Applicability of partial duty exemption to certain fabric subjected to a crushing operation abroad

HQ 554945 June 14, 1988 CLA-2 CO:R:C:V 554945 CW CATEGORY: Classification TARIFF NO.: 9802.00.40, HTSUSA (806.20, TSUS) Mr. Leslie A. Regenbogen Darlington Fabrics Corporation 1359 Broadway New York, New York 10018 RE: Applicability of partial duty exemption to certain fabric subjected to a crushing operation abroad Dear Mr. Regenbogen: This is in response to your letter of February 11, 1988, in which you request a ruling concerning the applicability of item 806.20, Tariff Schedules of the United States (TSUS), to certain fabric to be imported from France. Samples have been submitted for examination. FACTS: You advise that your company, a manufacturer of warp knitted elastic fabrics, is considering exporting fabric to France where it will be subjected to a processing operation designed to impart a permanent "crushed" or wrinkled look to the fabric. The fabric will then be imported into the U.S. and sold to U.S. garment producers for manufacture into swimsuits. ISSUE: Whether the described fabric, when returned to the U.S., will be eligible for the partial exemption from duty provided for in item 806.20, TSUS (subheading 9802.00.40, Harmonized Tariff Schedule of the United States Annotated (HTSUSA)). LAW AND ANALYSIS: Item 806.20, TSUS, provides for the assessment of duty on the value of repairs or alterations performed on articles that are sent abroad for that purpose. However, the application of this tariff provision is precluded where the operations performed abroad destroy the identity of the articles or create new or - 2 - or different commercial articles. Item 806.20, TSUS, treatment also is precluded where the exported articles are incomplete for their intended use and the foreign processing operations are necessary to the preparation or manufacture of finished articles. See LeGran Manufacturing Co. v. United States, 59 Cust. Ct. 58, C.D. 3070 (1967), and Dolliff & Company, Inc. v. United States, 66 CCPA 77, C.A.D. 1225 (1979). In Royal Bead Novelty Co. v. United States, 68 Cust. Ct. 154, C.D. 4353 (1972), it was held that glass beads which were exported for the application of a half coating of "Aurora Borealis" to impart a luster effect were entitled to item 806.20, TSUS, treatment. The Court stated that "the identity of the articles in question was not lost or destroyed by the coating process and no new articles were created; beads went out and beads came back." The Court further stated that the application of the coating did not change the "quality, texture, or character" of the beads. It is clear in this case that the fabric in its exported condition is complete for its intended use as material for swimsuits. Moreover, as was the case with respect to the beads in Royal Bead, the identity of the fabric is not lost or destroyed by the "crushing" operation and no new or different commercial article is created. The "crushing" process also does not appear to result in any significant change in the quality, texture, or character of the fabric. HOLDING On the basis of the information and samples submitted, it is our opinion that the process of "crushing" the subject fabric in France constitutes an "alteration," as that term is used in item 806.20, TSUS, thereby entitling the returned fabric to the benefits of that tariff provision. Sincerely, John Durant Director, Commercial Rulings Division