HQ 555430: Applicability of partial duty exemption under subheading 9802.00.50, HTSUS, to fabric exported to Canada for pleating

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 555430

                                    July 3, 1990

          CLA-2  CO:R:C:V  555430 LS

          CATEGORY:  Classification

          TARIFF NO.:  9802.00.50

          Mr. William J. LeClair
          Trans-Border Customs Services
          One Trans-Border Drive
          P.O. Box 800
          Champlain, New York 12919

          RE:  Applicability of partial duty exemption under subheading
               9802.00.50, HTSUS, to fabric exported to Canada for pleating

          Dear Mr. LeClair:

                This is in response to your letter of May 25, 1989, to our
          Customs office in Champlain, New York, on behalf of Unique Lamp
          Shade, Ltd., requesting a ruling on the applicability of
          subheading 9802.00.50, Harmonized Tariff Schedule of the United
          States (HTSUS), to pleated fabric imported from Canada for use in
          the manufacture of lamp shades.  Your letter was referred through
          the National Import Specialist in New York to this office for
          preparation of a response.  We regret the delay in responding.

          FACTS:

                Unique Lamp Shade, Ltd. exports U.S.-made polyester/cotton
          blend fabric in rolls to Canada where the fabric is pleated by
          means of a heat processing operation.  During the pleating
          operation, paper is placed between the fabric and heat press to
          prevent damage to the fabric.  The fabric with 1/4 inch pleats is
          then placed on rolls and returned to the U.S.  When the fabric is
          used in the U.S. in the manufacture of lamp shades, the paper
          backing is removed.  You state that the fabric will not be cut or
          subjected to any operation in Canada except for pleating.  You
          contend that the pleating operation constitutes an alteration for
          purposes of subheading 9802.00.50, HTSUS.

          ISSUE:

                Whether fabric which is exported to Canada for a pleating
          operation will be entitled to the partial duty exemption under
          subheading 9802.00.50, HTSUS, when returned to the U.S. for use
          in making lamp shades.













                                        - 2 -

          LAW AND ANALYSIS:

                Subheading 9802.00.50, HTSUS, provides a partial duty
          exemption for articles returned to the U.S. after having been
          exported to be advanced in value or improved in condition by
          means of repairs or alterations.  Such articles are dutiable only
          upon the 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 articles
          or create new or commercially different articles.  See A.F.
          Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956);
          Guardian Industries Corp. v. United States, 3 CIT 9 (1982).
          Tariff treatment under subheading 9802.00.50, HTSUS, also is
          precluded where the exported articles are incomplete for their
          intended use prior to the foreign processing.  Guardian.  As
          stated in Dolliff & Company, Inc. v. United States, 81 Cust. Ct.
          1, C.D. 4755, 455 F. Supp. 618 (1978), aff'd, 66 CCPA 77, 82,
          C.A.D. 1225, 599 F.2d 1015, 1019 (1979), "repairs and alterations
          are made to completed articles and do not include intermediate
          processing operations which are performed as a matter of course
          in the preparation or the manufacture of finished articles."

                Applying these principles to the pleating operation
          performed in Canada, we find that the operation exceeds an
          alteration and constitutes a manufacturing process.  The fabric,
          in its condition as exported, is not a completed article since it
          is not suitable for its intended use as lamp shade fabric.
          Instead, it is suitable for a multitude of uses.  The pleating
          operation is a necessary intermediate manufacturing process which
          makes the fabric suitable for use in the production of lamp
          shades.  Upon return to the U.S., the fabric undergoes further
          processing, including cutting operations and removal of the
          backing paper.

          HOLDING:

                On the basis of the information submitted, it is our
          opinion that the foreign operation constitutes a process of
          manufacture and not an alteration, within the meaning of
          subheading 9802.00.50, HTSUS.  Accordingly, the pleated fabric
          will not be eligible for the partial duty exemption available
          under this tariff provision when returned to the U.S.

                                        Sincerely,



                                        John Durant, Director
                                        Commercial Rulings Division