OT:RR:CTF:VS H135360 CMR
Ms. Stacy Bauman
American Shipping Company, Inc.
140 Sylvan Avenue
Englewood Cliffs, NJ 07632
RE: Modification of New York Ruling Letter K80820; eligibility of composite good consisting of pants with a self-fabric belt for preferential tariff treatment under General Note 3(a)(v) of the Harmonized Tariff Schedule of the United States (HTSUS) and under the United States – Jordan Free Trade Area Implementation Act
Dear Ms. Bauman:
Customs and Border Protection (CBP) issued New York Ruling Letter (NY) K80820, dated December 23, 2003, to you in response to your request on behalf of Dress Barn Inc. for a ruling on the classification and eligibility for preferential tariff treatment of a garment produced, in part, in a Qualifying Industrial Zone (QIZ), or in Jordan. We have had occasion to review the decision in NY K80820. We erred with respect to the composite good, consisting of the pants and a self-fabric textile belt being denied preferential tariff treatment as a product of a QIZ or a product of Jordan. Accordingly, NY K80820 is modified as set forth below.
Pursuant to section 625(c), Tariff Act of 1930 (19 U.S. C. 1625(c)), as amended by section 623 of Title VI (Customs Modernization) of the North American Free Trade Agreement Implementation Act, Pub. L. 103–182, 107 Stat. 2057, 2186 (1993), notice of the proposed modification of NY K80820 was published in the Customs Bulletin, Volume 45, Number 22, on May 25, 2011. Two comments were received during the notice and comment period. One comment supported CBP’s action while the other comment sought a broader modification.
FACTS:
As set forth in NY K80820, in relevant part:
The pants at issue, style DB3215, are constructed from 100 percent polyester woven fabric with a 100 percent polyester woven lining. The pants have a partially elasticized waistband with belt loops, a front fly zipper, a button
at the waistband that closes in the left-over-right direction, side seam pockets,
and hemmed leg openings. The pants will be imported with either a self fabric textile belt or a polyurethane belt.
* * *
You have indicated that the garment will be produced either in Jordan or in an approved “Qualifying Industrial Zone.” The manufacturing operations for the [garment] will be done in accordance with one of the following scenarios:
* * *
SCENARIO B
China
Fabric is woven
Waistband elastic is formed
Pocketing fabric is formed
Self-fabric belt is wholly made into a finished product
Jordan or QIZ
Body fabric is cut into components
Elastic is cut into components
All assembly of the pants is completed
All finishing operations are completed in Jordan, garment with Chinese origin self-fabric belt is shipped directly to the US.
* * *
SCENARIO D
China
Fabric is woven
Waistband elastic is formed and cut to length
Pocketing fabric is formed; pockets are made
Self-fabric belt is wholly made into a finished product
Jordan or QIZ
Body fabric is cut into components
All assembly of the pants is completed
All finishing operations are completed in Jordan, garment with Chinese origin self-fabric belt is shipped directly to the US.
ISSUE:
Is the composite good consisting of polyester woven pants and a self-fabric textile belt a product of Jordan qualifying for preferential treatment under the United
States – Jordan Free Trade Area Implementation Act or a product of a QIZ qualifying for preferential treatment under GN 3(a)(v), HTSUS?
LAW AND ANALYSIS:
On October 24, 2000, the United States and the Hashemite Kingdom of Jordan signed the U.S.-Jordan Free Trade Agreement (JFTA). The provisions of the JFTA were adopted by the United States with the enactment on September 28, 2001 of the United States-Jordan Free Trade Area Implementation Act (the “JFTA Act”), Public Law 107–43, 115 Stat. 243 (19 U.S.C. 2112 note). On December 7, 2001, the President signed Proclamation 7512 to implement the provisions of the JFTA. The Proclamation, published in the Federal Register on December 13, 2001 (66 FR 64497), modified the Harmonized Tariff Schedule of the United States (‘‘HTSUS’’) as set forth in Annexes I and II of the Proclamation. General Note (GN) 18, HTSUS, incorporated the relevant U.S.-Jordan Free Trade Agreement rules of origin as set forth in the United States-Jordan Free Trade Area Implementation Act. Customs and Border Protection (CBP) Regulations implementing the JFTA are set forth in Volume 19 of the Code of Federal Regulations at Part 10, Subpart K, §§ 10.701 through 10.712 (19 CFR §§ 10.701 through 10.712).
