HQ 226858: Temporary importation bond; subheading 9813.00.05, HTSUS;Repair; Alteration; Processing; 19 CFR 181.53(b)(5);Sizing and dyeing.

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 226858

                              July 12, 1996

CON-9-04-RR:IT:EC   226858 GOB

CATEGORY:   Entry/Temporary Importation Bond

Mary A. LaValley
Angel L. Cooper
A.N. Deringer, Inc. 
173 W. Service Road
Champlain, New York 12919

RE:  Temporary importation bond; subheading 9813.00.05, HTSUS;
Repair;        Alteration; Processing; 19 CFR 181.53(b)(5);
Sizing and dyeing.  

Dear Ms. LaValley and Ms. Cooper:

     This is in response to your letters of March 28, 1996 and
May 7, 1996 on behalf of Fersten Headwear ("Fersten").

FACTS:

     In your letter of March 28, 1996, you state as follows:

     We have been contacted by our client to obtain a binding
     ruling regarding whether or not sizing and dyeing of hat
     bodies is considered a change in condition in connection
     with the NAFTA Duty Deferral Program.

     With your March 28, 1996 letter, you submitted a handwritten
letter of March 26, 1996 from Fersten to you.  That letter
states:

     ...the bodies are shipped into the USA - They are only sized
     (which only stiffens the body) and dyed different colours -
     then returns [sic] to Canada still as a straw body and once
     in Canada we manufacture these bodies into many different
     straw hats.  (Emphasis in original.)

     In response to our request for additional information, with
your May 7, 1996 letter you submitted a letter to you dated April
25, 1996 from St. Louis Dyeing and 

Processing Co. ("St. Louis"), which performs the sizing and
dyeing for Fersten.  In its letter, St. Louis states:

     The unfinished hat bodies are received nested and compressed
     into bales containing 25 dozen each.  I have enclosed 1 hat
     body just as it is received by us.  There are 3 distinct
     processes needed to present our customer with a hat body
     that he may press out into the desired shape and decorate
     accordingly.  Process #1: The hat bodies are folded and
     placed into a bleach vat to be bleached lightly in order to
     facilitate their acceptance of the dyes used.  They are
     finished and sent to -- Process #2: The hat bodies are
     placed in "cages" and lowered into the dye vats and dyed and
     finished into the proper colors.  They are then dryed on a
     conveyor dryer and inspected for any flaws or color
     discrepancies.  After inspection they are sent to -- Process
     #3: The hat bodies are again folded and dunked into a water
     borne sizing (stiffening agent) and sent through another
     conveyor dryer to be stacked and boxed up ready to be
     shipped to our customers in Canada or the U.S.
    
     You do not identify which duty-deferral provision your
request relates to.  We assume that it relates to subheading
9813.00.05, HTSUS.

ISSUES:

     1.  May the hat bodies be entered under subheading
9813.00.05, HTSUS?

     2.  Is 19 CFR 181.53(b)(5) applicable to the factual
situation described supra?

LAW AND ANALYSIS:

Issue One

     Pursuant to General Note 1, Harmonized Tariff Schedule of
the United States ("HTSUS"), all merchandise imported into the
United States is subject to duty unless specifically exempted
therefrom.

     Subheading 9813.00.05, HTSUS, provides for the temporary
duty-free entry of:

     Articles to be repaired, altered, or processed (including
     processes which result in articles manufactured or produced
     in the United States.)

