HQ 555143: Applicability of subheading 9802.00.50, HTSUS, to grey cotton fabric shipped to Canada to be treated with a fire retardant chemical

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                                      HQ 555143


                                    May 19, 1989


          CLA-2  CO:R:C:V  555143 DBI

          CATEGORY:  Classification

          TARIFF NO.:  9802.00.50, HTSUS

          Mr. S. Fattal
          S. Fattal Cotton Inc.
          200 Edgehill Road
          Montreal, Canada H3Y 1E9

          RE:   Applicability of subheading 9802.00.50, HTSUS, to grey
                cotton fabric shipped to Canada to be treated with a fire
                retardant chemical

          Dear Mr. Fattal:

                This is in response to your letter of February 9, 1987, to
          the Area Director of Customs, New York Seaport, in which you
          request a ruling concerning the applicability of item 806.20,
          Tariff Schedules of the United States (TSUS) (now subheading
          9802.00.50, Harmonized Tariff Schedule of the United States
          (HTSUS)), to cotton grey fabric which is shipped from the U.S. to
          Canada to be treated with fire retardant chemicals and returned.
          Your letter was referred to this office for a response.  We
          regret the delay in replying to your inquiry.

          FACTS:

                You advise that greige woven cotton fabric of U.S. origin
          will be shipped to Canada to be treated with a solution to render
          the fabric fire retardant.  The fabric is described as a grey
          cotton osnaburg which is generally a plain woven, coarse yarn,
          medium to heavy weight fabric of low construction.  Following the
          chemical treatment, the goods will be returned to the U.S.  You
          have not provided any information on the intended use of the
          fabric or the processes that will be performed in the U.S. after
          the fabric's return to make it suitable for its intended use.  We
          understand, however, that such chemical treatment often is
          performed on fabrics used for upholstery and draperies.  No
          sample was provided.   


















                                         -2-



          ISSUE:

                Whether the described cotton fabric, when returned to the
          U.S., will be eligible for the partial exemption from duty
          provided for in subheading 9802.00.50, HTSUS.

          LAW AND ANALYSIS:

                As you are probably aware, the HTSUS replaced the TSUS, on
          January 1, 1989.  Item 806.20, TSUS, was carried over into the
          HTSUS as subheadings 9802.00.40 (repairs or alterations made
          pursuant to warranty) and 9802.00.50 (other repairs or
          alterations).  These provisions provide for the assessment of
          duty on the value of repairs or alterations performed on articles
          returned to the U.S. after having been exported for that purpose.
          However, the application of these tariff provisions is precluded
          in circumstances where the operations performed abroad destroy
          the identity of the articles or create new or commercially
          different articles.  See A.F. Burstrom v. United States, 44 CCPA
          27, C.A.D. 631 (1957);  Guardian Industries Corporation v. United
          States, 3 CIT 9, Slip Op. 82-4 (Jan. 5, 1982).  Treatment under
          subheadings 9802.00.40 and 9802.00.50, HTSUS, also is precluded
          where 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.  Dolliff and
          Company, Inc. v. United States, 66 CCPA 77, C.A.D. 1225,  599
          F.2d 1015 (1979).

                We have previously held in a ruling dated May 13, 1987 (HQ
          554541), that item 806.20, TSUS, treatment was precluded where
          fabric, intended to be used as window coverings, was exported to
          Holland to be treated with a special resin chemical to make it
          more receptive to pleating.  Following the chemical treatment,
          the fabric was squeezed, dried and returned to the U.S. for
          completion by the pleating process.  We reasoned that while
          unpleated fabric may be used as a window covering, the fabric was
          exported not as fabric to be pleated abroad, but as fabric
          exported for a chemical treatment that would prepare the fabric
          for the pleating process upon return.  This was considered an
          intermediate processing of unfinished goods and a continuation of
          the total goods-in-process manufacture that would produce pleated
          goods.  


















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                In ruling 554541 we distinguished the facts in that case
          from those in an earlier case where red cedar shakes and shingles
          were exported to Canada to be treated with fire retardant
          chemicals (Headquarters Ruling Letter 554192 dated September 5,
          1986).  In ruling 554192, we held that the shakes and shingles
          were entitled to item 806.20, TSUS, treatment because they were
          completed articles ready for their intended use, were regularly
          so used in their untreated condition, and appeared to be
          preferred over the more expensive treated product by the vast
          majority of customers.  We also stated that they did not lose
          their identity in the fire-retardant process.

                In the present case, although you have not provided any
          information regarding the intended uses of the fabric, we presume
          that since the fabric constitutes greige goods, it is unfinished
          for its intended use when exported to Canada.  To the extent that
          the goods are sent to Canada, treated with the chemicals, and
          then returned to the U.S. for further processing into finished
          fabric, the returned fabric would not be entitled to subheading
          9802.00.50, HTSUS, treatment.  The foreign processing would be
          merely an intermediate processing of unfinished goods to prepare
          the fabric for manufacture into finished fabric.

          HOLDING:

                The information submitted indicates that when the greige
          fabric is returned to the U.S., it will be further processed into
          finished fabric for possible use as draperies or upholstery.
          Under these circumstances, the foreign chemical treatment may not
          be considered an alteration as that term is used in subheading
          9802.00.50, HTSUS, and, therefore, the returned fabric would not
          be entitled to the benefits of this tariff provision.

                                     Sincerely,





                                     John Durant
                                     Director, Commercial
                                     Rulings Division