CLA-02/MAR-05 RR:TC:SM 560074 KKV
Ms. Cathy Schleiger
A.W. Fenton Company, Inc.
1157 Raring Avenue
Columbus, OH 43219-2357
RE Applicability of partial duty exemption under HTSUS
subheading 9802.00.80 to oversocks from the
Dominican Republic; further fabrication; cutting
garment according to pattern from exported fabric;
applicability of duty exemption under U.S. Note
2(b), subchapter II, Chapter 98, HTSUS; CBI (II);
CBERA; 19 CFR 102.21
Dear Ms. Schleiger:
We are in receipt of your letter dated August 27, 1996
(and subsequent facsimile dated September 17, 1996). Your
letter references New York Ruling 880279, dated November 24,
1992, issued to a predecessor in interest to the current
importer, which held that the merchandise was eligible for
the partial duty exemption provided in subheading
9802.00.80, Harmonized Tariff Schedule of the United States
(HTSUS). You incorporate by reference the facts presented
in our previous ruling, and inquire whether a change in the
location of the cutting operation will affect the
eligibility of the merchandise for special treatment. A
sample of the merchandise has been submitted for our
consideration.
FACTS:
The article at issue is a pair of Gore-Tex fabric socks
with an applied sole. The three-ply socks, designed for use
over regular socks, are made of U.S.-origin fabric and
consist of an outer shell that is 80% nylon and 20% spandex
knit fabric, with Gore-Tex laminated to a 76% nylon, 24%
spandex knit lining. You propose to export the fabric to
the Dominican Republic, where fabric components will be cut,
sewn together and the seams sealed prior to exportation of
the finished oversock (subheading 6117.80.0035, HTSUS) to
the United States.
ISSUE:
I. Whether Gore-Tex oversocks which are cut to pattern
from exported U.S. fabric and assembled in the
Dominican Republic, will be entitled to the partial
duty exemption under subheading 9802.00.80, HTSUS,
upon importation into the U.S.
II. Whether the subject Gore-Tex oversocks assembled in
the Dominican Republic are eligible for duty-free
treatment under U.S. Note 2(b), subchapter II,
Chapter 98, HTSUS.
III. What are the marking and visa requirements for
Gore-Tex oversocks assembled in the Dominican
Republic from U.S.-origin fabric cut to
pattern in the Dominican Republic upon
importation into the U.S.
LAW AND ANALYSIS:
I. Applicability of 9802.00.80.
Subheading 9802.00.80, HTSUS, provides a partial duty
exemption for:
[a]rticles assembled abroad in whole or in
part of fabricated components, the product
of the United States, which (a) were
exported in condition ready for assembly
without further fabrication, (b) have not
lost their physical identity in such
articles by change in form, shape or
otherwise, and (c) have not been advanced
in value or improved in condition abroad
except by being assembled and except by
operations incidental to the assembly
process such as cleaning, lubrication, and
painting.
All three requirements of HTSUS subheading 9802.00.80 must
be satisfied before a component may receive a duty
allowance. An article entered under this tariff provision is
subject to duty upon the full value of the imported
assembled article, less the cost or value of such U.S.
components, upon compliance with the documentary
requirements of section 10.24, Customs Regulations (19 CFR
10.24).
Section 10.14(a), Customs Regulations (19 CFR 10.14(a)),
states in part that:
[t]he components must be in condition
ready for assembly without further
fabrication at the time of their
exportation from the United States to
qualify for the exemption. Components
will not lose their entitlement to the
exemption by being subjected to operations
incidental to the assembly either before,
during, or after their assembly with other
components.
Section 10.16(a), Customs Regulations (19 CFR 10.16(a)),
provides that the assembly operation performed abroad may
consist of any method used to join or fit together solid
components, such as welding, soldering, riveting, force
fitting, gluing, lamination, sewing, or the use of
fasteners. Operations incidental to the assembly process
are not considered further fabrication operations, as they
are of a minor nature and cannot always be provided for in
advance of the assembly operations. However, any
significant process, operation or treatment whose primary
purpose is the fabrication, completion, physical or chemical
improvement of a component precludes the application of the
exemption under subheading 9802.00.80, HTSUS, to that
component. In particular, 19 CFR 10.16(c)(2), identifies
the cutting of garment parts according to pattern from
exported material as an operation which is more than
incidental to the assembly process. Under the facts
presented, U.S. origin fabric is exported to the Dominican
Republic, where it is cut into component parts and
subsequently assembled into the subject oversocks. Because
the assembled components were not exported in a condition
ready for assembly without further fabrication, the partial
duty exemption provided under subheading 9802.00.80, HTSUS,
is not applicable.
II. Application of U.S. Note 2(b), subchapter II, Chapter
98, HTSUS
Section 222 of the Customs and Trade Act of 1990 (P.L.
