CLA-2 RR:CR:TE 965883 JFS
Ms. Lynne McGowan
Import/Export Manager
Hamrick’s of North America
742 Peachoid Road
Gaffney, SC 29341
RE: Caribbean Basin Trade Partnership Act; Fabric Appliques; Trimmings
Dear Ms. McGowan:
This is in response to your letter dated August 12, 2002, requesting a binding ruling on the eligibility of a women’s knit top that incorporates fabric appliques for duty-free treatment under the United States-Caribbean Basin Trade Partnership Act ("CBTPA"). You submitted one sample for our examination.
FACTS:
The knit top under consideration, style 448A, has long sleeves, a full front opening secured by six buttons and is constructed from knit fabric that is made from 63% polyester and 37% cotton. The knit top is decorated with fabric appliques and embroidery in the shape of leaves.
The knit fabric is manufactured in the United States from U.S. yarn made from U.S. fibers. The embroidery thread is made in Belarus. The appliques are made from both U.S. and Taiwanese fabric. The sewing thread used to assemble the top is of U.S. origin. The buttons are of Taiwanese origin. The top will be cut and assembled, including embroidery and appliques, in a CBTPA beneficiary country, and then shipped to the U.S. You state that the value of all of the foreign findings and trimmings does not exceed 25% of the cost of the components of the assembled article.
The embroidery and applique process is as follows: The applique fabric is sent to an embroidery factory in a CBTPA country. A one-sided adhesive backing is heat set to the back side of the applique fabric. The applique fabric is then cut into the shape of the leaves. The knit fabric components to be embroidered are placed on an embroidery machine with a piece of tear away pellon backing on the underside of the component. A running stitch is used to form the outline of the appliques. The appliques are applied to the outlines and permanently attached to the knit fabric. The embroidery machine performs all embroidery on the appliques and the rest of the garment. The pellon backing is removed.
ISSUE:
Whether the knit top with appliques constructed from foreign yarn and U.S. or foreign fabric is eligible for preferential tariff treatment under the CBTPA?
LAW AND ANALYSIS:
The Trade and Development Act of 2000 (the Act”) was signed into law on May 18, 2000 (Pub. L. 106-200, 114 Stat. 251). Title II of the Act concerns trade benefits for Caribbean Basin countries 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. See Presidential Proclamation 7351, dated October 2, 2000, 65 Fed. Reg. 59329 (listing designated CBTPA beneficiary countries); and 65 Fed. Reg. 60236, dated October 10, 2000 (listing countries determined by the USTR to have met certain requirements for verifying origin). You stated that the knit top will be cut and assembled in a designated CBTPA beneficiary country.
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. It is noted that the issues raised in this ruling letter is outside the scope of the comments received.
Section 3107 of the Trade Act of 2002 (Pub. L. 107-210, 116 Stat. 3107), enacted on August 6, 2002, amended the CBTPA to modify the treatment accorded to certain textile and apparel articles imported from beneficiary CBTPA countries. Presidential Proclamation 7626, dated November 13, 2002, published in the Federal Register on November 18, 2002 (67 Fed. Reg. 69459), implemented the amendments to the CBTPA to facilitate the entry of the specific textile and apparel articles eligible for preferential treatment under the CBTPA.
Subheading 9820.11.18, HTSUSA, provides for the duty-free entry of:
Articles imported from a designated beneficiary Caribbean Basin Trade Partnership country enumerated in general note 17(a) to the tariff schedule:
Knitted or crocheted apparel articles (except T-shirts, other than underwear, classifiable in subheadings 6109.10.00 and 6109.90.10 and described in subheadings 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, and under the terms of U.S. note 2(a) to this subchapter.
Disregarding the foreign appliques and embroidery thread, the subject knit tops meet the terms of subheading 9820.11.18, HTSUSA.
As amended by section 211 of the CBTPA, 19 U.S.C. 2703(b)(2)(A) (vii)(I)(aa), permits the use of foreign origin findings or trimmings, provided that such findings and trimmings do not exceed 25 percent of the cost of the components of the assembled article. (Also cited at U.S. Note 3(a)(i), Subchapter XX, HTSUS). 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 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.
19 C.F.R. § 10.223(b)(1)(i)(A). Thus, if the appliques are “findings or trimmings,” and provided their total cost does not exceed 25% of the cost of the components of the knit top, their country of manufacture will be immaterial.
While "findings and trimmings" for purposes of the CBTPA are not specifically defined, the examples set forth above are indicative of the types of components that are considered to be within the purview of this provision. The exception for findings and trimmings was intended to be of a restrictive nature, as the intent of the statute was to ensure that all fabric components be formed and cut in the U.S. and CBTPA beneficiary countries. See HQ 562018, dated March 22, 2002. "Findings" are generally accepted to be sewing essentials used in textile goods while "trimmings" are decorative or ornamental parts. See, for example, Headquarters Ruling Letter ("HQ") 559552, dated February 14, 1996; HQ 560398, dated July 29, 1997; HQ 560458, dated March 6, 1998; HQ 559780, dated May 19, 1997 and HQ 560520, dated September 22, 1997, for examples of what qualifies as a finding or trimming. See also, HQ 558954, dated June 30,
1995; HQ 559522, dated February 14, 1996; HQ 559738, dated July 2, 1996; HQ 559794, dated June 3, 1996; and HQ 559738, dated July 2, 1996, for examples of what does not qualify as a finding or trimming.
Customs has consistently found that embroidery thread is a trimming. See HQ 560458, dated March 6, 1998; HQ 964521, dated April 18, 2001; HQ 965076, dated April 18, 2002; and HQ 965426, dated April 23, 2002. Accordingly, the foreign embroidery thread is considered a trimming and does not disqualify the subject garment from receiving preferential treatment under the CBTPA.
Customs has previously held under subheading 9802.00.90, HTSUS, that fabric components such as shoulder pads, sleeve headers, and velveteen collars are not findings or trimmings. See HRL 559552, dated February 14, 1996, and HRL 558954, dated June 30, 1995. However, Customs has found certain fabric items to be similar to those listed in the exemplars, and thus considered findings or trimmings. In HQ 560520, dated September 22, 1997, Customs found a patch label with the words "TOMMY HILFIGER" sewn onto jeans to be a finding or trimming. Customs relied on the fact that although the patch label added ornamentation, it was not an essential part of the jeans. In HQ 560726, dated December 12, 1997, Customs found that a Chinese-origin patch at issue depicting the "Pooh" character symbolized a brand and added ornamentation to the shorts and therefore was a finding or trimming.
In HQ 965426, dated April 23, 2002, Customs found that a woven decorative patch in the form of an American flag sewn to the chest area of a children’s tank top was a trimming. Customs, citing HQ 560726 and HQ 560520, found that the flag patch was ornamental and was a trimming. The instant appliques are substantially similar to the woven flag considered in HQ 965426 and, accordingly, are trimmings and will not disqualify the knit top from receiving preferential treatment under the CBTPA.
HOLDING:
Provided the cost of the foreign findings and trimmings is less than 25 percent of the cost of the components of the assembled knit tops and if constructed of fabrics wholly formed in the U.S. from yarns wholly formed in the U.S., the subject knit tops, style 448A, as described above, are eligible for duty free/quota free treatment under subheading 9820.11.18, HTSUSA, provided they are imported directly into the customs territory of the U.S. from a CBTPA beneficiary country.
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,
Myles B. Harmon, Acting Director
Commercial Rulings Division