CLA-2 RR:TC:SM 560520 RSD
Mr. George Cigarroa
Cigarroa Dispatch
P.O. Box 642
Laredo, Texas 78042
RE: Applicability of subheadings 9802.00.90 and
9802,00.8065, HTSUS, to woven denim apparel; Special Regime;
patch labels; findings; trimmings; NAFTA Eligibility; General
Note 12 (b)(vi); Article 509
Dear Mr. Cigarroa:
This is in reference to your letter of May 22, 1997, on
behalf of Kentucky Apparel regarding denim apparel assembled in
Mexico. Samples of a patch label and a waistband lining were
submitted with your request.
FACTS:
The articles at issue are jeans. You describe two scenarios
for making the jeans. Under the first scenario, fabric formed
and cut to shape in the U.S. is exported by Kentucky Apparel to
Mexico for assembly and wash only. A patch label from Hong Kong
with the words "TOMMY HILFIGER" is sewn onto the jeans in
Mexico. The patch label is less than .5% by weight of the
finished article. Under the second scenario, fabric formed in
Mexico and cut to shape in the U.S. is exported by Kentucky
Apparel for assembly and wash only. In Mexico, a Tommy Hilfiger
patch label and a waistband lining, both of Hong Kong origin, are
added to the jeans. The Tommy Hilfiger patch label and the
waistband liming are less than 1% of the weight of the finished
article. You have advised via the telephone that the yarn used to
produce the fabric in both cases is spun in the United States
from cotton grown in the United States.
ISSUES:
1. Under the first scenario, whether the "TOMMY HILFIGER"
patch label may be considered a "finding or trimming" for
purposes of subheading 9802.00.90, HTSUS.
2. Under the second scenario, whether the imported blue
jeans made from Mexican formed fabric, which is precut in the
United States and assembled and washed in Mexico with the
addition of a waistband lining and a patch label of Hong Kong
origin, are eligible for NAFTA duty preference and subheading
9802.00.80, HTSUS, treatment.
LAW AND ANALYSIS:
Scenario I
Appendix 2.4 of Annex 300-B of the NAFTA, provides that:
[o]n January 1, 1994, the U.S. shall eliminate customs
duties on textile and apparel goods that are assembled in Mexico
from fabrics wholly formed and cut in the United States and
exported from and re-imported into the United States under:
(a) U.S. tariff item 9802.00.80.10; or
(b) Chapter 61, 62, or 63 if, after such assembly,
those goods that would have qualified for treatment under
9802.00.80.10 have been subject to bleaching, garment
dyeing, stone-washing, acid-washing or perma-pressing.
Thereafter, the U.S. shall not adopt or maintain any customs
duty on textile and apparel goods of Mexico that satisfy the
requirements of subparagraph (a) or (b) or the requirements of
any successor provision to U.S. tariff item 9802.00.80.10.
Consequently, subheading 9802.00.90, HTSUS, was created to
provide for the duty-free entry of:
Textile and apparel goods, assembled in Mexico in which all
fabric components were wholly formed and cut in the United
States, provided that such fabric components, in whole or in
part, (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;
provided that goods classifiable in chapters 61, 62, or 63
may have been subject to bleaching, garment dyeing,
stone-washing, acid-washing or perma-pressing after assembly
as provided for herein.
In view of the fact that the enactment of subheading
9802.00.90, HTSUS, specifically was intended to extend duty-free
and quota-free status to all goods assembled in Mexico, which
previously were eligible for entry under the Special Regime
Program administered under U.S. tariff item 9802.00.8010, HTSUS,
it is Customs view that all of the policy directives implementing
this program should be considered applicable in the
administration of subheading 9802.00.90, HTSUS. One such policy
under the Special Regime Program included the allowance of
"findings, trimmings, and certain elastic strips of foreign
origin" to be incorporated into the assembled good "provided they
do not exceed 25 percent of the cost of the components of the
assembled product." Examples of findings and trimmings are
sewing thread, hooks and eyes, snaps, buttons, "bow buds," lace
trim, zippers, including zipper tapes, and labels. See 53 FR
15726 (May 3, 1988). We also note that "findings" have been
defined as "threads, tapes, buttons, bindings, hooks and eyes,
slide fasteners, Featherbone, belting, braids, and other sewing
essentials used in garment making,"and trimming is defined as
"decoration or ornamental parts." See M. Picken, The Fashion
Dictionary (1973). "Findings" are also defined as "a term
referring to supplementary fabrics employed in making a garment
such as zipper tapes, lining, pocketing, and waistband." See I.
