfied. HOLDING: Based on the information provided, we find that the proposed inspection and tagging operations of belted jeans and pants in Mexico qualifies as an alteration for purposes of subheading 9802.00.50, HTSUS. Therefore, the belted garments are entitled to duty-free treatment when returned to the United States, provided the documentary requirements of 19 C.F.R. § 181.64 are satisfied. A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction. Sincerely, Myles B. Harmon, Director Commercial Rulings Division