OT:RR:CTF:VS H252907 CMR
Robert Stack, Esq.
Tompkins & Davidson, LLP
5 Hanover Square
15th Floor
New York, NY 10004
RE: Modification of New York Ruling Letter (NY) N242661, dated July 1, 2013;
Eligibility for preferential tariff treatment; Subheading 9822.05.10; HTSUS; DR-
CAFTA
Dear Mr. Stack:
It has come to our attention that an error was made in New York Ruling Letter (NY) N242661, dated July 1, 2013, issued to you on behalf of your client, Macy’s Merchandising Group, Inc., regarding the eligibility of certain women’s sweaters for preferential tariff treatment under the Dominican Republic – Central America – United States Free Trade Agreement (DR-CAFTA). The ruling indicated that the sweaters may be eligible for preferential tariff treatment under subheading 9822.05.10, Harmonized Tariff Schedule of the United States (HTSUS). This is incorrect.
Pursuant to section 625(c)(1), Tariff Act of 1930 (19 U.S.C. §1625(c)(1)), as amended by section 623 of Title VI, notice of the proposed modification was published on December 24, 2014, in the Customs Bulletin, Volume 48, No. 51. CBP received two comments in response to this notice. The comments are addressed below.
FACTS:
The garment at issue, style D9750AF13, was described NY N242661 as follows:
The submitted sample, Style D9750AF13, is a woman’s “Live Love Dream™” label cut and sewn sweater that is constructed from 56% polyester, 41% rayon, and 3% spandex finely knit jersey fabric. The outer surface of the garment measures nine or fewer stitches per two centimeters in the direction the stitches were formed. The garment features long raglan sleeves with self-fabric cuffs, a round neckline with self-fabric edging, and a self-fabric banded bottom with a heart shaped heat seal. The garment extends to below the waist.
The garment was classified in subheading 6110.30.3020, HTSUS, as a women’s sweater of man-made fibers.
The manufacturing operations to produce the garment were described as:
The polyester/rayon/spandex fabric, for the body of the garment, is manufactured in U.S. from non-originating yarns.
The polyester twill neck tape is produced in China or another non-participating country from non-originating yarns.
The polyester twill ribbon fabric, for the hanger loops, is manufactured in China or another non-participating country from non-originating yarns.
The sewing thread is manufactured in U.S. from U.S. yarns.
The fabrics are cut, sewn and assembled in Guatemala.
The heart shaped plastic applique is produced in China or another non-participating country.
Your letter, dated May 28, 2013, requesting a ruling indicates that the garment is to be exported directly from Guatemala to the United States. You also indicated that your client was contemplating substituting a solid white neckband fabric formed in Guatemala for the current striped neckband fabric of U.S. origin.
ISSUE:
Whether the garment at issue, style D9750AF13, qualifies for preferential tariff treatment under the DR-CAFTA by classification in subheading 9822.05.10, HTSUS.
LAW AND ANALYSIS:
The DR-CAFTA was signed by the governments of Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and the United States on August 5, 2004. It was approved by the U.S. Congress with the enactment on August 2, 2005, of the Dominican Republic-Central America-United States Free Trade Agreement Implementation Act (the Act), Pub. L. 109-53, 119 Stat. 462 (19 U.S.C. 4001 et seq.).
GN 29, HTSUS, implements the DR-CAFTA. GN 29(b), subject to the provisions of subdivisions (c), (d), (m) and (n) of GN 29, sets forth the criteria for determining whether a good (other than agricultural goods provided for in GN 29(a)(ii)) is an originating good for purposes of the DR-CAFTA.
GN 29(d)(iv) states:
For a textile or apparel good provided for in chapters 61 through 63 of the tariff schedule that is not an originating good and for which the duty treatment set forth in subheading 9822.05.10 is claimed, the rate of duty set forth in the general subcolumn of rate of duty column 1 shall apply only on the value of the assembled good minus the value of fabrics formed in the United States, components knit-to-shape in the United States and any other materials of U.S. origin used in the production of the good, provided that the good is sewn or otherwise assembled in the territory of a party to the Agreement (other than the United States) with thread wholly formed in the United States, from fabrics wholly formed in the United States and cut in one or more parties to the Agreement or from components knit-to-shape in the United States, or both. For purposes of this subdivision—
a fabric is wholly formed in the United States if all the production processes and finishing operations, starting with the weaving, knitting, needling, tufting, felting, entangling or other process, and ending with a fabric ready for cutting or assembly without further processing, took place in the United States; and
(2) a thread is wholly formed in the United States if all the production processes, starting with the extrusion of filaments, strips, film or sheet, and including slitting a film or sheet into strip, or the spinning of all fibers into thread, or both, and ending with thread, took place in the United States.