Under GN 3(a)(v), HTSUS, articles which are the product of the West Bank, the Gaza Strip or a QIZ and which are imported directly to the United States from the West Bank, the Gaza Strip, a QIZ or Israel qualify for duty-free treatment, provided the sum of (1) the cost or value of materials produced in the West Bank, the Gaza Strip, QIZ, or Israel, plus (2) the direct costs of processing operations performed in the West Bank, the Gaza Strip, QIZ or Israel, is not less than 35% of the appraised value of such articles when imported into the U.S. An article is considered to be a "product of" the West Bank, the Gaza Strip, or a QIZ if it is either wholly the growth, product or manufacture of one of those areas or a new or different article of commerce that has been grown, produced or manufactured in one of those areas.
NY K80820 classified the pants and self fabric belt combination as a composite good of heading 6204, HTSUS. In determining whether the pants and belt combination at issue is eligible for preferential treatment under the JFTA, we look to GN 18 which provides at paragraph (b):
For purposes of this note, subject to the provisions of subdivisions (d) and (e), goods imported into the customs territory of the United States are eligible for treatment as “products of Jordan” only if–
such goods are imported directly from Jordan into the customs territory of the United States, and
(ii) they are–
(A) wholly the growth, product or manufacture of Jordan, or
new or different articles of commerce that have been grown,
produced or manufactured in Jordan and meet the requirements of subdivision (c) of this note.
Paragraph (d) of GN 18 provides in relevant part:
(d) Textile and apparel articles.
For purposes of this note, a textile or apparel article imported directly from Jordan into the customs territory of the United States shall be eligible for tariff treatment provided in subdivision (a) of this note only if –
* * *
(D) the article is any other textile or apparel article that is wholly assembled in Jordan from its component pieces.
Such textile and apparel articles not wholly obtained or produced in Jordan must comply with the requirements of this subdivision and of subdivision (c)(ii) of this note.
Paragraph (c)(ii) of GN 18 provides, in pertinent part:
. . ., goods are eligible for the tariff treatment provided in this note if the sum of–
(A) the cost or value of the materials produced in Jordan, plus
the direct costs of processing operations performed in Jordan,
is not less than 35 percent of the appraised value of such article at the time it is entered. * * *
Therefore, in this case, in order for the pants and belt combination to be a “products of Jordan” eligible for preferential tariff treatment under the JFTA, the composite good must be produced or manufactured in Jordan into new or different article of commerce and meet the 35 percent value-added requirement of GN 18(c)(ii).
As the goods are classifiable under heading 6204, HTSUS, the textile and apparel provision of GN 18(d) cited above applies. We must also refer to the CBP Regulations applicable to the JFTA. Section 10.709 (19 CFR § 10.709) provides in relevant part:
(a) General. Except as otherwise provided in paragraph (b) of this section, a good imported directly from Jordan into the customs territory of the United States will be eligible for preferential tariff treatment under the US–JFTA only if:
(1) The good is either:
(i) Wholly the growth, product, or manufacture of Jordan; or
(ii) A new or different article of commerce that has been grown, produced, or manufactured in Jordan; and
(2) With respect to a good described in paragraph (a)(1)(ii) of this section, the good satisfies the value-content requirement specified in § 10.710 of this subpart.
* * *
(c) Textile and apparel goods. For purposes of determining whether a textile or apparel good meets the requirements of paragraph (a)(1) of this section, the provisions of § 102.21 of this chapter will apply.
The JFTA Act provides for “Rules of Origin” in Section 102 of the Act. Section 102(c) provides the specific rules for textile and apparel articles. Section 102(e) provides for the issuance of regulations by the Secretary of the Treasury as may be necessary to carry out Section 102. In House Report 107-176, Part 1, “United States-Jordan Free Trade Area Implementation Act”, dated July 31, 2001, the explanation of Section 102 includes the following with regard to the textile and apparel product rules of origin:
However, in addition, section 102 prescribes specific origin rules for textile and apparel products, consistent with those set out in paragraph 9 of Annex 2.2 of the Agreement, and in section 334 of P.L. 103-465, the Uruguay Round Agreements Act (the so-called `Breaux-Cardin' rule.) For apparel products, this rule means that the place of assembly will generally determine origin of the product. A textile product will be considered to originate where the fabric is knit or woven.
Emphasis added.
The House Report reflects that Congress viewed the textile and apparel rules of origin set forth in the JFTA Act and in the JFTA Agreement to be consistent with the rules set forth in section 334 of the Uruguay Round Agreements Act, codified at 19 U.S.C. § 3592. The rules of section 334 are implemented in § 102.21 of the CBP Regulations. Those regulations were issued as a final rule, after public comment, on September 5, 1995 in the Federal Register. See 60 Federal Register 46188.