101- 382) amended U.S. Note 2, subchapter II, Chapter 98,
HTSUS, ("Note 2(b)") to provide for duty-free treatment of
articles, other than certain specified products, which are
assembled or processed in a Caribbean Basin Economic
Recovery Act (CBERA) beneficiary country (BC) wholly of
fabricated components or ingredients (except water) of U.S.
origin. This amendment was effective with respect to goods
entered on or after October 1, 1990.
Specifically, Note 2(b) provides that:
(b) No article (except a textile
article, apparel article, or
petroleum, or any product
derived from petroleum, provided
for in heading 2709 or 2710)may
be treated as a foreign article,
or as subject to duty, if-
(i) the article is--
(A) assembled or processed
in whole of fabricated
components that are a
product of the United
States, or
(B) processed in whole of
ingredients (other than
water) that are a
product of the United
States, in a
beneficiary country;
and
(ii) neither the fabricated
components, materials or
ingredients, after
exportation from the United
States, nor the article
itself, before importation
in the United States, enters
the commerce of any foreign
country other than a
beneficiary country.
As used in this paragraph, the term "beneficiary
country" means a country listed in General Note 7(a), HTSUS.
Pursuant to General Note 7(a), HTSUS, the Dominican Republic
been designated as a BC for CBERA purposes. Note 2(b)
specifies four categories of products which are excluded
from duty-free treatment under this provision: textile
articles; apparel articles; petroleum; and certain products
derived from petroleum. As set forth in NY Ruling 880279,
dated November 24, 1992, the finished oversocks are
classified under subheading 6117.80.90, HTSUS. For purposes
of Note 2(b), Customs has held that "textile" and "apparel"
articles are articles classified in provisions of the HTSUS
which include a textile category number, i.e., are subject
to textile agreements. See Treasury Decision (T.D.) 91-88,
dated October 18, 1991. Subheading 6117.80.90, HTSUS
includes a textile category number. Therefore, because the
finished oversock is an apparel article, the duty exemption
provided under U.S. Note 2(b), subchapter II, Chapter 98,
HTSUS, is inapplicable to the subject merchandise.
III. Marking and Visa Requirements
Section 304 of the Tariff Act of 1930, as amended (19
U.S.C. 1304), provides that, unless excepted, every article
of foreign origin imported into the United States shall be
marked in a conspicuous place as legibly, indelibly, and
permanently as the nature of the article (or its container)
will permit, in such a manner as to indicate to the ultimate
purchaser in the United States the English name of the
country of origin of the article. By enacting 19 U.S.C.
1304, Congress intended to ensure that the ultimate
purchaser would be able to know by inspecting the marking on
the imported goods the country of which the goods are the
product. The evident purpose is to mark the goods so that
at the time of purchase the ultimate purchaser may, by
knowing where the goods were produced, be able to buy or
refuse to buy them, if such marking should influence his
will. United States v. Friedlaender & Co., 27 C.C.P.A. 297,
302 C.A.D. 104 (1940).
Part 134, Customs Regulations (19 CFR Part 134),
implements the country of origin marking requirements and
exceptions of 19 U.S.C. 1304. One of the exceptions to the
general marking requirement is codified in 19 U.S.C.
1304(a)(3)(D) (as implemented
by 19 CFR 134.32(d)), which provides that an article may be
excepted from marking if
the marking of its container will reasonably indicate its
origin to the ultimate purchaser. As provided in section
134.41, Customs Regulations (19 CFR 134.41), the country of
origin marking is considered to be conspicuous if the
ultimate purchaser in the United States is able to find the
marking easily and read it without strain. The degree of
permanence of the marking should be at least sufficient to
insure that in any reasonably foreseeable circumstance, the
marking shall remain on the article until it reaches the
ultimate purchaser unless it is deliberately removed. The
marking must survive normal distribution and store handling.
On December 8, 1994, the President signed into law the
Uruguay Round Agreements Act. Section 334 of that Act
(codified at 19 U.S.C. 3592) provides new rules of origin
for textiles and apparel entered, or withdrawn from
warehouse, for consumption, on and after July 1, 1996. On
September 5, 1995, Customs published Section 102.21, Customs
Regulations (19 CFR 102.21), in the Federal Register,
implementing Section 334 (60 FR 46188). Thus, effective
July 1, 1996, the country of origin for a textile or apparel
product is determined by a sequential application of the
origin rules set forth in paragraphs (c)(1) through (5) of
section 102.21. As a general rule, under the new textile
origin rules, where a textile or apparel article is
assembled in one country from components cut to shape in
another country, the country of assembly will be the origin
of the article. Cutting fabric to shape generally will no
longer confer origin.
Section 102.21(c)(1), Customs Regulations (19 CFR
102.21(c)(1)), states that "the country of origin of a
textile or apparel product is the single country, territory,
or insular possession in which the good was wholly obtained
or produced." As the subject merchandise is not wholly
obtained or produced in a single country, territory, or
insular possession, paragraph (c)(1) of section 102.21 is
inapplicable.
