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HQ 555510


January 30, 1990

CLA-2 CO:R:C:V 555510 KAC

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.50 (806.20)

Mr. T.A. Schofield
A.N. Deringer, Inc.
R.D. #1 - Box W-432
Alexandria Bay, New York 13607-9798

RE: Request for Reconsideration of Customs Ruling Letter 071770 Dated February 24, 1984

Dear Mr. Schofield:

This is in response to your letter dated October 18, 1989, on behalf of your client, Milliken Industries of Canada Limited, requesting reconsideration of Headquarters Ruling Letter 071770 dated February 24, 1984. That ruling denied eligibility under item 806.20, Tariff Schedules of the United States (TSUS) (now subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS)), to carpet tiles sent to Canada for dyeing operations and then imported into the U.S. Enclosed with your letter were the 1988/1989 Milliken Pattern Listing pamphlet and letters dated July 31, and August 23, 1989, from your client. Samples previously submitted with your 1984 request were examined.

FACTS:

Milliken Industries manufactures carpet tiles at its plant in LaGrange, Georgia. The basic color carpet tiles are shipped to the Milliken plant in Deseronto, Ontario, Canada, where they are unpacked and run through a machine which applies a dye to the carpet tile in a selected design and color. The dyed carpet tile is then washed, dryed and repackaged for shipment to the U.S.

In Headquarters Ruling Letter 071770 of February 24, 1984, we held that the carpet tile imported into the U.S. after the dyeing and washing operations in Canada was not eligible for the partial duty exemption in item 806.20, TSUS. We determined that the dyeing and washing operations constituted a continuation of the manufacture of the carpet tiles.

Your client's letters ask that we consider the fact that the carpet tile exported to Canada and the dyed tile imported into the U.S. are both finished products. In support of this contention, the P 3000 and P 3020 carpet tiles are cited as an example. The P 3000 basic carpet tile is exported to Canada for processing into the P 3020 dyed carpet tile. As evidenced by the 1988/1989 Milliken Pattern Listing pamphlet, both carpet tiles are marketed and sold to the consumer as separate products. In sum, it is alleged that since the P 3000 carpet tile is a finished product before it is shipped to Canada, the operations performed on the carpet tile merely alter it to the P 3020 carpet tile product.

ISSUE:

Whether the operations performed on the U.S. carpet tiles in Canada will entitle the merchandise to the partial duty exemption in subheading 9802.00.50, HTSUS, when returned to the U.S.

LAW & ANALYSIS:

Headquarters Ruling Letter 071770 stated that "it has generally been held, by judicial precedent, that a foreign process that constitutes either an intermediate or finishing step in the preparation of finished goods cannot be characterized as an alteration under the tariff provision." The above referenced judicial precedent refers to, among others, Dolliff & Company, Inc. v. United States, 81 Cust.Ct. 1, C.D. 4755, 455 F.Supp. 618 (1978), aff'd, 66 CCPA 77, C.A.D. 1225, 599 F.2d 1015 (1979). The court in Dolliff found that the processing steps (heat- setting, chemical-scouring, dyeing and a second heat-setting) performed on exported greige goods were all necessarily undertaken to initially produce the finished curtain fabric and did not comprise alterations under item 806.20, TSUS. In reaching its decision, the court distinguished Amity Fabrics, Inc. v. United States, 43 Cust.Ct 64, C.D. 2104, 305 F.Supp 4 (1959), by stating that dyeing and other processing steps are all necessarily undertaken to initially produce the finished fabric and, thus, a result different from Amity must be reached. In Amity, velveteen fabric had been dyed a particular color and placed on sale in the U.S. The color proved to be unpopular and, as a result, the fabric was exported to Italy, dyed black, and then imported back into the U.S. and placed on sale. The court held that the dyeing of the fabric comprised an alteration of an already finished fabric to place it in a more marketable condition without either destroying its identity or creating a new article.

We have previously held that articles that were silk screened, hand-painted or printed abroad and returned to the U.S., were not eligible for item 806.20, TSUS, treatment because the operations performed were more than a mere alteration. See, Headquarters Ruling Letter 555021 dated July 1, 1988, which held that socks with a design resulting from a silk screening process are different from socks without such a design, and, as such, the foreign silk screening process has created a different article of commerce. Furthermore, the silk screening process constituted a finishing step in the manufacture of the socks. See also, Headquarters Ruling Letters 555363 dated August 25, 1989, and 554371 dated December 10, 1986.

With regard to the facts you have provided and based on our previous rulings, we are of the opinion that the foreign dyeing operation constitutes an operation that exceeds an alteration. The operations performed on the P 3000 carpet tile to manufacture it into a P 3020 carpet tile entail a process of dyeing and washing. The Canadian operations, therefore, fall within the framework of the Dolliff case as the dyeing and washing operations are processing steps necessary to produce a finished product, the P 3020 carpet tile. The Amity case does not apply to the instant case. In Amity, the unsalable fabric was sent to be re-dyed to make the already finished fabric salable. In this case, the carpet tile sent to Canada is not considered finished because the dyeing operations constitute a final step in the production of the patterned tile. The foreign dyeing process imparts new and different characteristics to the tile, resulting in a different article with specialized appeal to the consumer. Therefore, the carpet tile is analogous to the socks in Headquarters Ruling Letter 555021 in that the foreign dyeing operation constitutes a finishing step in the preparation of the dyed carpet tile, which is a different article from that which was exported.

HOLDING:

On reconsideration of the described operations performed in Canada, as well as the samples and other evidence submitted, we find that the dyeing and washing operations performed on the carpet tile constitute finishing operations and not alterations. Accordingly, the carpet tile imported into the U.S. is not eligible for the partial duty exemption in subheading 9802.00.50, HTSUS.

Sincerely,

John Durant, Director
Commercial Rulings Division

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