HQ 224933: Request for Internal Advice concerning the establishment of abonded warehouse.

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 224933

                        February 10, 1994


WAR-3-01/02 CO:R:C:E 224933  TLS

CATEGORY: Entry

District Director
U.S. Customs Service
1801-K Cross Beam Drive
Charlotte, North Carolina  28217


RE: Request for Internal Advice concerning the establishment of a
bonded warehouse.


Dear Sir:

     This office has received the above-referenced request for
internal advice as provided for under Customs regulations.  We
have considered the request and have made the following decision.

FACTS:

     The importer wishes to import cotton fabric from Pakistan in
rolls.  The fabric is to be imported to a bonded warehouse for
further processing.  The processing will consist of either
printing the fabric, coating one side of the fabric, or both
printing and coating the fabric.

     This request for advice concerns whether the processing
described above is permissible in a bonded warehouse.  The
importer proposes two different sitations:  The fabric is
processed and then withdrawn from the warehouse for exportation
under bond, or processed and then entered for consumption into
the Customs territory.  The fabric will not be processed any
further than what is described above.

ISSUE:

     Whether the printing, coating, or printing and coating of
fabric imported in rolls in a bonded warehouse is considered a
manipulation or manufacture.

LAW AND ANALYSIS:

     The controlling statute in this case is 19 U.S.C. 1562.  The
relevant part reads as follows:

     ...upon permission therefor being granted by the
     Secretary of the Treasury, and under customs
     supervision, at the expense of the proprietor,
     merchandise may be cleaned, sorted, repacked, or
     otherwise changed in condition, but not manufactured,
     in bonded warehouses established for that purpose... 
     (Emphasis added.)

     The Court of International Trade recently ruled that, for
the purposes of 19 U.S.C. 1562, merchandise may be considered
"manufactured" even if the processing results in merely a
material for further manufacture.  Tropicana Products, Inc. v.
United States, 789 F. Supp. 1154, 1158 (CIT 1992).  The court
found that while the processing of orange juice in the case might
not have been considered a manufacture under other Customs
provisions, its concern focused on whether the merchandise had
been transformed for the purposes of section 1562.  In finding
so, the court noted that the orange juice was not yet fit for
market but had been transformed into a product from which another
product could be made.  Id.

     In the present case, the fabric will be printed and/or
coated.  To present just one example of what might be considered
a manufacture a particular instance, we look to a section of the
Customs regulations.  The regulation establishes, for the purpose
of determining whether an article is the product of a particular
country or territory, a threshold requirement of dyeing and
printing of fabric along with two of several other processes.  19
CFR 12.130(e)(1)(i).  Clearly, the requirement is not met in this
case.  Our analysis does not end there, however, since we are not
concerned here with whether the merchandise is the product of a
particular country or territory.  To emphasize, our focus
concerns whether the merchandise has been changed in condition so
as to be considered a manufacture for the purposes of 19 U.S.C.
1562.

     The Tropicana court stressed that the merchandise must not
be "otherwise changed in condition" as stated in the statute. 
From the description of the coating and printing processes that
we received from you, it appears that the merchandise in fact
does change in condition.  The coating process allows the fabric
to be used in the manufacturing of ironing board covers.  The
transformation from mere fabric to material on which clothes can
be ironed.  We believe this is a significant change, one which
changes the condition of the merchandise as comtemplated under
section 1562.  The printing evidently serves a decorative
purpose.  This processing also changes the condition of the
article, theoretically making the fabric more attractive and thus
more marketable.  Again, we find this processing to be the kind
of change in condition section 1562 considers.  Thus, in
accordance with section 1562 and the Tropicana holding, we find
that the processing described above would result in a manufacture
of the subject merchandise if it took place in a bonded
warehouse.

HOLDING:

     The printing and coating operations described above are
considered a manufacture under 19 U.S.C. 1562 for the purposes of
admitting the subject merchandise to a Class 8 bonded warehouse. 
The fabric is not eligible for admission under these
circumstances.

     This decision should be mailed by your office to the
internal advice requester no later than 60 days from the date of
this letter.  On that date the Office of Regulations and Rulings
will take steps to make the decision available to Customs
personnel via the Customs Rulings Module in ACS and to the public
via the Diskette Subscription Service, Lexis, Freedom of
Information Act, and other public access channels.

                    Sincerely,




                    John Durant, Director
                    Commercial Rulings Division