Wingate, Fairchild's Dictionary of Textiles (1970).
In this case, you question whether the patch label would be
considered a "finding or trimming" as that term is used for
purposes of the policy directives issued in connection with the
Special Regime Program.
In HRL 559738, dated July 2, 1996, we determined that
shoulder pads, sleeve headers, chest pieces synthetic suede yoke
and elbow patches, were not "findings or trimmings." While we
noted that Fairchild's Dictionary of Textiles defined "findings"
as including supplementary fabrics, linings, and pocketing, under
the Special Regime Program, linings and pocketings were
specifically excluded from consideration as findings and were
required to be U.S. formed and cut. Since the shoulder pads,
sleeve headers, and chest pieces appeared to be analogous to
lining or pocketing, it was our opinion that the shoulder pads,
sleeve headers, and the chest pieces would not be considered
"findings or trimmings." In regard to the suede yoke and elbow
patches, we noted that they comprised a relatively large surface
area of the jacket and served more than just decorative purposes.
Accordingly, it was our opinion that the suede yoke and elbow
patches could not be considered "findings or trimmings" for
purposes of subheading 9802.00.90, HTSUS.
In this case, it appears that the patch is a label that is
placed on the garment to indicate the brand name of the product.
In addition, although the patch label may add some ornamentation
to the jeans, it is not an essential part of the structure of the
jeans. We also note that the patch label is a relatively small
portion of the completed garments and accounts less than .5% of
the weight of the finished article. Accordingly, we conclude
that the patch label is a finding or trimming. Therefore,
attaching the Hong Kong origin patch label to the jeans would not
disqualify the jeans from eligibility under HTS 9802.00.90,
assuming the label does not exceed 25% of the cost of the
components of the jeans.
Scenario II
NAFTA Eligibility
In the second scenario, Mexican formed fabric is cut in the
United States and sent to the Mexico for assembly and wash only.
In Mexico, a Tommy Hilfiger patch label and a waist band lining
of Hong Kong Origin are added to the blue jeans. The waistband
lining and patch label constitute less than one percent of the
weight of the finished. In order to ascertain the
classifications of the relevant articles, we consulted with the
Textile & Apparel Branch of the National Commodity Specialist
Division. They advised based on the information available that
the finished blue jeans would be classified in subheading
6203.42.40.10, HTSUS, and the patch label would be classified in
heading 5810, HTSUS. With respect to the waistband lining,
National Commodity Specialist Division advised that there was
insufficient information to give a definitive classification, but
they have indicated that it appears to be classifiable in
subheading 5209.43.0030 HTSUS. Accordingly, our analysis will be
based on these classifications.
General Note 12, HTSUSA, incorporates Article 401 of the
North American Free Trade Agreement (NAFTA) into the HTSUSA.
Note 12(a) provides, in pertinent part:
* * *
(ii) Goods that originate in the territory of a NAFTA party
under subdivision (b) of this note and that qualify to
be marked as goods of Mexico under the terms of the marking rules... and are entered under a subheading for
which a rate of duty appears in the "Special" subcolumn
followed by the symbol "MX" in parentheses, are eligible for such duty rate... . [Emphasis added]
Accordingly, the jeans at issue will be eligible for the
"Special" "MX" rate of duty, provided it is a NAFTA "originating"
good under General Note 12(b), Harmonized Tariff Schedule of the
Unites States Annotated (HTSUSA), and it qualifies as a good of
Mexico under the NAFTA Marking Rules.
