MAR-2 RR:CR:SM 562027 KKV
Beth C. Ring, Esq.
Sandler, Travis & Rosenberg, P.A.
551 Fifth Avenue
New York, NY 10176
RE: U.S.-Caribbean Basin Trade Partnership Act; findings and trimmings; heat transfers; ornamentation; decorative; HRL 956426
Dear Ms. Ring:
This is in response to your letter of January 22, 2001, on behalf of The Lilli Group, Inc., which requests a binding ruling regarding the status of certain decorative foreign-origin heat transfers under the Caribbean Basin Trade Partnership Act (“CBTPA”). Specifically, you inquire whether the foreign heat transfers, the cost of which exceeds 25 percent of the cost of the components of the asembled article, that are attached to t-shirts in qualifying CBTPA countries, will disqualify the garments from preferential tariff treatment. The t-shirts will be made in qualifying CBTPA countries from cotton fabric wholly knit in the United States wholly from U.S. yarn, that are cut either in the U.S. and/or a qualifying CBTPA country, and sewn in the CBI country. Samples of the transfers were submitted for our review.
FACTS:
You state that your client (The Lilli Group) manufactures non-underwear t-shirts in a qualifying CBTPA country from fabric wholly knit in the United States from U.S. yarn. The t-shirts are cut to shape either in the U.S. or the CBTPA country and are wholly assembled in the CBTPA country. The front panel of the t-shirts will be embellished by means of various types of heat transfers to impart a design or lettering. The heat transfers are of several types: plastisol or flexiglitter, rhinestones, rhinestuds or nailheads (made of either plastic, metal or glass), PET (polyethylene terephthalate) foils, “caviar” beads consisting of plastic beads on a silicon substrate, and flocked transfers (textile fibers glued to a plastic substrate).
ISSUE:
Whether attaching the foreign heat transfers to a t-shirt disqualifies the subject garment from duty-free treatment under the CBTPA.
LAW AND ANALYSIS:
Title II of the Trade and Development Act of 2000, (Pub. L. 106-200, 114 Stat. 251), concerns trade benefits for the Caribbean Basin and is referred to as the United States-Caribbean Basin Trade Partnership Act ("CBTPA"). Section 211 of the CBTPA amended section 213 (b) of the Caribbean Basin Economic Recovery Act (CBERA) (19 U.S.C. 2703(b)) to provide expanded trade benefits during a “transition period” to designated countries in the Caribbean Basin.
Section 211 of the CBTPA eliminates tariffs and quantitative restrictions on specific textile and apparel articles and extends North American Free Trade Agreement duty treatment standards to non-textile articles that previously were ineligible for preferential treatment under the CBERA. “Transition period” is defined in section 19 U.S.C. 2703(b)(5)(D) as meaning, with respect to a designated CBTPA country, the period that begins on October 1, 2000, and ends on the earlier of September 30, 2008, or the date on which a free trade agreement enters into force with respect to the U.S. and the CBTPA country.
Presidential Proclamation 7351, dated October 2, 2000, published in the Federal Register on October 4, 2000 (65 Fed. Reg. 59329), implemented the CBTPA by designating the eligible CBTPA countries and amending Chapter 98, HTSUS (including the creation of new subchapter XX) to facilitate the entry of the specific textile and apparel articles eligible for preferential treatment under the CBTPA. The enhanced trade benefits provided by the CBTPA are available to eligible articles imported directly from a country: (1) that is designated as a CBTPA beneficiary country; and (2) which the U.S. Trade Representative (“USTR”) has determined has implemented and follows, or is making substantial progress toward implementing and following certain customs procedures that allow U.S. Customs to verify the origin of the articles.
Interim Customs Regulations to implement the trade benefit provisions of section 211 of the CBTPA were published in the Federal Register as Treasury Decision (T.D.) 00-68 on October 5, 2000 (65 Fed. Reg. 59650). The T.D. invited public comments to be submitted on the Interim Regulations by December 4, 2000. It is noted that the issue you have raised is outside the scope of the comments received.
Paragraph (b)(2)(A)(i) of amended section 213 provides preferential tariff treatment to apparel articles assembled in one or more CBTPA beneficiary countries from fabrics wholly formed and cut in the United States, from yarns wholly formed in the United States, (including fabrics not formed from yarns, if such fabrics are classifiable under heading 5602 or 5603 of the HTS and are wholly formed and cut in the United States) that are—
entered under subheading 9802.00.80 of the HTS; or
entered under chapter 61 or 62 of the HTS, if, after such assembly, the articles would have qualified for entry under subheading 9802.00.80 of the HTS but for the fact that the articles were embroidered or subjected to stone washing, enzyme washing, acid washing, perma pressing, oven baking, bleaching, garment dyeing, screen printing, or other similar processes.
Articles eligible for preferential tariff treatment under section 213(b)(2)(A)(i)(I)or (II) of the CBERA are entered under subheading 9802.00.8044, HTSUS, or subheading 9820.11.03, HTSUS, respectively. See also section 10.223(a)(1) and (2), Interim Customs Regulations (19 CFR 10.223(a)(1) and (2).