     Pursuant to U.S. Notes 1(a) and (c) of Subchapter XIII of
Chapter 98, HTSUS, which contains subheading 9813.00.05:

     
     The articles described in the provisions of this subchapter,
     when not imported for sale or for sale on approval, may be
     admitted into the United States without the payment of duty,
     under bond for their exportation within 1 year from the date
     of importation, which period, in the discretion of the
     Secretary of the Treasury, may be extended, upon
     application, for one or more further periods which, when
     added to the initial 1 year, shall not exceed a total of 3
     years ...
     ...
     For purposes of this subchapter, if an article imported into
     the United States under heading 9813.00.05 is withdrawn for
     exportation to the territory of Canada or Mexico, the duty
     assessed shall be waived or reduced in an amount that does
     not exceed the lesser of the total amount of duty payable on
     the article that would have been payable on importation
     under chapters 1 through 97, inclusive, of the Harmonized
     Tariff Schedule of the United States or the total amount of
     customs duties paid to Canada or to Mexico on the exported
     article, unless such article is covered by section 203(a)(1)
     through 203(a)(8), inclusive, of the NAFTA Implementation
     Act.  The amount of duties or refunds calculated on such
     articles pursuant to this note shall be adjusted to take
     into account any subsequent claim for preferential tariff
     treatment made to another NAFTA country.  This note shall
     apply to shipments to Canada on or after January 1, 1996,
     and to Mexico on or after January 1, 2001.

     At issue are the applicability of subheading 9813.00.05,
HTSUS, and 19 CFR 181.53(b)(5) to the factual situation described
by the ruling requester on behalf of Fersten.

     Webster's Third New International Dictionary (unabridged,
1966) defines the verb "process" as follows, in pertinent part:

     process ... 1 a : to proceed against by law...2 : to subject
     to a particular method, system, or technique of preparation,
     handling, or other treatment designed to effect a particular
     result : put through a special process: as a (1) : to
     prepare for market, manufacture, or other commercial use by
     subjecting to some process ... (2) to make usable by special
     treatment ...

     We believe that the dyeing and sizing of the hat bodies, as
described supra, clearly falls within the second definition of
"process," supra.

     In Ruling 224661 dated January 11, 1994, which pertained to
subheading 9813.00.05, we stated that "[t]he processing can be a
relatively minor procedure or extensive enough to be considered a
manufacture or production."  

     In other rulings involving subheading 9813.00.05, we have
held the following to be a "processing":  a melting procedure
(Ruling 223003 dated October 15, 1991, citing DB 200149 dated May
13, 1963, where we held a freezing procedure to be a processing); 
the cutting and sewing of airline seat covers (Ruling 222106
dated March 27, 1990);  embroidery (Ruling 223640 dated March 2,
1992);  and the trimming of coils to reduce their width and the
cutting of edges to certain tolerances (Ruling 224283 dated March
17, 1993).
     
     Based upon the above authorities, we determine that the hat
bodies may be entered under subheading 9813.00.05 because they
are processed within the meaning of subheading 9813.00.05. 

     Please note, however, that if the hat bodies are not
exported, they are not eligible for treatment under subheading
9813.00.05.  See U.S. Note 1(a) of Subchapter XIII of Chapter 98,
HTSUS, excerpted supra.  In this regard, we note that the letter
of April 25, 1996 from St. Louis, excerpted supra, states that,
after the processing, the hat bodies are "stacked and boxed up
ready to be shipped to our customers in Canada or the U.S." 
(Emphasis supplied.)

     Please note U.S. Note 2(b) of Subchapter XIII of Chapter 98,
HTSUS, which states:

     2.  Merchandise may be admitted into the United States under
     heading 9813.00.50 only on condition that:
     *     *     *     *     *
     (b) If any processing of such merchandise results in an
     article (other than an article described in (a) of this U.S.
     Note) manufactured or produced in the United States:

     (i) A complete accounting will be made to the Customs
     Service for all articles, wastes and irrecoverable losses
     resulting from such processing; and

     (ii) All articles and valuable wastes resulting from such
     processing will be exported or destroyed under customs
     supervision within the bonded period; except that in lieu of
     the exportation or destruction of valuable waste, duties may
     be tendered on such wastes at rates of duties in effect for
     such wastes at the time of importation.

