CLA-02 OT:RR:CTF:VS H016584 HEF
Mr. Larry Ordet
Sandler, Travis & Rosenberg, P.A.
The Waterford
5200 Blue Lagoon Drive
Miami, Florida 33126-2022
RE: Applicability of subheading 9802.00.50, HTSUS, to certain garments
Dear Mr. Ordet:
This is in response to your letter dated August 28, 2007, on behalf of Hanesbrands, Inc. (“HBI”), in which you request a binding ruling regarding the eligibility of certain garments for entry under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (“HTSUS”).
FACTS:
HBI will import various garments into the United States from several sources, including China, the Dominican Republic, and Mexico. Claims for preferential tariff treatment under the Dominican-Republic Central American Free Trade Agreement (“DR-CAFTA”) and the North American Free Trade Agreement (“NAFTA”) will be made for the goods from the Dominican Republic and Mexico, respectively. The Chinese-origin goods will be dutiable upon entry into the United States. You note that each garment will be marked with its country of origin in accordance with Customs and Border Protection (“CBP”) and Federal Trade Commission (“FTC”) regulations.
After the garments are imported into the United States, HBI will export the garments in bulk containers to a Mexican distribution facility. Some of the garments may be shipped on hangers. At the Mexican distribution facility, the garments will be segregated into bins based on their style and without regard to their country of origin. You attest that the commingled inventory will only include goods previously imported into the United States and that no substitution of these goods will take place. At the Mexican facility, each garment will be removed from inventory, visually inspected, and then tagged or “stickered”. Then, the garments will be returned to inventory. The garments will be pulled from inventory on the basis of customer orders without regard to their country of origin.
HBI intends to return the garments to the United States and enter them under subheading 9802.00.50, HTSUS. The returned garments will retain their original country of origin markings. HBI proposes to match the goods exported from the United States to Mexico to the “altered” goods returned to the United States using a first-in, first-out (“FIFO”) accounting methodology.
ISSUE:
Whether, under the circumstances described above, the garments are eligible for tariff treatment pursuant to subheading 9802.00.50, HTSUS.
LAW & ANALYSIS:
Subheading 9802.00.50, HTSUS, provides a full or partial duty exemption for articles returned to the United States after having been exported to be advanced in value or improved in condition by means of repairs or alterations. Articles returned to the United States after having been repaired or altered in Mexico, whether or not pursuant to warranty, may be eligible for duty-free treatment, provided the documentary requirements of section 181.64(c), CBP Regulations, (19 C.F.R. § 181.64(c)), are satisfied.
Section 181.64(a), CBP Regulations, (19 C.F.R. § 181.64(a)), states that:
‘Repairs or alterations’ means restoration, addition, renovation, redyeing, cleaning, resterilizing, or other treatment which does not destroy the essential character of, or create a new and commercially different good from, the good exported from the United States.
Court cases considering the applicability of subheading 9802.00.50, HTSUS, and its precursor provisions (item 806.20, Tariff Schedules of the United States (“TSUS”), and, before that, paragraph 1615(g), Tariff Act of 1930), have held that this tariff provision is inapplicable where: (1) the exported articles are not complete for their intended use and the foreign processing operation is a necessary step in the preparation or manufacture of finished articles; or (2) the operations performed abroad destroy the identity of the exported articles or create new or commercially different articles through a process of manufacture. See Guardian Indus. Corp. v. United States, 3 Ct. Int’l Trade 9 (1982), and Dolliff & Co., Inc., v. United States, 81 Cust. Ct. 1, C.D. 4755, 455 F. Supp. 618 (1978), aff’d, 66 C.C.P.A. 77, C.A.D. 1225, 599 F.2d 1015 (1979).
With regard to the tagging or “stickering” operations HBI intends to perform in Mexico, CBP has held that marking or affixing a label to a product constitutes an acceptable alteration for purposes of subheading 9802.00.50, HTSUS. See Headquarters Ruling Letter (“HRL”) W563554, dated November 13, 2006 (t-shirts exported to Mexico for re-labeling were entitled to tariff treatment under subheading 9802.00.50, HTSUS); HRL 562952, dated March 29, 2004 (belted jeans and pants exported to Mexico for inspection and tagging were entitled to duty-free treatment under subheading 9802.00.50, HTSUS); HRL 559639, dated June 25, 1996 (flashlights exported to Mexico, where a product nameplate or label was affixed and the company’s logo and product name were pad-printed onto the flashlight, were entitled to duty-free treatment under subheading 9802.00.50, HTSUS); HRL 555724, dated December 17, 1990 (air bag sensors exported to Mexico for re-labeling and testing operations were eligible for treatment under subheading 9802.00.50, HTSUS); HRL 554996, dated June 30, 1988 (sunglasses exported for inspection, temple adjustment, and retagging were entitled to partial duty exemption under item 806.20, TSUS); and HRL 071159, dated March 2, 1983 (diodes exported to Mexico for marking and packaging operations were entitled to treatment under item 806.20, TSUS, as the printing operation had no more significance than a label for identification purposes).
