OT:RR:CTF:VS H280295 RMC
David J. Evan
Grunfeld, Disiderio, Lebowitz, Silverman & Klestadt LLP
399 Park Avenue, 25th Floor
New York, NY 10022
Re: Request for Ruling; U.S.-Morocco Free Trade Agreement; Men’s Denim Pants
Dear Mr. Evan:
This is in response to your request, dated August 10, 2016, on behalf of your client, Diesel USA Inc. (“Diesel”), for a ruling on the eligibility for preferential treatment under the U.S.-Morocco Free Trade Agreement (“UMFTA”) of certain men’s denim pants. Your request was forwarded to this office from the National Commodity Specialist Division for review. You provided this office with a representative garment sample along with your request.
FACTS:
You describe the garment at issue as a “pair of 98% cotton / 2% elastane men’s denim pants” that are classified under subheading 6203.42.4011, Harmonized Tariff Schedule of the United States (“HTSUS”). The sample provided is a pair of dark blue men’s jeans in size W32 L32 with a tag on the inside stating “Safado – Regular Slim-Straight.” There are three pockets on the front side of the pants—one of the left side and two on the right—and three pockets in a similar position on the back side. The pants have a front zipper closure with a button at the top on the waistband, which has six belt loops. Care instructions on an interior tag state that the pants were “Made in Morocco.”
You state that the pants will be cut and sewn in Morocco from fabric woven in Morocco. The fabric will be made from two yarns. The first yarn is described as a warp yarn of heading 5205, HTSUS. This 100% cotton yarn will be made from cotton fibers from Brazil and Spain. The second yarn is a weft yarn, also of heading 5205, HTSUS, which will be a blend of 97% cotton and 3% elastane. The cotton for the weft yarn will be made from Brazilian and Spanish cotton fibers, while the elastane will come from Vietnam.
The following production processes will be undertaken in Morocco to produce the finished denim pants. First, the Brazilian- and Spanish-origin raw cotton will be mixed, cleaned, and combed. The warp yarn will then be produced by taking the clean cotton fibers, spinning them, and dying the resulting yarn. Next, the weft yarn will be produced by spinning the clean cotton fibers into a cotton yarn which is then wrapped around a Vietnamese-origin elastane yarn core. These two yarns are then woven into a denim fabric which contains 98% cotton and 2% elastane. The denim fabric will then be cut and sewn into a finished pair of men’s denim pants. Finally, the pants will be washed, trim will be applied, the pants will be ironed, and the pants will be packaged for shipment to the United States.
ISSUE:
Whether the men’s denim pants of subheading 6203.42.4011, HTSUS, are eligible for preferential treatment under the UMFTA.
LAW AND ANALYSIS:
The United State-Morocco Free Trade Agreement (“UMFTA”) was signed on June 15, 2004, and entered into force on January 1, 2006, as approved and implemented by the U.S.-Morocco Free Trade Agreement Implementation Act, Pub. L. 108-302, 118 Stat. 1103, dated August 17, 2004. The provisions of the agreement are set forth in General Note (“GN”) 27 of the HTSUS. Pursuant to GN 27(b), a good is eligible for treatment as an originating good under the UMFTA only if—
The good is a good wholly the growth, product or manufacture of Morocco, the United States, or both;
The good is a new or different article of commerce that has been grown, produced or manufactured in the territory of Morocco or the United States, or both, and that falls in a heading or subheading of the tariff schedule that is not covered by the product-specific rules of subdivision (h), [of GN 27]; and the sum of—
The value of each material produced in the territory of Morocco or the United States, or both, and
The direct costs of processing operations performed in the territory of Morocco or the United States, or both, is not less than 35 percent of the appraised value of the good at the time the good is entered into the territory of the United States; or
The good falls in a heading or subheading covered by a product-specific rule in [GN 27(h)]…
and is imported directly into the territory of the United States from the territory of Morocco.
Here, you claim that the denim pants meet the tariff shift rule in GN 27(h) applicable to goods of subheading 6203.42.4011, HTSUS. The tariff shift rule requires “[a] change to subheading 6203.41 through 6203.49 from any other chapter, except from heading 5106 through 5113, 5204 through 5212, 5307 through 5308 or 5310 through 5311, chapter 54 or heading 5508 through 5516, 5801 through 5802 or 6001 through 6006, provided that the good is cut or knit to shape, or both, and sewn or otherwise assembled in the territory of Morocco or of the United States, or both.” Although the Spanish and Brazilian raw cotton, classified in heading 5201, HTSUS, meet this rule, the Vietnamese elastane yarn, classified in heading 5204, HTSUS, does not.
Although the presence of non-originating elastane of chapter 5204, HTSUS, would normally disqualify a good from preferential treatment under the UMFTA tariff shift rule discussed above, you argue that the elastane is de minimis and thus does not affect UMFTA eligibility. The UMFTA de minimis rule states, in pertinent part, that:
Except as provided in subdivision (ii) below, a textile or apparel good that is not an originating good under the terms of this note, 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 set out in subdivision (h) of this note, shall be considered to be an originating good if the total weight of all such fibers or yarns in that component is not more than seven percent of the total weight of that component. Notwithstanding the preceding sentence, a textile or apparel good containing elastomeric yarns in the component of the good that determines the tariff classification of the good shall be considered to be an originating good only if such yarns are wholly formed in the territory of Morocco or of the United States.
GN 27(e)(i).
Here, it is undisputed that the denim fabric is the component that determines the tariff classification of the good for purposes of eligibility for preferential treatment under the UMFTA. See, e.g., Headquarters Ruling (“HQ”) 562291, dated February 21, 2002 (holding that the fabric that comprises the body of trousers is the “component which determines the tariff classification of the good” for purposes of eligibility for preference under the North American Free Trade Agreement). It is also undisputed that this denim fabric contains non-originating elastomeric yarns. However, you argue that because the denim fabric is composed of yarns spun in Morocco and classified in a heading for “cotton yarn,” the presence of non-originating elastomeric yarn does not affect the garment’s eligibility for de minimis treatment.
This interpretation of GN 29(e)(i) is inconsistent with GN 27(e)(iii), which states that “[f]or the purposes of this note, in the case of a textile or apparel good that is a yarn, fabric or group of fibers, the term ‘component that determines the tariff classification of the good’ means all the fibers in the yarn, fabric or group of fibers.” Here, in order to produce the weft yarn, cotton is spun around a core of Vietnamese-origin elastane yarn. The resulting weft yarn, along with the 100% cotton warp yarn, is then woven to produce the denim fabric, which is the component that determines the tariff classification of the good. See HQ 562291. Because the text of GN 29(e)(i) plainly excludes from de minimis treatment non-originating elastomeric yarns or fibers in the component that determines the tariff classification of the good, and denim fabric in this case contains non-originating elastomeric yarns, the de minimis rule does not apply under these circumstances. Accordingly, the finished denim pants do not qualify for preferential treatment on the basis of the tariff shift rule applicable to goods of subheading 6203.42.4011, HTSUS.
HOLDING:
The men’s’ denim pants are not eligible for preferential treatment under the UMFTA.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a CBP field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
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 of this ruling, it should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Yuliya A. Gulis, Acting Chief
Valuation and Special Programs Branch