HQ 555633: Applicability of subheading 9801.00.10 or 9802.00.50, HTSUS, to embroidered rosebuds from Mexico; 555481

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 555633

                        February 25, 1991


CLA-2 CO:R:C:S  555633 RA

CATEGORY:   Classification

TARIFF  NOS.:   9801.00.10, 9802.00.50

Mr. Richard G. Seley
Rudolph Miles & Sons Inc.
P.O. Box 144
El Paso, Texas 79942

RE:  Applicability of subheading 9801.00.10 or 9802.00.50, 
     HTSUS, to embroidered rosebuds from Mexico; 555481

Dear Mr. Seley:

     This is in response to your letter of April 2, 1990, for 
a ruling on behalf of the Conso Products Company regarding the
applicability of subheading 9801.00.10 or 9802.00.50, 
Harmonized Tariff Schedule of the United States (HTSUS), to 
certain embroidered rosebuds of U.S. origin which are 
exported to Mexico for packaging and,  in some cases, the 
removal of a thread before being returned to the U.S.  We 
regret the delay in responding.

FACTS:

     Embroidered minature rosebuds made in the U.S. by 
machine weaving rayon thread are exported to Mexico glued to 
cheese cloth.  At the Mexico plant, the tiny rosebuds are 
removed from the cheese cloth, inspected, and packaged in a 
plastic bag holding two gross.  Approximately 6% of the 
rosebuds have a hanging thread which must be snipped off prior 
to packaging.

ISSUE:

     Whether the packaged rosebuds to be returned to the U.S. 
are entitled to duty-free treatment under subheading 
9801.00.10, HTSUS, or to a partial duty exemption under 
subheading 9802.00.50, HTSUS.

LAW AND ANALYSIS:

     Subheading 9801.00.10, HTSUS, provides for the duty-free 
entry of products of the U.S. which are returned without 
having been advanced in value or improved in condition while
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abroad.   Absent some alteration or change in the U.S. product
itself,  the mere repackaging of the item,  even for the purpose
of resale to the ultimate consumer,  is not sufficient to 
preclude the merchandise from receiving the benefits of this 
tariff provision.   See United States v. John V. Carr & Son, 
Inc.,  61 CCPA 52, C.A.D. 1118  (1974).   Accordingly, the rose-
buds which are merely removed from the cheese cloth and packed 
in plastic bags would qualify for duty-free treatment under
subheading 9801.00.10, HTSUS, upon compliance with the
documentation requirements of section 10.1, Customs 
Regulations (19 CFR 10.1).

     In those instances in which a hanging thread is snipped from
the rosebuds prior to packaging, an advancement in value 
and improvement in condition results.   Therefore, duty-free
treatment under subheading 9801.00.10, HTSUS, for rosebuds
subjected to this cutting operation is precluded.   See
Headquarters Ruling Letter 555481 dated October 24,  1989.

     Subheading 9802.00.50, HTSUS, provides for a duty only on the
cost or value of repairs or alterations made on 
articles returned to the U.S. after having been exported for 
that purpose.   However, the articles must be complete for 
their intended use at the time of their exportation from the 
U.S., and the foreign operation must not destroy the identity 
of the exported articles or create new or different articles.
Dollill & Company,  Inc. v.U.S.,  66 CCPA 77,  599 F.2d 1015,
C.A.D. 1225 (1979).

     You state that the "purpose of cutting off a long thread is
purely aesthetic, having nothing to do with the function or
stability of the product."  Moreover, you advise that, while
Conso's customers in the U.S. could cut off any loose threads 
at the time that they sew the rosebuds to their products, 
Conso prefers to perform this operation before the rosebuds 
are sold so that they will appear as attractive as possible. 
Under these circumstances,  it is our opinion that the 
embroidered rosebuds are complete products suitable for their
intended use when exported from that U.S., and that the 
snipping of a loose thread from approximately 6% of the 
products clearly does not destroy the identity of the article 
or create a new or different article.

     Therefore, we find that the cutting of a hanging thread from
the completed rosebuds is an operation within the scope 
of the term repair or alteration under subheading 9802.00.50,
HTSUS.   Classification under this tariff provision, with duty
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only on the cost or value of the foreign processing operation,
requires compliance with the documentation requirements of 
section 10.8, Customs Regulations (19 CFR 10.8).

     To obtain the benefits of subheading 9801.00.10, HTSUS, 
for those rosebuds which are merely packaged abroad, and 
subheading 9802.00.50, HTSUS, for those items from which a 
hanging thread is removed, it will be necessary for the 
importer to substantiate to the satisfaction of the district
director of Customs at the port of entry the precise quantity 
of rosebuds which are entitled to each tariff provision on an
entry-by-entry basis.

HOLDING:

     Embroidered rosebuds composed of rayon thread which are
exported to Mexico for separation from a cheese cloth carrier 
and packaged in plastic bags may be returned free of duty 
under subheading 9801.00.10, HTSUS, upon compliance with the
documentation requirements of 19 CFR 10.1.   Those rosebuds 
which have hanging threads removed before packaging are 
entitled to the partial duty exemption under subheading 
9802.00.50, provided the documentation requirements of 19 CFR 
10.8 are satisfied.

                              Sincerely,



                              John Durant, Director
                              Commercial Rulings Division