Based on the information provided and the foregoing rulings, we find that the proposed operations constitute acceptable alterations for purposes of subheading 9802.00.50, HTSUS.
The documentary requirements to obtain treatment under subheading 9802.00.50, HTSUS, for goods re-entered after repair or alteration in Mexico are set forth in 19 C.F.R. § 181.64(c). The regulation requires the importer to file with CBP a declaration of the person who performed the repairs or alterations stating, “in substantially the following form” that:
…the goods herein specified are the goods which, in the condition in which they were exported from the United States, were received by me (us) on _________________, 19 [sic] __, from _______________ (name and address of owner or exporter in the United States); that they were received by me (us) for the sole purpose of being repaired or altered; that only the repairs or alterations described below were performed by me (us); that such repairs or alterations were (were not) performed pursuant to a warranty; that the full cost or (when no charge is made) value of such repairs or alterations is correctly stated below; and that no substitution whatever has been made to replace any of the goods originally received by me (us) from the owner or exporter thereof mentioned above.
19 C.F.R. § 181.64(c)(1)(i).
The declaration also includes the “marks and numbers” relating to the goods as well as a description of the articles. See id. In addition, 19 C.F.R. § 181.64(c)(1)(ii) requires the filing of a declaration by the “owner, importer, consignee, or agent, in “substantially the following form” that:
…the (above) (attached) declaration by the person who performed the repairs or alterations abroad is true and correct to the best of my knowledge and belief; that the goods ____ were ____ were not (check one) subject to NAFTA drawback; that such goods were exported from the United States for repairs or alterations from ________ (port) on ______________, 19 [sic] ___; and that the goods entered in their repaired or altered condition are the same goods that were exported on the above date and that are identified in the (above) (attached) declaration.
Both HRL 557661, dated November 14, 1994, and HRL 559551, dated September 10, 1996, involved requests for internal advice where CBP examined whether defective telephones exported for repair and returned to the United States were entitled to tariff treatment under subheadings 9802.00.40 and 9802.00.50, HTSUS. The defective telephones were exported from the United States to foreign repair facilities, where they were entered into general repair inventories. Both importers employed the FIFO method to trace the returned, repaired telephones to the defective telephones exported from the United States. At the time the goods were imported, the Customs Regulations required the filing of a Certificate of Registration, Customs Form (“CF”) 4455, with the district director prior to the exportation of the goods to be repaired. The form required the quantity and a description of the articles being exported and the dates when, and ports where, the articles were examined by Customs and laden aboard the exporting carrier. The form also included a statement by the importer that “[d]uty-free entry is claimed for the described articles….” In addition, the importer was required to file with Customs a declaration of the person who performed the repairs or alterations, which was virtually identical to the above-quoted declaration found in 19 C.F.R. § 181.64(c)(1)(i). In both cases, CBP determined that the use of a FIFO inventory method did not satisfy the importers’ responsibility, under the applicable documentation requirements, to establish that the “articles entered in their repaired or altered condition are the same articles covered by the Certificate of Registration.” However, both rulings stated that the regulations also provided that if the district director was satisfied that the articles were imported under circumstances meeting the requirements of subheadings 9802.00.40 or 9802.00.50, HTSUS, the district director could waive submission of the declarations. Based on the particular facts of each case, CBP granted waivers of the declarations.
In the instant case, we similarly find that the use of a FIFO inventory method does not satisfy the importer’s responsibility, under the documentary requirements of 19 C.F.R. § 181.64(c)(1), to establish that the goods entered in their repaired or altered condition are the same goods that were exported on the date specified. However, we also note that 19 C.F.R. § 181.64(c)(3) provides that:
If the port director concerned is satisfied, because of the nature of the goods or production of other evidence, that the goods are imported under circumstances meeting the requirements of this section, he may waive submission of the declarations provided for in paragraph (c)(1) of this section.
In the instant case, HBI attests that the commingled inventory will only include goods previously imported into the United States and that no substitution whatsoever will take place. Furthermore, the garments returned to the United States will retain their original country of origin markings. The potential for substitution appears to be minimal, in this case. Under these specific circumstances, provided the port director is satisfied that the requirements of subheading 9802.00.50 are met, the port director may allow 19 C.F.R. § 181.64(c)(1) to be waived.
HOLDING:
The Mexican operations enumerated above constitute "repairs" and “alterations” within the meaning of subheading 9802.00.50, HTSUS. Based on the information provided, it is our opinion that the methodology employed by HBI identifies the garments as articles sent abroad for “repair or alteration” and returned. Provided that the port director agrees that the garments otherwise satisfy the conditions and requirements of subheading 9802.00.50, HTSUS, the garments will be entitled to tariff treatment under this subheading upon re-entry into the United States.
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,
Monika R. Brenner, Chief,
Valuation & Special Programs Branch