Issue Two

     19 CFR 181.53(b)(5), promulgated by Treasury Decision 96-14
(published in the Customs Bulletin and Decisions on February 14,
1996 at p.6), provides:

     (5) Temporary importation under bond. Except in the case of
     a good imported from Canada or Mexico for repair or
     alteration, where a good, regardless of its origin, was
     imported temporarily free of duty for repair, alteration or
     processing (subheading 9813.00.05, Harmonized Tariff
     Schedule of the United States) and is subsequently exported
     to Canada or Mexico, duty shall be assessed on the good on
     the basis of its condition at the time of its importation
     into the United States.  Such duty shall be paid no later
     than 60 calendar days after either the date of exportation
     or the date of entry into a duty-deferral program of Canada
     or Mexico, except that, upon filing of a proper claim under
     paragraph (a)(3) of this section, the duty shall be waived
     or reduced in an amount that does not exceed the lesser of
     the total amount of duty payable on the good under this
     section or the total amount of customs duties paid to Canada
     or Mexico.

     A different question is presented with respect to the
applicability of 19 CFR 181.53(b)(5).  In particular, in addition
to being a "processing," is the subject operation a "repair or
alteration," such that the "except" clause at the beginning of
section 181.53(b)(5) would apply to take the operation out of
section 181.53(b)(5)?

     Webster's Third New International Dictionary (unabridged,
1966) defines "repair" as follows, in pertinent part:

     repair ... 1 a: to restore by replacing a part or putting
     together what is torn or broken: fix, mend ... b: to restore
     to a sound or healthy state: renew, revivify...

     It is clear that the work performed is not a repair of the
hat bodies at issue.  There is no restoration, replacement,
renewal, or the like to the hat bodies.

     Webster's Third New International Dictionary (unabridged,
1966) defines "alteration" and "alter" as follows, in pertinent
part:

     alteration ... 1 a: the act or action of altering b: the
     quality or state of being altered 2: the result of
     altering...

     alter ... 1: to cause to become different in some particular
     characteristic (as measure, dimension, course, arrangement,
     or inclination) without changing into something else ... syn
     see change

     The Random House Dictionary of the English Language (The
Unabridged Edition, 1973) defines "alteration" and "alter" as
follows, in pertinent part:

     alteration ... 1. the act or state of altering: or the state
     of being altered ... 2. a change; modification ...

     alter ... 1. to make different in some particular, as size,
     style, course, or the like; modify ... 3. to change; become
     different or modified.

     19 CFR 181.64(a) provides in pertinent part as follows:

     181.64  Goods re-entered after repair or alteration in
     Canada or Mexico.

     (a) General.  This section sets forth the rules which apply
     for purposes of obtaining duty-free or reduced-duty
     treatment on goods returned after repair or alteration in
     Canada or Mexico as provided for in subheadings 9802.00.40
     and 9802.00.50, HTSUS...For purposes of this section,
     "repairs or alterations" means restoration, addition,
     renovation, redyeing, cleaning, resterilizing, or other
     treatment which does not destroy the essential
     characteristics of, or create a new or commercially
     different good from, the good exported from the United
     States.

     The matter at issue here does not involve subheadings
9802.00.40 or 9802.00.50, and thus the definition in section
181.63(a) is not controlling here.  Nevertheless, we believe that
the above definition is instructive.  We believe that the work
performed in this case would not fall within the definition of
"repairs or alterations" in 19 CFR 181.64(a).  While the
definition, supra, includes "redyeing" and the matter here
involves "dyeing," the matter here involves much more than
dyeing.  Further, redyeing denotes that the article has been dyed
previously, which is not the case here.

     In Ruling 557443 dated October 14, 1993, which involved
subheading 9802.00.50, HTSUS (a partial duty exemption for
articles returned to the United States after having been exported
to be advanced in value or improved in condition by repairs or
alterations), we stated:

     Tariff treatment under subheading 9802.00.50, HTSUS, is also
     precluded where the exported articles are incomplete for
     their intended purpose prior to the foreign processing. 
     Guardian [Guardian Industries Corp. v. United States, 3 CIT
     9 (1982)]; Dolliff & Company, Inc. v. United States, 455 F.
     Supp. 618 (CIT 1978), aff'd, 599 F.2d 1015 (Fed. Cir. 1979).