First we determine whether the blue jeans would qualify as
an originating good under General Note 12(b). Note 12(b)
provides, in pertinent part, that "for the purposes of this note,
goods imported into the customs territory of the United States
are eligible for the tariff treatment and quantitative
limitations set forth in the tariff schedule as goods originating
in the territory of a NAFTA party" only if--
(i) they are goods wholly obtained or produced entirely in
the territory of Canada,
Mexico and/or the United States; or
(ii) they have been transformed in the territory of
Canada, Mexico and/or the United States so that--
(A) except as provided in subdivision (f) of this note,
each of the non-originating materials used in
the production of such goods undergoes a change in tariff
classification described in subdivisions (r), (s) and
(t) of this note or the rules set forth
therein, or,
(B) the goods otherwise satisfy the applicable
requirements of subdivisions (r), (s) and (t)
where no change in tariff classification is required, and the
goods satisfy all other requirements of this
note; or
(iii) they are goods produced entirely in the territory
of Canada, Mexico and/or the United States exclusively
from originating materials; or
* * *
Based on the additional information that you have supplied,
we conclude that the fabric formed in Mexico, cut to shape in the
U.S., and exported to Mexico for assembly would be an originating
material because the yarn used to make the fabric is spun in the
United States from cotton that is grown in the United States.
This means that the only non-originating materials in the jeans
would be the patch label and the waistband lining. For the jeans
to qualify as an originating good pursuant to General Note
(12)(b)(ii), these non-originating materials must undergo the
change in classification required by General Note 12(t). For
goods classifiable under heading 6203.42, the rule is
a change to that heading "from any other chapter, except
from headings 5106 through 5113, 5204 through 5212, 5307
through 5308 or 5310 through 5311, chapter 54, or headings
5508 through 5516, 5801 through 5802 or 6001 through 6002,
provided that the good is both cut and sewn or otherwise
assembled in the territory of one or more of the NAFTA
parties."
While the patch label undergoes the requisite change in
tariff classification, the jeans nevertheless do not qualify
under General Note 12(b)(ii) because one of the materials in the
jeans, the Hong Kong waistband lining, is classified under
5209.43 HTSUS--a heading that falls into one of the exceptions
mentioned in the rule cited above.
Although the non-originating, waistband lining, in the jeans
does not undergo the requisite change in tariff classification,
General Note 12(f), HTSUSA, sets out the terms of De Minimis for
NAFTA. As the subject merchandise is classified in subheading
6203.42, HTSUSA, we look to General Note 12(f)(vi) which provides
as follows:
A good provided for in chapters 50 through 63, inclusive, of
this schedule that does not originate because certain fibers
or yarns used in the production of the component of the good
that determines the tariff classification of the good do not
undergo an applicable change in tariff classification,
provided for in subdivisions (r), (s) and (t) of this note,
shall nonetheless be considered to originate if the total
weight of all such fibers or yarns in that component is not
more than 7 percent of the total weight of that component.
You indicate that the weight of the non-originating
material, the patch label and waistband lining, is less than one
percent of the final good. Based on this information, under
General Note 12 (f)(vi), the final good would be eligible for the
NAFTA duty preference.
Next we must determine if the blue jeans would qualify as a
good of Mexico under the NAFTA Marking Rules. On September 5,
1995, Customs published in the Federal Register (60 FR 46188)
T.D. 95-69 which set forth final amendments to the Customs
Regulations to implement the provisions of section 334 (b) of the
Uruguay Round Agreements Act ("the Act"), Public Law 103-465, 108
Stat. 4809, hereinafter 19 U.S.C. 3592, regarding the country of
origin of textile and apparel products. These final regulations
apply to goods entered, or withdrawn from warehouse, for
consumption on or after July 1, 1996. The regulatory provisions
in T.D. 95-69 that implement the basic origin principles of
section 334(b) of the Act are contained in a new section102.21 of
the Customs Regulations (19 CFR 102.21).
Section 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 was not wholly obtained or
produced in a single country, territory, or insular possession,
Section 102.21(c)(1) is not applicable.
Section 102.21(c)(2) states that, "Where 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."
Section 102.21(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:"
The rule for determining the country of origin of a good
classifiable under subheading 6203.43 provides that:
if the good consists of two or more component parts, a
change to an assembled good of heading 6201 through 6208
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 blue jeans are assembled from components in a single
country, Mexico, and thus under section 102.21(e) the origin of
the imported blue jeans would be Mexico.
Subheading 9802.00.80, HTSUS
You also indicate that the jeans will be entered under
9802.00.80 HTSUS. Accordingly we will also determine whether the
jeans would be eligible for entry under 9802.00.80 HTSUS.
