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HQ 554950


April 12, 1988

CLA-2 CO:R:C:V 554950DJG

CATEGORY: CLASSIFICATION

TARIFF NO: 9802.00.40 (806.20, TSUS)

Daniel E. Waltz, Esq.
Patton, Boggs & Blow
2550 M Street, N.W.
Washington, D.C. 20037

RE: The treatment of used clothes imported into the U.S. pursuant to item 806.20, Tariff Schedules of the United States (TSUS) (9802.00.40, Harmonized Tariff Schedule of the United States (HTS)) as a product of Mexico.

Dear Mr. Waltz:

In your letter of March 7, 1988, you asked whether used clothing, sorted and fumigated in Mexico, and reimported under item 806.20, TSUS, should be treated as clothing of Mexico for quota purposes.

FACTS:

Used clothing (20% domestic, 30% foreign and 50% unknown origin) is exported to Mexico for fumigation and sorting, then reimported to the U.S. In Headquarters ruling, 554802, dated December 9, 1987, we held that these articles may be imported under the repairs and alterations provision of item 806.20, TSUS, upon compliance with the regulations. We further held, in HQ 554802, that pursuant to headnote 2, part 1 of schedule 8, TSUS, these articles may not, upon their return to the U.S., be treated as products of the U.S., but must be considered foreign.

You seek clarification on whether these articles should be treated as articles of Mexican origin, in accordance with the provisions of item 806.20, TSUS.

ISSUE:

Whether used clothing, exported from the U.S. to Mexico for repairs or alterations, may upon reimportation pursuant to headnote 2, part 1 of schedule 8, TSUS, be treated as articles of Mexican origin.

LAW AND ANALYSIS:

Although, used clothing, subjected to the kind of process you describe, would, for marking purposes, be considered articles of the U.S., under the provisions of item 806.20, TSUS, the merchandise would, upon reimportation, be treated as foreign. It would not be inconsistent to consider the subject merchandise to be a product of the U.S. for marking purposes while treating the same merchandise upon reimportation as a product of Mexico, since Customs makes country-of-origin determinations within the context of the area in which its being applied. See National Juce Products Ass'n V. United States, 10 CIT , 628 F. Supp.978 (1986). However, we need not rely on this principle in the present case since headnote 2, part 1 of schedule 8, TSUS, creates, in effect, a legal fiction by stating that, "any product of the United States which is returned after having been advanced in value or improved incondition ... shall be treated for the purposes of this act as a foreign article ...". Therefore, for purposes of item 806.20, TSUS, we are directed to "treat" the merchandise, which has an established country-of-origin for marking purposes, as a foreign article. The question remains, however, should the merchandise be treated as a product of Mexico, thus narrowing, for quota and duty purposes, the term "foreign".

Generally, when dealing with item 806.20, TSUS, the mention of country-of-origin is incidental to determinations of the degree of the repairs or alterations performed on the merchandise. If, for example, we discover that, as a result of the process a new article is created, we will find that the process went beyond the contemplated operations allowed under the item. Further, we may determine that the process was so substantial that it effected a change of the merchandise and altered its country-of-origin.

Similarly, in the present case we must determine, in the context of item 806.20, TSUS, what is incidentally a country-of- origin question, that is, whether the merchandise should properly be considered to be (or be treated as) a product of the country in which the repairs or alterations were done, to enable us to apply proper duty and quota within the fiction created by the
headnote. However, the rather unspecific "foreign" designation proscribed by the headnote does not, as a practical matter assist us in this end. We must know the "country" of origin of the merchandise before we can establish the duty or quota. Designating the merchandise as "foreign" is too broad.

Therefore, although Customs is required by the headnote to treat the subject merchandise as foreign, a determination that the articles are of Mexican origin may, in our opinion, be made, provided, a nexus between that country and the merchandise is demonstrated. We are also of the opinion that a sufficient nexus is created by the process performed in the present case to support such a finding for item 806.20, TSUS, purposes.

Under the auspices of item 806.20, TSUS, the repairs or alterations form the basis for determining duty and quota, for otherwise products of U.S. origin, that is, the duty to be paid is based on the value of the repairs or alterations performed on the merchandise. It must logically follow that when the merchandise is reimported, under item 806.20, TSUS, it be treated, for duty and quota purposes, as a product of Mexico, the country in which the repairs or alterations took place.

HOLDING:

Pending implementation of the HTS, under which used clothing may be entered under a separate tariff provision, customs will treat the subject used clothing as articles of Mexican origin for duty and quota purposes upon their reimportation under item 806.20, TSUS.

Sincerely,

John Durant

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