     In Dolliff, supra, certain dacron polyester fabric goods
     were subjected to multiple operations abroad, including
     dyeing, heat-setting, chemical-scouring and treating with
     chemicals.  The finished fabric that was returned to the
     U.S. was denied the partial duty exemption for alterations
     abroad because it was determined that the dyeing and
     numerous other processing steps were all necessarily
     undertaken to produce the finished fabric.

     In an earlier alterations case, C.J. Tower & Sons of
     Niagara, Inc. v. United States, C.D. 2208, 45 Cust. Ct. 111
     (1960), cotton drills were exported and subjected to
     stretching, dyeing, and sizing operations.  The cotton cloth
     that was returned to the U.S. was similarly denied the
     partial duty exemption under item 806.20, Tariff Schedules
     of the United States (TSUS) (now subheading 9802.00.50,
     HTSUS), because it was determined that the merchandise
     exported was changed in color, width, length, porosity, in
     the distribution of the threads in the weave, in weight,
     tensile strength, and suppleness by the foreign processing. 
     In holding that the foreign processing constituted more than
     an alteration, the court found that the returned merchandise
     was a new and different article, having materially different
     characteristics and a more limited and specialized use.

     In general, texturizing changes the dimensions of the yarn
     and may make it softer or give it greater
     elasticity...Customs has long held that texturizing
     operations exceed the meaning of the term alteration for the
     purposes of item 806.20, TSUS.  See DB 474.5 dated February
     24, 1964, which held that the texturizing process that gave
     the yarn twist and resulted in greater elasticity exceeded
     an alteration; TC 511.4 dated July 30, 1963; and SP 511.1
     dated June 11, 1968.  Therefore, in the instant case, we
     find that texturizing the yarn in Finland exceeds an
     alteration because it is a step in the manufacture of
     finished yarn.  Accordingly, the texturized yarn will not be
     entitled to a partial duty exemption under subheading
     9802.00.50, HTSUS, upon importation into the U.S.  (Emphasis
     supplied.)
     
     On the basis of the authorities noted supra, we conclude
that the work described in this case is not an "alteration."  The
sizing and dyeing of the hat bodies "exceeds an alteration."  The
hat bodies were incomplete for their intended use prior to the
processing.  The excerpt from Ruling 557443, supra, and the
authorities cited therein, are very instructive on this issue. 
For example, while the sizing and dyeing of the hat bodies is not
identical to the texturizing in Ruling 557443, the two processes
appear to be somewhat comparable.  Similarly, the processes
described in Dolliff and C.J. Tower & Sons, supra, appear to be
somewhat comparable to the sizing and dyeing at issue here.

     Accordingly, we determine that the work is not a "repair or
alteration," as these words are used in 19 CFR 181.53(b)(5).  

     Thus, the except clause at the beginning of 19 CFR
181.53(b)(5) is not applicable, and 19 CFR 181.53(b)(5) applies
to the factual situation at issue here. 

     We note that the hat bodies are "goods subject to NAFTA
drawback" within the meaning of 19 U.S.C. 3333(a) because they
are not exported to a NAFTA country in the same condition as when
imported into the United States within the meaning of 19 U.S.C.
3333(a)(2).



HOLDINGS:

     1.  If they are exported, the hat bodies may be entered
under subheading 9813.00.05, HTSUS.

     2.  The work at issue is not a "repair or alteration," as
these words are used in 19 CFR 181.53(b)(5).  Thus, the except
clause at the beginning of 19 CFR 181.53(b)(5) is not applicable,
and 19 CFR 181.53(b)(5) applies to the factual situation at issue
here.  The hat bodies are "goods subject to NAFTA drawback"
within the meaning of 19 U.S.C. 3333(a) because they are not
exported to a NAFTA country in the same condition as when
imported into the United States within the meaning of 19 U.S.C.
3333(a)(2).




                              Sincerely,



                              Director,
                              International Trade Compliance
Division