Applicability of partial duty exemption under HTSUS subheading 9802.00.50 to textured polyamide 66 (nylon) filament yarn; texturizing

HQ 557443 October 14, 1993 CLA-2 CO:R:C:S 557443 MLR CATEGORY: Classification TARIFF NO.: 9802.00.50 Ms. Janne Markala Kemira Fibres Filaments P.O. Box 24 37601 Valkeakoski, Finland RE: Applicability of partial duty exemption under HTSUS subheading 9802.00.50 to textured polyamide 66 (nylon) filament yarn; texturizing Dear Ms. Markala: This is in response to your letter of June 7, 1993, forwarded to our branch by the Chief, Textiles & Plastic Branch, New York Seaport, regarding the applicability of subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), to textured polyamide 66 (nylon) filament yarn. FACTS: Kemira Fibres of Finland ("Kemira") proposes to ship untexturized, continuous extruded multifilament yarn to Finland where it will be texturized by an air jet process. The untexturized yarn may be of U.S.-origin. The resulting product will be textured polyamide 66 (nylon) filament yarn. ISSUE: Whether untexturized yarn exported from the U.S. to Finland to be texturized is eligible for a partial duty exemption under subheading 9802.00.50, HTSUS, when returned to the U.S. LAW AND ANALYSIS: Subheading 9802.00.50, HTSUS, provides a partial duty exemption for articles returned to the United States after having been exported to be advanced in value or improved in condition by repairs or alterations. Such articles are dutiable only upon the cost or value of the foreign repairs or alterations, provided the documentary requirements of section 10.8, Customs Regulations (19 CFR 10.8) are satisfied. However, entitlement to this tariff treatment is precluded in circumstances where the operations performed abroad destroy the identity of the exported articles or create new or commercially different articles. See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956), aff'g C.D. 1752, 36 Cust. Ct. 46 (1956); Guardian Industries Corp. v. United States, 3 CIT 9 (1982). Tariff treatment under subheading 9802.00.50, HTSUS, is also precluded where the exported articles are incomplete for their intended purpose prior to the foreign processing. Guardian; Dolliff & Company, Inc. v. United States, 455 F. Supp. 618 (CIT 1978), aff'd, 599 F.2d 1015 (Fed. Cir. 1979). In Dolliff supra, certain dacron polyester fabric goods were subjected to multiple operations abroad, including dyeing, heat- setting, chemical-scouring and treating with chemicals. The finished fabric that was returned to the U.S. was denied the partial duty exemption for alterations abroad because it was determined that the dyeing and numerous other processing steps were all necessarily undertaken to produce the finished fabric. In an earlier alterations case, C.J. Tower & Sons of Niagara, Inc. v. United States, C.D. 2208, 45 Cust.Ct. 111 (1960), cotton drills were exported and subjected to stretching, dyeing, and sizing operations. The cotton cloth that was returned to the U.S. was similarly denied the partial duty exemption under item 806.20, Tariff Schedules of the United States (TSUS) (now subheading 9802.00.50, HTSUS), because it was determined that the merchandise exported was changed in color, width, length, porosity, in the distribution of the threads in the weave, in weight, tensile strength, and suppleness by the foreign processing. In holding that the foreign processing constituted more than an alteration, the court found that the returned merchandise was a new and different article, having materially different characteristics and a more limited and specialized use. In general, texturizing changes the dimensions of the yarn and may make it softer or give it greater elasticity. The air jet process (which is used by Kemira) involves feeding continuous filament yarn through an air jet onto take-up rollers which draw off the yarn at a speed lower than the speed at which it is fed into the jet, causing the formation of numerous random loops. See HRL 073917 dated September 29, 1985. Customs has long held that texturizing operations exceed the meaning of the term alteration for the purposes of item 806.20, TSUS. See DB 474.5 dated February 24, 1964, which held that the texturizing process that gave the yarn twist and resulted in greater elasticity exceeded an alteration; TC 511.4 dated July 30, 1963; and SP 511.1 dated June 11, 1968. Therefore, in the instant case, we find that texturizing the yarn in Finland exceeds an alteration because it is a step in the manufacture of finished yarn. Accordingly, the texturized yarn will not be entitled to a partial duty exemption under subheading 9802.00.50, HTSUS, upon importation into the U.S. HOLDING: On the basis of the information submitted, texturizing the yarn in Finland creates a new or commercially different article and completes the yarn for its intended use, thereby precluding it from receiving a partial duty exemption under 9802.00.50, HTSUS. Sincerely, John Durant, Director