MAR-2 RR:CR:SM 562224 KSG
Maribeth Vanderford
Fruit of the Loom
One Fruit of the Loom Drive
P.O. Box 90015
Bowling Green, KY 42102-9015
RE: U.S.-Caribbean Basin Trade Partnership Act; 9802.00.8044; cutting a zipper slit abroad; incidental to assembly
Dear Ms. Vanderford:
This is in response to your letter dated July 10, 2001, requesting a binding ruling on the eligibility of certain sweatshirts for duty-free treatment under the United States-Caribbean Basin Trade Partnership Act (“CBTPA”). You submitted a diagram of the two styles involved for our examination.
FACTS:
Union Underwear Co. dba as Fruit of the Loom proposes to produce two styles of men's sweatshirts with a high mock turtle neckline that has a partial front opening with a zipper closure (Styles 18ZP30R and 18ZP30XR). The garments are made from knitted cotton fabric formed in the U.S. from yarn that is formed in the U.S. The component parts are cut in the U.S. The parts are then shipped to a CBTPA beneficiary country where the zipper slit (a ten inch cutting comprising less than 5% of the total cutting required for the garment) is cut and the garment is assembled. The garment is then shipped to the U.S. You ask whether the garments would be entitled to CBTPA duty-free treatment under subheading 9802.00.8044, HTSUS or subheading 9820.11.18, HTSUS.
ISSUE:
Whether the sweatshirts, manufactured as described above, are eligible for 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 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.
In addition, Interim Customs Regulations to implement the trade benefit provisions of section 211 of the CBTPA were published in the Federal Register as 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.
Subheading 9802.00.80, HTSUS, provides for a duty exemption for:
Articles…assembled abroad in whole or in part of fabricated components, the product of the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change inform, 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, such as cleaning, lubricating and painting.
U.S. Note 7(b)(i), Subchapter II, Chapter 98, HTSUS, provides that:
For purposes of heading 9802.00.80, duty-free treatment shall be accorded to the following articles imported directly from a beneficiary United States-Caribbean Basin Trade Partnership Act (CBTPA) country previously designated by the President in a proclamation issued pursuant to such Act and enumerated in general note 17(a) to the tariff schedule—
(i) apparel articles assembled in one or more such 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 chapter 56 and are wholly formed and cut in the United States);
See also paragraph (b)(2)(A)(i)(l) of amended section 213 of the CBERA, and section 10.223(a)(1) of the Interim Customs Regulations.
Although U.S. Note 7(b)(i), HTSUS, requires the cutting of fabrics to be performed in the U.S., Customs believes that additional cutting of fabric components may be performed in a CBTPA beneficiary country under this provision to the extent that the cutting is considered incidental to the foreign assembly process. The regulations implementing subheading 9802.00.80, HTSUS, are set forth in sections 10.11 through 10.24
(19 CFR 10.11 through 10.24). Section 10.16(b) provides, in pertinent part:
Operations incidental to the assembly process whether performed before, during, or after assembly, do not constitute further fabrication, and shall not preclude the application of this exemption. The following are examples of operations which are incidental to the assembly process:
…(5) Adjustments in the shape or form of a component to the extent required by the assembly being performed abroad;
Section 10.16(c) provides, in pertinent part:
Any significant process, operation, or treatment other than assembly whose primary purpose is the fabrication, completion, physical or chemical improvement of a component, or which is not related to the assembly process, whether or not it effects a substantial transformation of the article, shall not be regarded as incidental to the assembly and shall preclude the application of the exemption to such article. The following are examples of operations not considered incidental to the assembly as provided under subheading 9802.00.80, Harmonized Tariff Schedule of the United States (19 U.S.C. 1202):
…(2) Cutting of garment parts according to pattern from exported material
The issue presented is whether the cutting of the ten inch zipper slit is an operation incidental to the assembly and therefore, an operation that may properly be performed in the CBTPA beneficiary country for a garment that is classified in subheading 9802.00.8044, HTSUS.
In Rudolph Miles v. United States, 567 F.2d 979 (CCPA 1979), the Court held that burning slots and holes in z-beams in connection with the assembly abroad of railroad boxcars was not a further fabrication for the purposes of item 807, TSUS (precursor provision for subheading 9802.00.80, HTSUS). The court found that "the processing of Z-beams in Mexico, especially the burning of holes and slots, was concomitant with the assembly of center sills and was not substantial enough to preclude qualification under clause (a) of item 807.00."
Customs has ruled in several cases that drilling or punching holes in various components is an operation incidental to assembly where the operation is not substantial and is necessary for the assembly process. See Headquarters Ruling Letter ("HRL") 560599, dated March 13, 1998, involving holes cross-drilled in an insulator, HRL 555671, dated March 15, 1991, involving holes punched into wooden venetian blinds and HRL 555394, dated August 15, 1989, involving punching a hole into a vertical blind strip, which allowed for the subsequent attachment of a plastic hook.
Further, Customs has ruled that creating button holes is an operation incidental to the assembly operation. See HRL 559341, dated November 21, 1995, and HRL 557366, dated October 6, 1993. Custom also ruled that cutting sizing holes, and a buckle slit, into belt strips in making a belt were operations incidental to the assembly process. See HRL 560409, dated June 24, 1997.
This case is similar to the cases involving burning slots and punching holes, cutting button holes and cutting sizing holes, and a buckle slit in order to assemble components because the ten inch zipper slit is cut into the sweatshirts in order to insert and attach the zipper. Like the operations discussed above, this operation is not substantial and is necessary for the assembly process. Accordingly, we find that cutting the zipper slit in a CBTPA beneficiary country is incidental to the assembly operation and does not preclude classification of the article in subheading 9802.00.8044, HTSUS.
Subheading 9820.11.18, HTSUS, provides as follows:
Knitted or crocheted apparel articles (except t-shirts, other than underwear, classifiable in subheadings 6109.10.00 and 6109.90.10 and described in subheading 9820.11.12) cut and assembled in one or more such countries from fabrics wholly formed in the United States from yarns wholly formed in the United States (including fabrics not formed from yarns, if such fabrics are classifiable in heading 5602 or 5603 of the tariff schedule and are formed wholly in the United States), if such assembly is with thread formed in the United States………………………………….
In this case, the component parts of the sweatshirt are cut in the U.S., and not in a CBTPA beneficiary country. Therefore, the sweatshirts in this case may not be entered under subheading 9820.11.18, HTSUS.
HOLDING:
Based on the information provided, the sweatshirts, manufactured as described in this case, are eligible for CBTPA treatment under subheading 9802.00.8044, HTSUS, provided they are imported directly into the customs territory of the U.S. from a CBTPA beneficiary country and all other requirements under the CBTPA regulations are met. Cutting a ten inch slit for the zipper for the sweatshirts in a CBTPA beneficiary country is incidental to the assembly process and does not preclude classification in subheading 9802.00.8044, HTSUS.
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