CON-9-04-CO:R:C:E 222106 JR

District Director of Customs
1 Virginia Avenue
Wilmington, North Carolina 28401

RE: Request for Internal Advice (FILE ADM-9-DD, dated January 22, 1990); Temporary Importation Under Bond; 9813.00.05, HTSUS; Airline Seat Covers manufactured with imported customer-owned and specially woven dress fabric; C.S.D. 81-32

Dear Sir:

This is in response to your request for our advice on the Jepson Burns Corporation's desire to import temporarily free of duty under bond woven dress fabric to be made into airline seat covers under subheading 9813.00.05, Harmonized Tariff Schedule of the United States (HTSUS).

The Jepson Burns Corporation, a manufacturer of commercial aircraft seating, will be the importer of record of the customer- owned dress fabric which has been specially woven to the customer's (the foreign airline's) specifications. Jepson Burns cuts and sews the customer-furnished material into dress covers for the aircraft seating they manufacture. After the processing is completed, Jepson Burns either (1) exports the seating directly to the non-U.S. customer in order to be placed in aircraft abroad, i.e., by Airbus Industry, or (2) delivers the seating, as per the terms of its contract with the non-U.S. customer, to Boeing or McDonnell Douglas for installation in an aircraft which will be subsequently exported to the non-U.S. customer (Boeing and McDonnell Douglas have a separate manufacturing contract with the non-U.S. customer).

With respect to the second situation, Jepson Burns states that it obtains a certificate of export from Boeing or McDonnell Douglas which tracks the seats including the covers out of the country. See C.S.D. 81-32 (aircraft that departs from the U.S. empty or in revenue service is "exported" for purposes of cancelling a TIB). Of course, it is clear that the company relies on these third parties (Boeing or McDonnell Douglas) to export the seats within the time limitations of U.S. Note 1(a) to Chapter 98, Subchapter XIII, HTSUS, set out infra. The company states that any scraps of fabric left over after fabrication of the seat covers are retained for inspection and then destroyed, and we assume that they are destroyed as articles of commerce. See U.S. Note 2(b). The balance of the fabric is incorporated into the seats and either exported directly by them or subsequently when the aircraft is exported in compliance with the applicable law.

Your office is concerned that because the Jepson Burns Corporation sells the finished seats to the airlines who supplied the fabric at no cost, subheading 9813.00.05, HTSUS, would not apply.

Subheading 9813.00.05, HTSUS, provides for the importation into the United States temporarily free of duty under bond (TIB), of articles to be repaired, altered or processed (including processes which result in articles manufactured or produced in the United States). U.S. Note 1(a) to Chapter 98, Subchapter XIII, HTSUS, provides in part that merchandise imported under TIB procedures may not be imported for sale or sale on approval. Further, U.S. Note 1(a) allows the initial TIB period, one year from date of importation, to be extended, upon application to the district director, for one or more further periods which, when added to the initial one year, shall not exceed a total of three years.

We are of the opinion that the construction of seat covers from fabric furnished at no cost for incorporation into aircraft seats which are subsequently sold to the supplier of the fabric does not fall into the category of a sale which is impermissible under U.S. Note 1(a), Chapter 98, Subchapter XIII, HTSUS. From the facts presented, it appears that the Jepson Burns selling of the finished seats they manufacture to the non-U.S. customer does not amount to a sale of the seat covers since the company does not include the price of the fabric, the article which is imported and processed, into the finished seats. When Jepson Burns sells the finished seats to the foreign airline, it is not selling the seat covers which cover the seats but sells the actual seats themselves. The foreign airline pays only for the labor of the cutting and sewing of the fabric into seat covers and is not billed for the imported fabric as it was customer- furnished. We do not view this process of sewing the imported customer-owned fabric into seat covers as a sale.

In the instant case, Jepson Burns states that it maintains complete traceability of all the component parts that are installed in the seats as is required by the Federal Aviation Administration. As such, a particular tracking number or "sales order" number is provided to the customer-furnished fabric. Jepson Burns is able to trace the fabric to specific seats, thus maintaining controls over the fabric temporarily imported under bond.

Please note that the imported fabric may be subject to a quota. Any merchandise subject to a quota which has been filled cannot be released under a temporary importation bond. See T.D. 54802(53) and (54). If the quota is open, the merchandise may be entered under TIB procedures, but there will be a charge against the quota.

To summarize, Jepson Burn's cutting and sewing of airline seat covers with imported fabric provided by its customer is a process within the meaning of subheading 9813.00.05, HTSUS. As the imported fabric which is made into seat covers is not sold (there is a charge only for the cutting and sewing) but rather incorporated into the finished seats which are sold to the airline furnishing the fabric, there is no sale per se of the seat covers manufactured from the imported fabric furnished by the customer carrier.


Jerry Laderberg, Acting Director
Commercial Rulings Division