CLA-2 RR:TC:SM 559553 DEC
Mr. Thomas Caldecot Chubb, III
Associate General Counsel
Oxford Industries, Incorporated
222 Piedmont Avenue, N.E.
Atlanta, Georgia 30308
RE: Eligibility of certain shirts for duty-free treatment under
subheading 9802.00.90;
HRL 555409; U.S. Note 2, subchapter II, Chapter 98, HTSUS
Dear Mr. Chubb:
This is in response to your letter dated November 9, 1995,
concerning the eligibility of certain shirts for duty-free
treatment under subheading 9802.00.90, Harmonized Tariff Schedule
of the United States (HTSUS).
FACTS:
The shirts at issue are assembled in Mexico for Oxford
Industries, Incorporated (Oxford). The fabric components used in
the assembly of the shirts are formed and cut in the United
States. The shirts are then imported into the United States
pursuant to subheading 9802.00.90, HTSUS. Oxford has planned to
perma-press these shirts at its Vidalia, Georgia facility.
However, since the Vidalia facility is experiencing a massive
production backlog, Oxford is now contemplating the exportation
of these shirts to Juarez, Mexico for perma-pressing in Mexico
and the re-importation of the shirts into the United States
through the Port of El Paso, Texas pursuant to subheading
9802.00.90, HTSUS.
ISSUE:
If an imported article has received duty-free treatment
under subheading 9802.00.90, HTSUS, is the article entitled to
the duty exemption again when the article is subsequently re-imported?
LAW AND ANALYSIS:
Annex 300-B of the North American Free Trade Agreement
("NAFTA") is applicable to textile and apparel goods. Appendix
2.4 of Annex 300-B provides that:
[o]n January 1, 1994, the U.S. shall eliminate customs
duties on textiles and apparel goods that are assembled
in Mexico from fabrics wholly formed and cut in the
United
States and exported from and reimported into the United
States under:
(a) U.S. tariff item 9802.00.80.10; or
(b) Chapter 61, 62, or 63 if, after such
assembly,
those goods that would have qualified for
treatment
under 9802.00.80.10 have been subject to
bleaching,
garment dyeing, stone-washing, acid-washing
or
perma-pressing.
Thereafter, the U.S. shall not adopt or maintain any
customs
duty on textile or apparel goods of Mexico that satisfy
the
requirements of subparagraph (a) or (b) or the
requirements
of any successor provision to U.S. tariff item
9802.00.80.10.
Consequently, subheading 9802.00.90, HTSUS, was created to
provide for the duty-free entry of:
Textile and apparel goods, assembled in Mexico in which
all fabric components were wholly formed and cut in the
United States, provided that such fabric components, in
whole or in part (a) were exported in condition ready
for assembly without further fabrication, (b) have not
lost
their physical identity in such articles by change in
form,
shape or otherwise, and (c) have not been advanced in
value or improved in condition abroad except by being
assembled and except by operations incidental to the
assembly process; provided that goods classifiable in
chapters 61, 62 or 63 may have been subject to
bleaching,
garment dyeing, stone-washing, acid-washing or perma-
pressing after assembly as provided for herein
In view of the fact that the enactment of subheading
9802.00.90, HTSUS, specifically was intended to extend duty-free
and quota-free status to all goods
assembled in Mexico, which previously were eligible for entry
under the Special Regime Program administered under subheading
9802.00.80, HTSUS, it is Customs view that all of the policy
directives implementing this program should be considered
applicable for our administration of subheading 9802.00.90,
HTSUS.
Where an article originally entered under subheading
9802.00.80, HTSUS, is exported for further assembly operations
abroad with U.S. components, then those components exported for
assembly are entitled to allowances in duty under this tariff
provision upon return of the article. However, those components
that were afforded duty allowances when the article was initially
imported are not entitled to the duty exemption a second time
since, in their condition as exported for further assembly, they
are not U.S. fabricated components "ready for assembly", but an
already- assembled foreign article. U.S. Note 2(a), subchapter
II, Chapter 98, HTSUS (Note 2(a)) is the most instructive
regarding this issue. Note 2(a) provides, in relevant part,
that:
any imported article which has been assembled abroad in
whole or in part of products of the United States,
shall be
treated for the purposes of this Act as a foreign
article, and,
if subject to a duty which is wholly or partly ad
valorem, shall
be dutiable, except as otherwise prescribed in this
part, on
its full value determined in accordance with section
402 of the
Tariff Act of 1930, as amended. (Emphasis added).
Customs has previously held that it is clear from a reading
of Note 2(a) that when an article assembled abroad of U.S.
fabricated components is entered under subheading 9802.00.80,
HTSUS, it is considered a "foreign article" for tariff purposes.
See Headquarters Ruling Letter (HRL) 555409, dated March 12,
1990. Note 2(a) supra is equally applicable to articles
assembled in Mexico from U.S. formed and cut fabric components
which are entered under subheading 9802.00.90, HTSUS. Therefore,
the shirts that were entered under 9802.00.90, HTSUS, are foreign
articles for tariff purposes.
In HRL 555409, Customs addressed whether capacitors
assembled in Mexico and imported into the U.S. pursuant to
subheading 9802.00.80, HTSUS, were eligible for re-importation
under subheading 9802.00.80, HTSUS, if they were returned to
Mexico and later imported back into the U.S. Subsequent to the
first importation of the capacitors, the importer shipped the
articles to various U.S. customers. Some of the capacitors were
returned for failure to meet certain specifications or were
defective. These capacitors were shipped back to the Mexican
facility to be tested. If they were deemed not to be defective,
they were put back into finished inventory to await re-shipment.
If they were defective, they would be reworked and then put back
into the inventory.
The capacitors were granted the duty benefit under
subheading 9802.00.80, HTSUS, on the value of the U.S. components
assembled therein when initially imported after foreign assembly.
At that point, the capacitors were considered foreign articles
pursuant to Note 2(a). Therefore, as the capacitors were not
transformed into products of the U.S. while in the U.S., and were
not then further assembled abroad, the plain meaning of
subheading 9802.00.80, HTSUS, and Note 2(a) compelled the
conclusion in HRL 559409 that the capacitors were not again
entitled to the duty exemption when re-imported.
In the case at hand, you have presented an analogous
situation in that the shirts that have been previously imported
under subheading 9802.00.90, HTSUS, and are now going to be
exported only for perma-pressing, are deemed to be foreign
articles pursuant to Note 2(a). Since the shirts are deemed to
be foreign articles when they initially enter the U.S. pursuant
to subheading 9802.00.90, the subject shirts that are perma-pressed in Mexico will be ineligible for classification under
subheading 9802.00.90, HTSUS, when re-imported.
HOLDING:
The shirts that are sent to Mexico for perma-pressing as
described above may not be entered free of duty under subheading
9802.00.90, HTSUS, since they are deemed to be foreign articles
when the subject shirts are initially entered into the U.S. prior
to their exportation to Mexico for perma-pressing.
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
Tariff Classification Appeals
Division