In your request of May 28, 2013, you acknowledged that style D9750AF13 was not an originating good under the DR-CAFTA, but you believed the garment to be eligible for a partial duty allowance under subheading 9822.05.10, HTSUS. Subheading 9822.05.10, HTSUS, provides for:
Textile and apparel goods of chapters 61 through 63 described in U.S. Note 22 to this subchapter and entered pursuant to its provisions
Note 22, Subchapter XXII, Chapter 98 restates the language of GN 29(d)(iv).
Unlike some of the preferential rules set forth in GN 29(n) which look to the formation of fiber or yarn, subheading 9822.05.10, HTSUS, liberalizes this requirement and looks to the formation of the fabric of the textile or apparel good but requires that the good be from fabrics wholly formed in the United States. The provision requires that all fabric and thread used in a qualifying textile or apparel article be wholly formed in the U.S.
Similar language to that in subheading 9822.05.10, HTSUS, is found in subheading 9820.11.06, HTSUS, one of the provisions implementing the United States – Caribbean Basin Trade Partnership Act (CBTPA). The provision provides, in relevant part, for preferential tariff treatment to textile apparel articles sewn or otherwise assembled in beneficiary countries “with thread formed in the United States from fabrics wholly formed in the United States.” In interpreting this provision, CBP has held that no foreign fabric may be used in the production of apparel, unless it falls within the findings or trimmings provision set forth in the CBTPA. See HQ 966703, dated December 9, 2003, wherein CBP stated that reflective tape and a rear rectangular patch comprising a large surface area of a coverall were not findings or trimmings and if made of foreign fabric would disqualify the coveralls from eligibility for preferential tariff treatment under the CBTPA.
The construction of style D9750AF13 includes not only fabrics which are wholly formed in the United States, but fabrics which have been formed outside the United States - specifically, the polyester twill neckband tape fabric and the polyester twill ribbon hanger fabric, in addition to the possibility of the solid white neckband fabric. The language of Note 22, Subchapter XXII, Chapter 98, is the same language found in GN 29(d)(iv) and requires that the good be produced from fabrics wholly formed in the United States. There is no allowance, or de minimis, for fabrics formed outside the U.S. to be used in the production of garments qualifying for classification in subheading 9822.05.10, HTSUS. Therefore, style D9750AF13, produced as described herein of fabrics wholly formed in the U.S. and fabrics formed outside the U.S., cut and sewn in Guatemala with thread wholly formed in the U.S., does not qualify for preferential tariff treatment under subheading 9822.05.10, HTSUS.
Two commenters argue against the modification of the decisions subject to the Notice of Proposed Action. One commenter disagrees with CBP’s view that language in this provision and in a similarly worded provision in the CBTPA, i.e., subheading 9820.11.06, HTSUS, should be subject to the same interpretation. The objection is based not on the language of the provisions, but in the duty effect provided by the provisions. Subheading 9820.11.06, HTSUS, provides for duty-free treatment, while subheading 9822.05.10, HTSUS, provides for only a partial duty exemption.
When we compare the relevant language of subheading 9820.11.06, HTSUS, and Note 22, subheading 9822.05.10, HTSUS, we find the following:
9820.11.06, HTSUS:
Apparel articles sewn or otherwise assembled in one or more such countries with thread formed in the United States from fabrics wholly formed in the United States and cut in one or more such countries from yarns wholly formed in the United States, or from components knit-to-shape in the United States from yarns wholly formed in the United States, or both . . . .
Note 22, Subchapter XXII, Chapter 98, HTSUS:
For a textile or apparel good provided for in chapters 61 through 63 of the tariff schedule that is not an originating good under general note 29 and for which the duty treatment set forth in heading 9822.05.10 is claimed . . . provided that the good is sewn or otherwise assembled in the territory of a party to the Agreement (other than the United States) with thread wholly formed in the United States, from fabrics wholly formed in the United States and cut in one or more parties to the Agreement or from components knit-to-shape in the United States, or both.
Emphasis added.