The textile and apparel rules of origin set forth in the JFTA and the JFTA Act are nearly verbatim to the same rules set forth in 19 U.S.C. § 3592. Therefore, the determination of whether a textile set or textile composite good is a “product of” Jordan for purposes of the JFTA should be consistent with that same result reached by the application of § 102.21.
The composite good at issue is classified in heading 6204, HTSUS and is produced from processing occurring in more than one country. As such, under § 102.21(c)(2), we look to the rule for goods of heading 6204 set forth in § 102.21(e). The applicable rule requires that if the good consists of two or more component parts that it undergo a change to an assembled good of heading 6204 from unassembled components provided the change is the result of the good being wholly assembled in a single country, territory or possession. “Wholly assembled” is defined in § 102.21(b)(6) as meaning:
that all components, of which there must be at least two, preexisted in essentially the same condition as found in the finished good and were combined to form the finished good in a single country, territory or insular possession. Minor attachments and minor embellishments (for example, appliqués, beads, spangles, embroidery, buttons) not appreciably affecting the identity of the good, and minor subassemblies (for example, collars, cuffs, plackets, pockets), will not affect the status of a good as “wholly assembled” in a single country, territory, or insular possession.
Based on the information provided, the pants are “wholly assembled” in Jordan and therefore are a “product of” of Jordan.
In HQ 563246, dated July 7, 2005, a composite good consisting of a pair of shorts and a matching belt was determined to be a product of Jordan for purposes of the JFTA. The shorts determined the classification of the composite good and thus, the origin of the shorts which were cut and sewn in Jordan, determined the origin of the composite good. See HQ 960033, dated January 30, 1997, wherein the origin of a composite good consisting of a vest and belt was determined by the origin of the vest as it imparted the essential character of the good. (“Since the instant vest and belt are considered a composite good and the vest imparts the essential character of the composite good, the country of origin of the vest will determine the origin for the composite good and the country of origin of the belt will not be determined separately.”) See also, HQ 959342, dated July 18, 1996, wherein the origin of a dress and self-fabric
belt was based on the origin of the dress as it imparted the essential character to the composite good. Similarly, in this case, the pants determine the classification of the composite good as they impart its essential character. Thus, as in HQ 563246, the origin of the accompanying belt which is joined to the pants in Jordan, is not relevant to the determination that the composite good is a product of Jordan.
Similarly, with regard to the eligibility of the subject pants and self-fabric belt under GN 3(a)(v) as a product of a QIZ, we apply the rules of origin set forth in 19 CFR § 102.21. As the processing in the QIZ is the same as the processing which would occur in Jordan, the result is the same. The country of origin of the composite good consisting of the pants and self-fabric belt is the QIZ.
We note that the reason cited for denying preferential treatment to the composite good in NY K80820 was Treasury Decision (T.D.) 91-7. This was an error. T.D. 91-7 set forth the position of the Customs Service with regard to the tariff treatment and country of origin marking of sets, mixtures and composite goods prior to the enactment of section 334 of the Uruguay Round Agreements Act which is codified at 19 U.S.C.
§ 3592, the statutory basis for 19 CFR § 102.21.
In HQ 559983, dated August 22, 1996, the Customs Service (now CBP) considered the marking of a dress and belt composite good. The composite good had been the subject of HQ 959342, dated July 18, 1996, which applied § 102.21 to determine the origin of the dress and belt to be the country in which the dress components were fully assembled, country B. In the ruling, we stated:
Since 19 CFR 102.21 implements section 334 of the Uruguay Round Agreements Act which applies ‘for purposes of the customs laws,’ and 19 U.S.C. 1304 is a Customs law, the country of origin of the dress and self-fabric belt for marking purposes is Country B. Therefore, only a single country of origin marking on the dress will be needed for the dress and belt composite good.
We noted in HQ 559983 that the decision reached therein was consistent with the “common sense” approach of T.D. 91-7 and that the analysis presented in that T.D. need not be used.
HOLDING:
Under scenarios B and D, the country of origin of the composite good consisting of the woven polyester pants with a self-fabric textile belt is either Jordan or the QIZ, i.e., where the pants are wholly assembled. Provided that the 35 percent value added
requirement is met, the pants and belt would qualify for preferential treatment under the JFTA or GN 3(a)(v). NY K80820 is hereby modified with respect to the matters addressed herein. In accordance with 19 U.S.C. § 1625(c), this ruling will become effective 60 days after its publication in the Customs Bulletin.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division