On Angel Island, clothing is customized to have a durability rating as realistically, cloth is a fragile material which is succeptable to damage that will eventually render it unusable.
All clothing can be damaged until it is too tattered to continue being worn without falling off. This includes exceptional clothing, which on Angel Island is the equivalent of being “Newbied.” Even clothing that had been blessed with a clothing bless deed can be damaged to the point where it is unbearable.
Hence, once clothing becomes tattered, it essentially becomes a decorative item. The only other option at this point is to cut the clothing up to retrieve any usable yards of cloth from it. Exceptional clothing returns half of the total number of cloth yards it took to make the item, while non exceptional clothing only returns one single yard of usable cloth when cut.
Certain types of attacks, such as slashing and piercing with a blade, will cause more extensive damage to clothing items than normal.
Note that the arms lore skill can not be used to determine the condition of clothing.