CLA-2 CO:R:C:S 557600 MLR

Mr. Steven L. Bullard
Wrangler
P.O. Box 21488
Greensboro, NC 27420-1488

RE: Applicability of duty exemption under HTSUS subheading 9802.00.50 to washing; pressing; stapling; use of "tach-it" barbs; tack stitching; jeans; country of origin; quota; visa

Dear Mr. Bullard:

This is in reference to your letter of September 28, 1993, requesting a ruling regarding the implications on country of origin marking, duty, and visa and/or quota restrictions to denim jeans subjected to certain operations in Mexico. The determination as to the visa and quota requirements has been referred to the Textiles Classification Branch and will be addressed in a separate letter.

FACTS:

You state that Wrangler Jeans, part of V.F. Corp., plans to ship denim jeans to Mexico. In a telephone conversation with a member of my staff, you indicated that the jeans are made in the U.S. from fabric which is also produced in the U.S. As to the fabric, however, you state only that it is made from "North American" origin yarn. In Mexico, non-permanent ticketing will be tack stitched to the jeans or will be attached using tack-it barbs or staples. The ticketing includes a warranty statement, back pocket paper billboards, paper tickets, and/or hangtags. Permanent labeling would already be attached to the jeans in the U.S. The jeans also will be washed in a water and detergent solution and pressed in Mexico. The jeans are then re-packed and shipped to Wrangler in the U.S.

ISSUES:

I. Whether the jeans subjected to washing, pressing, stapling, "tack it", and tack stitching operations in Mexico will qualify for the duty exemption under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), when returned to the U.S.

II. What is the country of origin of the jeans upon their return to the U.S.?

LAW AND ANALYSIS:

Articles exported from and returned to the U.S., after having been advanced in value or improved in condition by repairs or alterations in Mexico, may qualify for a duty exemption under HTSUS subheading 9802.00.50, provided the foreign operation does not destroy the identity of the exported articles or create new or commercially different articles through a process of manufacture. 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). Accordingly, entitlement to this tariff treatment is 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). Articles are entitled to this duty exemption provided the documentary requirements of section 181.64, of the North American Free Trade Agreement (NAFTA), Interim Rules (T.D. 94-1), which were published December 30, 1993 (58 Fed. Reg. 69483) (copy enclosed), are met.

We have ruled that marking or affixing a label to a product constitutes an alteration. See T.D. 56320(1) dated September 17, 1964 (electrical diodes exported to Mexico for inspection, evaluation, and stamping of their electrical diode characteristics were entitled to treatment under 806.00, Tariff Schedules of the United States (TSUS) (now 9802.00.50, HTSUS); see also Headquarters Ruling Letter (HRL) 071159 dated March 2, 1983 (diodes exported to Mexico for marking and packaging operations were entitled to treatment under 806.20, TSUS, as the printing operation had no more significance than a label for identification purposes).

We have also ruled that certain cleaning operations constituted alterations. See HRL 555180 dated December 26, 1989 (carrots exported to Mexico for washing, cooling, sorting by size, grading for quality, and packaging for retail sale were entitled to the partial duty exemption provided for under subheading 9802.00.50, HTSUS); see also Wilbur G. Hallauer v. United States, 40 CCPA 197, C.A.D. 518 (1953) (apples exported for wiping (to remove an insecticide spray), polishing, grading and wrapping were entitled to tariff treatment under the alterations provision).

Consequently, in the instant case, we find that the washing, pressing, stapling, "tack it", and tack stitching operations performed on the jeans in Mexico constitute "alterations", thereby qualifying the jeans for the full duty exemption under subheading 9802.00.50, HTSUS, when returned to the U.S., provided the documentary requirements of section 181.64 are met.

Regarding the country of origin of the jeans upon return to the U.S. from Mexico, the Rules for Determining Country of Origin of a Good for Purposes of Annex 311 of the North American Free Trade Agreement, (new Part 102) Interim Rules (T.D. 94-4), which were published January 3, 1994 (59 Fed. Reg. 110) and corrected February 3, 1994 (59 Fed. Reg. 5082), will be applicable.

Section 102.11(a) of the Interim Rules provides that the country of origin of a good is the country in which:

(1) the good is wholly obtained or produced; (2) the good is produced exclusively from domestic materials; or (3) each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20, and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.

We find that pursuant to this section, the jeans are products of the U.S. at the time of exportation to Mexico.

Section 102.14 of the Interim Rules provides that:

[n]o good, last advanced in value or improved in condition outside the United States has United States origin. If under any provision of this part such a good is determined to be a good of the United States, that determination will be disregarded and the country of origin of the good will be the last foreign country in which the good was advanced in value or improved in condition.

As we determined above, the operations performed on the jeans in Mexico are alterations, which therefore constitute an advancement in value or improvement in condition of the jeans within the meaning of section 102.14.

Therefore, pursuant to section 102.14, the proper country of origin of the jeans for marking purposes will be "Mexico" upon their return to the U.S. Pursuant to section 134.43(e) of the Customs Regulations (as amended by T.D. 94-4) (copy enclosed), the goods may be marked: (1) Further processed in Mexico from U.S. materials; (2) Product of Mexico made from U.S. components; or (3) Product of Mexico.

You also requested our opinion regarding which operations could be omitted so that the country of origin for the jeans would remain the U.S. Subheading 9801.00.10, HTSUS, provides for the free entry of products of the U.S. that have been exported and returned without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, provided the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1), are met. In United States v. John V. Carr & Sons, Inc., 69 Cust. Ct. 78, C.D. 4377, 347 F. Supp. 1390 (1972), 61 CCPA 52, C.A.D. 1118, 496 F.2d 1225 (1974), the court stated that absent some alteration or change in the item 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 being classified under item 800.00, TSUS (now subheading 9801.00.10, HTSUS). Therefore, assuming that the jeans were not washed or pressed in Mexico, they would be entitled to be entered under subheading 9801.00.10, HTSUS, as American Goods Returned.

Lastly, for your general information, there are no quotas on NAFTA originating textile and apparel articles, nor are visas required. However, in order to claim eligibility as a NAFTA originating good, you must determine under which provision of General Note 12, HTSUS (Article 401 of NAFTA) the jeans qualify as originating goods. In order for Customs to issue a ruling on this matter, you need to submit information which will enable Customs to determine the classification of the jeans and all other materials (including the yarn) used to produce the jeans. Please send this information to U.S. Customs Service, 1301 Constitution Ave., N.W. (Franklin Court), Washington, D.C. 20229, Attn: Textiles Classification Branch. Upon receipt of these additional facts, the textile and visa issue will be addressed in a separate ruling.

HOLDING:

On the basis of the information submitted, it is our opinion that the jeans subjected to washing, pressing, stapling, "tack it", and tack stitching operations in Mexico will qualify for the full duty exemption under subheading 9802.00.50, HTSUS, when returned to the U.S., provided the documentary requirements of section 181.64 (T.D. 94-1) are satisfied. The country of origin of the jeans will be Mexico. The jeans may be marked in accordance with 19 CFR 134.43 (T.D. 94-4) either (1) Further processed in Mexico from U.S. materials; (2) Product of Mexico made from U.S. components; or (3) Product of Mexico.

Sincerely,

John Durant, Director
Commercial Rulings Division

Enclosures