HQ 555535: Applicability of alteration provision in subheading 9802.00.50, HTSUS, to fabrics exported to Canada for heat transfer designs and returned

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 555535

                                    March 15, 1990

            CLA-2 CO:R:C 555535 RA

            CATEGORY:  Classification

            TARIFF NO.:  9802.00.50, HTSUS


            Ms. Ann M. Williams
            A.N. Deringer, Inc.
            30 West Service Road
            Champlain, New York 12919-9703

            RE:  Applicability of alteration provision in subheading
                 9802.00.50, HTSUS, to fabrics exported to Canada for
                 heat transfer designs and returned

            Dear Ms. Williams:

                 This is in response to your letter of November 30, 1989,
            on behalf of Master Fabrics Ltd., in Quebec, requesting a
            ruling on the applicability of subheading 9802.00.50,
            Harmonized Tariff Schedule of the United States (HTSUS) to
            fabrics sent to Canada where designs are applied by a heat
            transfer process before being returned to the United States.

            FACTS:

                 Two different woven fabrics in the greige of U.S.
            manufacture are finished in Canada by printing with a heat
            transfer.  The first item consists of a cotton, polyester, and
            rayon plain fabric which is printed by means of a German-made
            paper by Transfertex.  The second item is a fabric composed of
            a nylon face and a back of polyester and cotton, which is
            printed with a paper transfer of German or U.S. origin.  When
            completed, the first item has a multi-colored design on one
            side and the second item has a pink napped surface on one
            side.

            ISSUE:

                 Are the returned printed fabrics eligible for tariff
            treatment under the alterations provision in subheading
            9802.00.50, HTSUS?

            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











                                         - 2 -

            means of an alteration and duty is assessed only on the cost
            or value of the alteration abroad.  The application of this
            provision is precluded where the operations abroad result in
            new or different articles or are for the purpose of finishing
            them to certain specifications.  Thus, intermediate processing
            operations which are performed in the preparation of finished
            articles do not come within the scope of the term
            "alterations."

                 In Dolliff & Company, Inc. v. U.S., 66 CCPA 77, C.A.D.
            1225 (1979), the court found that the processing steps
            performed on exported greige goods were undertaken to produce
            the finished fabric and could not be considered as
            alterations.  It was concluded that alterations are made to
            completed articles and do not include processing operations
            done as a matter of course in the preparation or the
            manufacture of finished articles.  Congress did not intend to
            permit uncompleted articles to be exported and made into
            finished products in the foreign country and when returned to
            be subject to duties only on the cost of the so-called
            alterations.  U.S. v. J.D. Richardson Co., 36 CCPA 15, C.A.D.
            390 (1948).

                 In Headquarters Ruling Letter of November 2, 1983
            (071501), we held that rolls of fabric in the greige state
            exported to Italy for bleaching, dyeing, and printing and
            returned were dutiable on total value since the process of
            producing the finished article went beyond an alteration.
            Moreover, in Headquarters Ruling Letter dated February 6, 1989
            (554985), we decided that socks sent to Taiwan for silk
            screening with a novelty design could not be treated as merely
            altered abroad because, when returned, they were decorated
            socks in a finished condition.

            HOLDING:

                 On the basis of the information and samples submitted, we
            must conclude that the fabrics involved were incomplete
            articles when exported to Canada and finished products when
            returned which renders them ineligible for the partial duty
            exemption available under subheading 9802.00.50, HTSUS.

                                       Sincerely,




                                       John Durant, Director
                                       Commercial Rulings Division













            6cc:  A.D., NY Seaport
            1cc:  D.D., Champlain, NY
            ARNOLD:lw 2/7/90