Section 102.21(c)(2), Customs Regulations (19 CFR
102.21(c)(2)), provides:
[w]here the country of origin of a textile
or apparel product cannot be determined
under paragraph (c)(1) of this section,
the country of origin of the good is the
single country, territory, or insular
possession in which each foreign material
incorporated in that good underwent an
applicable change in tariff
classification, and/or met any other
requirement, specified for the good in
paragraph (e) of this section.
Paragraph (e) states that "The following rules shall
apply for purposes of determining the country of origin of a
textile or apparel product under paragraph (c)(2) of this
section:"
6101-6117 (1) If the good is not
knit to shape and
consists of two or more
components parts, a
change to an assembled
good of heading 6101
through 6117 from
unassembled components,
provided that the
change is the result of
the good being wholly
assembled in a single
country, territory, or
insular possession...
The oversocks satisfy the rule in section 102.21(e) for
6101-6117(1). Based upon the information provided, the
merchandise is not knit to shape, it consists of two or more
component parts and the component parts are changed to an
assembled good of heading 6117 as a result of being wholly
assembled in the Dominican Republic. Accordingly, pursuant
to 19 CFR 102.21, the country of origin of the oversocks for
country of origin marking and visa purposes will be the
Dominican Republic.
Additionally, it is stated that the fabric from which
the oversocks are assembled, is either woven or knit in the
U.S. While you have not provided the tariff classification
provision of the fabrics woven or knit in the U.S., it
appears that the origin of the fabric to be used (i.e., 80%
nylon and 20% spandex knit fabric and 76% nylon, 24% spandex
knit fabric) will be the country where the fabric-making
process occurs which is defined as "any manufacturing
operation that begins with polymers, fibers, filaments
(including strips), yarns, twine, cordage, rope, or fabric
strips and results in a textile fabric." Accordingly, the
fabric woven or knit in the U.S. will be considered to be of
U.S.-origin.
We presume that the authority relied upon for currently
marking the oversocks "Assembled in the Dominican Republic
of U.S. Components" is 19 CFR 10.22, as it appears that the
finished garments were previously eligible for the partial
duty exemption under subheading 9802.00.80, HTSUS, because
the oversocks were assembled in the Dominican Republic from
fabric made and cut to shape in the U.S. Please note that
the "Rules for Determining Country of Origin of a Good for
Purposes of Annex 311, of the North American Free Trade
Agreement" (T.D. 96-48), published at 61 FR 28932, 28955
(June 6, 1996), has removed 19 CFR 10.22, applicable to
goods entered, or withdrawn from a warehouse, for
consumption on or after August 5, 1996. Accordingly,
effective August 5, 1996, you may no longer rely upon 19
CFR 10.22 as authority for marking the goods "Assembled in
the Dominican Republic of U.S. Components."
On the other hand, effective August 5, 1996, section
134.43(e), Customs Regulations (19 CFR 134.43(e), provides,
in pertinent part that:
Where an article is produced as a result
of an assembly operation and the country
of origin of such article is determined
under this chapter to be the country in
which the article was finally assembled,
such article may be marked, as
appropriate, in a manner such as the
following:
(1) Assembled in (country of final
assembly);
(2) Assembled in (country of final
assembly) from components of
(name of country or countries of
origin of all components); or
(3) Made in, or product of, (country
of final assembly).
See 61 FR 28936 and 28957. [We note that once the article
has been correctly marked with the country of origin, there
is no additional marking requirement for indicating the
location of other manufacturing steps or the origin of any
components utilized]. In this case, because the oversocks
are produced as a result of an assembly operation and the
country of origin of such garments has been determined under
19 CFR 102.21 to be the country of final assembly, the
Dominican Republic, the garments may be marked "Assembled in
the Dominican Republic" or "Assembled in the Dominican
Republic from U.S. Fabric." In the alternative, the
garments may also be marked, "Dominican Republic," "Made in
the Dominican Republic,""Product of the Dominican Republic"
or words of similar meaning.
HOLDING:
Gore-Tex oversocks which are cut to pattern abroad from
exported U.S. fabric and assembled in the Dominican
Republic, will not be entitled to the partial duty exemption
under subheading 9802.00.80, HTSUS, upon importation into
the U.S.
Textile articles subject to textile agreement, such as
the Gore-Tex oversocks, are not eligible for duty-free
treatment under U.S. Note 2(b), subchapter II, Chapter 98,
HTSUS.
On the basis of the information submitted, the country
of origin of the oversocks will be the Dominican Republic
for country of origin marking and visa purposes pursuant to
19 CFR 102.21(c)(2).
A copy of this ruling letter should be attached to the
entry documents filed at the time this merchandise is
entered. If the documents have been filed without a copy,
this ruling should be brought to the attention of the
Customs officer.
Sincerely,
John Durant, Director
Tariff Classification
Appeals Division