In order to receive the partial duty exemption provided for in subheading 9822.05.10, HTSUS, the imported good must meet the proviso set forth in Note 22, Subchapter XXII, Chapter 98. The commenter would have us interpret substantially similar language in the tariff differently based upon the differences in the duty consequence. However, the interpretation of a tariff provision is based upon the language of the provision, not the duty consequence of that provision as set forth in the tariff. The tariff is a statute which must be read as a whole. The same or substantially similar language should be interpreted in the same manner, unless specifically limited. See Acme Venetian Blind & Window Shade Corp. v. United States, 56 Cust. Ct. 563 (June 8, 1966) at 568 (“Words used in the same act in two different places are presumed to mean the same in both. Schooler v. United States, 231 F. 2d 560.”) See also, Schooler v. United States, 231 F. 2d 560, 563, wherein the court cited 82 C.J.C., Statutes, § 348 (1953):
‘In the absence of anything in the statute clearly indicating an intention to the contrary, where the same word or phrase is used in different parts of a statute, it will be presumed to be used in the same sense throughout; and, where its meaning in one instance is clear, this meaning will be attached to it elsewhere
* * *.’
While 9820.11.06, HTSUS, relates to the CBTPA and 9822.05.10, HTSUS, relates to DR-CAFTA, there is nothing in the tariff indicating the substantially similar language should not be interpreted in the same manner. The differences between the two provisions is the duty assessment on the merchandise entered under the provisions.
The same commenter also argues against the modification of the decisions subject to the Notice of Proposed Action based on Congressional action to make technical corrections to the Harmonized Tariff Schedule of the United States relating to the textile and apparel rules of origin for the Dominican Republic-Central America-United States Free Trade Agreement in Public Law 112-163, enacted on August 10, 2012. The commenter submits that as NY N018963, dated November 21, 2007, was issued prior to action by Congress to amend the tariff with regard to the DR-CAFTA textile rules of origin, Congress in effect ratified the existing CBP interpretation given to subheading 9822.05.10, HTSUS, in NY N018963.
As stated in Autolog Corporation v Regan, 731 F.2d 25, (D.C. Cir. 1984), at 32:
When an agency interpretation has been officially published and consistently followed, “Congress is presumed to be aware of [the] administrative * * * interpretation of a statute and to adopt that interpretation when it re-enacts a statute without change[.]” Merrill Lynch, Pierce, Fenner &Smith, Inc. v. Curran, 456 U.S. 353, 382 n.66, 72 L. Ed. 2d 182, 102 S. Ct. 1825 (1982).
In Autolog Corporation, supra, the court noted in discussing Customs’ rulings interpreting 46 U.S.C. § 289, that “Congress has acquiesced in Customs’ interpretation for almost a century and has not acted to change it during several revisions of the coastwise laws.” In this case, one ruling interpreting subheading 9822.05.10, HTSUS, was issued by CBP prior to the technical amendments contained in Public Law 112-163. We do not believe the existence of this single ruling is sufficient to conclude that Congress acquiesced to the decision therein simply because it did not address the application of subheading 9822.05.10, HTSUS, in legislation making technical amendments to the DR-CAFTA.
The second commenter only addresses one ruling, NY N249027, of the three rulings set forth in the proposed modification. However, because it addresses findings and trimmings, we address it here. The commenter believes CBP’s reason for viewing the garment at issue in NY N249027, style ST14398A, as not eligible for classification in subheading 9822.05.10, HTSUS, and thus not eligible for the partial duty exemption afforded merchandise classifiable therein, is a belief that “the Chinese overlay of sequin covered 100% polyester mesh fabric is not considered an ornamental trim (sequin overlay) as described in the requirements in the CBTPA Special Access program.” The commenter submits that the overlay component is an ornamental trim, the value of which does not exceed 25 percent of the cost of the components of the assembled garment.
CBP agrees with the commenter that the Chinese sequined fabric is ornamental trim as used in style ST14398A. Unlike subheading 9820.11.06, HTSUS, from the CBTPA which provides an allowance for foreign findings and trimmings, but requires the U.S. formed fabric be formed from U.S.-formed yarns; subheading 9822.05.10, allows for the U.S.-formed fabric to be formed in the U.S. from yarns of any origin. Differences are apparent in the provisions, including the lack of a de minimis allowance for classification in subheading 9822.05.10, HTSUS. As stated above, there is no allowance, or de minimis, for fabrics formed outside the U.S. to be used in the production of garments qualifying for classification in subheading 9822.05.10, HTSUS, even if that fabric is used as a finding or trimming.
HOLDING:
Style D9750AF13 is not eligible for classification in subheading 9822.05.10, HTSUS, and therefore, not eligible for preferential tariff treatment under the DR-CAFTA. NY N242661, dated July 1, 2013, is hereby modified in accordance with the analysis set forth above. In accordance with 19 U.S.C. § 1625(c), this ruling will become effective 60 days after its publication in the Customs Bulletin.
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 CBP officer handling the transaction.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division