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, lubricating and painting.
All three requirements of subheading 9802.00.80, HTSUS, 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 cost or value of the imported assembled article,
less the cost or value of the U.S. components assembled therein,
upon compliance with the documentary requirements of section
10.24, Customs Regulations (19 CFR 10.24).
The rules of origin for textile and apparel products, 19
U.S.C. 3592(b)(4), codifying section 334(b)(4)(A) of the Uruguay
Round Agreements Act, provides that:
[t]he value of a component that is cut to shape (but
not to length, width, or both) in the United States from
foreign fabric and exported to another country, territory,
or insular possession for assembly into an article that is
then returned to the United States --
(i) shall not be included in the dutiable value of such
article.
The effect of 19 U.S.C. 3592(b)(4) is to preserve the tariff
treatment afforded by subheading 9802.00.80, Harmonized Tariff
Schedule of the United States (HTSUS), that otherwise would no
longer be available under the section 334 origin rules since
cutting fabric in the U.S. no longer results in the cut fabric
being considered a "product of" the U.S.
Section 10.25, Customs Regulations (19 CFR 10.25),
implements 19 U.S.C. 3592(b)(4), and incorporates by reference
the same operational, valuation, and documentation requirements
applicable to goods entered under subheading 9802.00.80, HTSUS.
Therefore, imported goods entitled to a duty allowance under 19
CFR 10.25 are to be entered under subheading 9802.00.8065,
HTSUS, and, solely for purposes of calculating the duty allowance
under this subheading, Customs will treat the textile components
cut to shape in the U.S. from foreign fabric as if they were
"U.S. fabricated components."
In this case, the fabric formed in Mexico is imported into
the U.S. where it is cut to shape of the Jeans' components. The
fabric components, cut in the U.S., are exported to Mexico for
the assembly of the jeans. Accordingly, assuming that the
Mexican formed fabric is cut to shape in the U.S. (but not merely
to length, width or both) the jeans assembled in Mexico from such
components may qualify for the partial duty exemption provided
for in subheading 9802.00.8065, HTSUS, if the all the other
requirements of the subheading are satisfied.
Section 10.14(a), Customs Regulations {19 C.F.R. 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 C.F.R. 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. See 19 C.F.R. 10.16(a). 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. See 19 C.F.R.
10.16(c).
In the instant case, sewing the cut components together to
form the jeans is considered an acceptable assembly operation
pursuant to 19 C.F.R. 10.16(a), because components are being
joined (i.e., sewn) together. Assuming that the washing of the
jeans is a simple cleaning operation, it will be an operation
incidental to the assembly processing under 10.16(b). (See HRL
554497, dated March 18, 1987, which involved washing assembled
garments in a commercial laundry using a standard detergent and
softener, and tumble drying and lightly pressing them).
Consequently, the jeans may enter the U.S. under subheading
9802.00.80, HTSUS, with allowances in duty for the cost or value
of the fabric components which are cut to shape in the U.S. from
foreign fabric provided the documentary requirements of 19 C.F.R.
10.24 are satisfied. No allowance in duty may made for the
patch label and waistband lining of Hong Kong origin.
HOLDING:
The Tommy Hilfiger patch label in this case is a finding or
a trimming, and under the first scenario outlined above, the
jeans would qualify for duty free entry under 9802.00.90 HTSUS.
In the second scenario, provided the non-originating materials,
i.e., the patch label and waistband lining, constitute less than
seven percent of the weight of the finished article, in
accordance the De Minimis rule for textiles, General Note 12
(f)(vi), the finished blue jeans would be eligible for the
applicable NAFTA "MX" duty rate. The jeans are goods of Mexico
under the NAFTA marking rules. The jeans would be eligible for
entry under 9802.00.80 HTSUS, with allowance in duty for the cost
or value of the fabric components cut to shape in the U.S. from
Mexican fabric.
A copy of this ruling letter should be attached to the entry
documents filed at the time the goods are entered. If the
documents have been filed without a copy, this ruling should be
brought to the attention of the Customs officer handling the
transaction.
Sincerely,
John Durant, Director
Tariff Classification Appeals
Division