Paragraph (b)(2)(A)(ii) of amended section 213 provides preferential tariff treatment to apparel articles cut and assembled in one or more CBTPA beneficiary countries from fabric wholly formed in the United States from yarns wholly formed in the United States if such articles are assembled with thread formed in the United States. Subheading 9820.11.06, HTSUS, was created for the entry of articles eligible for preferential tariff treatment under section 213(b)(2)(A)(ii) of the CBERA. See also, section 10.223(a)(3), Interim Customs Regulations (19 CFR 10.223(a)(3)).
Subchapter XX, U.S. Note 3(a), HTSUSA, provides:
An article otherwise eligible for preferential treatment under any provision of this subchapter shall not be ineligible for such treatment because the article contains—
(i) findings and trimmings of foreign origin, if the value of such findings and trimmings does not exceed 25 percent of the cost of the components of the assembled article[.]
The Interim Regulations regarding findings and trimmings further provide:
An article otherwise described under paragraph (a) of this section will not be ineligible for the preferential treatment referred to in [19 C.F.R.] § 10.221 because the article contains:
(A) Findings and trimmings of foreign origin, if the value of those findings and trimmings does not exceed 25 percent of the cost of the components of the assembled article. For the purposes of this section “findings and trimmings” include, but are not limited to, hooks and eyes, snaps, buttons, “bow buds,” decorative lace trim, elastic strips (but only if they are each less than 1 inch in width and are used in the production of brassieres), zippers (including zipper tapes), labels, and sewing thread except in the case of an article described in paragraph (a)(3) or (a)(12) of this section.
See 19 CFR 10.223(b)(1)(i)(A).
While “findings and trimmings” for purposes of the CBTPA were not specifically defined, the examples set forth above, such as zippers, buttons, decorative lace trim and labels are indicative of the types of components which are considered to be within the purview of this provision. The exception for findings and trimmings was necessarily intended to be of a restrictive nature, as the intent of the statute, as discussed above, was to ensure that all fabric components be formed and cut in the U.S. and CBTPA beneficiary countries.
In support of your position, you assert that the the subject heat transfers, classifiable in Chapter 39, HTSUS, as articles of plastic are neither “fabric” nor “findings” for purposes of the CBTPA. We agree, noting that “findings” are generally accepted to be sewing essentials used in textile goods while “trimmings” have been defined as “decoration or ornamental parts. See M. Picken, The Fashion Dictionary (1973).
In the Conference Report for the CBTPA, Conf. Rep. No. 606, 106th Cong., 2nd Sess. 102 (2000), the Senate states that it:
[I]ntends that this new program of textile and apparel benefits will be administered in a manner consistent with the regulations that apply under the “Special Access Program” for textiles and apparel articles from Caribbean and Andean Trade Preference Act countries, as described in 63 Fed. Reg. 16474-16476 (April 3, 1998). Thus, the requirement that products must be assembled from fabric formed in the United States applies to all textile components of the assembled products, including linings and pocketing, subject to the exceptions that currently apply under the “Special Access Program.”
Thus it is instructive to examine past rulings issued in conjunction with the Special Access Program (SAP), as the scope of the exception for “findings and trimmings” under SAP and the CBTPA are very similar. In this regard, Customs has previously held under subheading 9802.00.90, HTSUS, that fabric items such as shoulder pads, sleeve headers, and velveteen collars are not “findings and trimmings.” See HRL 559552, dated February 14, 1996, and HRL 558954, dated June 30, 1995. In HRL 559738, dated July 2, 1996, Customs held that a synthetic suede yoke and elbow patches are not “findings and trimmings” because they comprise a large surface area and serve more than decorative purposes. However, embroidered patch labels which indicate or symbolize the brand name and provide ornamentation have been held to be “findings and trimmings” for purposes of the Special Access Program. See HRL 560520, dated September 22, 1997 and HRL 560726, dated December 12, 1997.
You also assert that the subject heat transfers are not “trimmings” for purposes of the CBTPA, citing HRL 956103, dated June 29, 1994, as support for the proposition that “trimmings” constitute additions to a garment located along the edge of a garment or outlining constructed portions of a garment. The discussion of trimming in HRL 956103, supra, was in the context of a classification determination instead of one involving the CBTPA or Special Access Program; accordingly, it has little relevance to the matter at hand. We agree that an ornamental “trimming” comprised of either fabric or non-fabric material may, indeed, be placed along the extremities of a garment. But for purposes of the CBTPA, it need not necessarily be located there. In HRL 956426, dated April 23, 2002, Customs held that a woven decorative patch sewn to the chest area of a sleeveless knit is a “trimming” for purposes of the CBTPA. Similar to the patches in 560520 and 560726, supra, the patch was considered to add ornamentation to the garment.
Based on the analysis set forth above, we find that the foreign-origin heat transfers, which are used to provide ornamentation to the t-shirts, are “trimmings,” for purposes of the CBTPA. Therefore, the t-shirts will be disqualified from preferential tariff treatment under the CBTPA in the event that the 25% restriction for foreign-origin “findings and trimmings” is exceeded.
HOLDING:
The foreign-origin heat transfers which are used to provide ornamentation to t-shirts are “trimmings,” the use of which will disqualify the shirts for preferential tariff treatment under the CBTPA in the event that the cost of the foreign-origin “findings and trimmings” exceeds 25% of the cost of the components of the assembled garments.
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 handling the transaction.
Sincerely,
John Durant, Director
Commercial Rulings Division