VAL-2 OT:RR:CTF:VS H026124 CMR
U.S. Customs and Border Protection
Protest and Control
1100 Raymond Boulevard
Suite 402
Newark, NJ 07102
RE: Application for Further Review and Protest No. 4601-07-101945; pants; belt;
U.S.-Jordan FTA; sets
Dear Port Director:
This decision is in response to your memorandum of April 8, 2008, forwarding Protest No. 4601-07-101945 for further review and a determination by this office. The protest was timely filed by Sandler, Travis & Rosenberg, on behalf of their client, LEI Division of Jones Apparel of Texas II, against your decision to deny preferential tariff treatment to certain entries of apparel under the United States – Jordan Free Trade Agreement (JFTA). The application for further review was properly approved as it met the requirements of sections 174.23 and 174.24(a).
In reaching our decision, this office has considered the information contained in the protest file forwarded to us by the port, information conveyed to us in a meeting on July 28, 2009 with representatives from Sandler, Travis & Rosenberg and their client, and supplemental submissions submitted by counsel dated August 7, 2009.
FACTS:
This protest involves thirteen entries of women’s woven pants imported with belts. The pants vary in fabric composition. In twelve entries, the pants are classifiable as “of cotton” and for the remaining entry, the pants are classifiable as of man-made fibers, under heading 6204 of the Harmonized Tariff Schedule of the United States (HTSUS), which provides for, among other things, women’s woven trousers. The entries were liquidated at the normal trade relations rate of duty for the applicable subheadings. The protestant claims that the entries qualify for preferential tariff treatment under the United States – Jordan Free Trade Agreement and the entries should be reliquidated at the preferential rate of FREE.
We have learned from the port that one entry of women’s cotton woven pants with a belt described as “Textile – 100% cotton” was reliquidated in accordance with the importer’s claim and a refund of duties paid was issued on August 31, 2007. As such, any protest of this entry is moot. Therefore, this decision addresses only the twelve remaining entries of which five involved women’s woven pants with PVC belts, two involved women’s woven pants with polyester sash belts, and the remaining five involved women’s woven pants with belts described as “avery-webbing poly w/studs.” The belts are of Chinese or Hong Kong origin.
Documentation in the file indicates that the pants are cut and sewn in Jordan from foreign fabric and foreign findings. The packing materials appear to be a combination of foreign and Jordanian origin materials. As already indicated, the belts that are combined with the pants assembled in Jordan are of foreign origin. The belts are fed through the belt loops on the pants in Jordan.
The file contained copies of related protests. Cost sheets for the merchandise at issue in those protests were also in the file. With regard to the merchandise at issue in the protest before us, only two cost sheets were in the file; one for the entry which was reliquidated per the importer’s request and not at issue herein, and the second for one of the styles at issue in the subject protest. The supplemental submissions submitted by counsel contained revised cost sheets for the styles at issue.
With regard to the classification of the merchandise involved, i.e., the pants and belt combinations, it is not clear as to whether the port classified the merchandise as composite goods or as sets. However, based upon the descriptions in the record and exchanges with counsel for the importer, it is our understanding that the merchandise at issue is classifiable as sets under General Rule of Interpretation (GRI) 3(b). This office was provided with one sample of the pants and belt combinations at issue. We understand that the specific belts at issue are not sold separately. However, classification as a set is not dependent upon whether the specific belts at issue are sold separately, but whether they are of a kind which one could find sold separately. Based upon our review of the submitted sample, the pants and belt combination is classifiable as a set pursuant to GRI 3(b). Furthermore, based upon representations from counsel, the goods at issue are sets and not composite goods.
ISSUE:
Are the pants with accompanying belts at issue in Protest No. 4601-07-101945 eligible for the preferential tariff rate under the JFTA?
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. The modifications to the HTSUS included the addition of General Note (GN) 18, incorporating the relevant JFTA rules of origin as set forth in the JFTA Act, and the insertion throughout the HTSUS of the preferential duty rates applicable to individual products under the JFTA designated by the special program indicator ‘‘JO’’ in the ‘‘Special’’ rate of duty subcolumn. 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).
The combination pants with accompanying belts are classifiable under the appropriate provisions of heading 6204 as women’s woven pants based on application of GRI 3(b) which provides, in relevant part, that composite goods made up of different components and goods put up in sets for retail sale which cannot be classified by reference to GRI 3(a) are classified as if consisting of the material or component which imparts the essential character to the composite good or retail set. See Headquarters Ruling Letter (HQ) 966639, dated October 22, 2003 for a discussion of the classification of garments with belts under the HTSUS; see also the rulings cited in HQ 966639.
In determining whether the pants and belt combinations at issue are 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 combinations to be “products of Jordan” eligible for preferential tariff treatment under the JFTA, the goods must be produced or manufactured in Jordan into new or different articles 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.
As stated in the FACTS section, we consider the merchandise at issue to be classifiable as GRI 3(b) sets put up for retail sale. Section 102.21(d) addresses the treatment of sets and states:
Where a good classifiable in the HTSUS as a set includes one or more components that are textile or apparel products and a single country of origin for all of the components of the set cannot be determined under paragraph (c) of this section, the country of origin of each component of the set that is a textile or apparel product shall be determined separately under paragraph (c) of this section.
Counsel for the protestant submits that in determining the eligibility of a garment and belt combination, whether classifiable as a set or as a composite good, CBP must determine the classification of the combination and then only consider the component that “represents the ‘essential character’ of a garment/belt combination in determining whether the combination is a ‘product of’ Jordan.” As support, counsel cites paragraph one of the General Notes to the U.S. Tariff Schedule, attached to Annex 2.1 of the JFTA. This paragraph states:
Relation to the Harmonized Tariff Schedule of the United States (USHTS). The provisions of this schedule are generally expressed in terms of the Harmonized Tariff Schedule of the United States, and the interpretation of the provisions of this schedule, including the product coverage of subheadings of this schedule, shall be governed by the General Notes, Section Notes, and Chapter Notes of the USHTS. To the extent that provisions of this schedule are identical to the corresponding provisions of the USHTS, the provisions of this schedule shall have the same meaning as the corresponding provisions of the USHTS.
Counsel argues, based on the above language, that for a good classifiable by application of GRI 3(b), only the component that determines the “essential character” of the good need qualify for preferential treatment under the JFTA. It is our opinion that the entire good must qualify for preferential treatment under the JFTA. The HTSUS is utilized to determine the proper classification of the good and that classification determines the provision of the JFTA which is applicable to determine the eligibility of the good for preferential tariff treatment under the JFTA.
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. “When Congress enacts a law it is presumed to know the existing law.” (cases cited omitted). See American Bayridge Corp. v. United States, 22 C.I.T. 1129, 1150 (December 16, 1998).
Furthermore, it is presumed that Congress is familiar with and sanctions existing regulations on substantially identical language when that language is repeated in legislation with no substantive change. See United States v. Douglas Aircraft Company, 62 C.C.P.A. 53, 58 (February 20, 1975).
At the time the JFTA Act was enacted, the regulations implementing the textile and apparel rules set forth in section 334 of the Uruguay Round Agreements Act had been in place for several years. As already noted, Congress is presumed to have been familiar with those regulations when drafting and considering the JFTA Act. In addition, while counsel is correct that the JFTA does not address the eligibility of sets or composite goods, the CBP regulations in § 102.21 do. “When Congress grants authority to an agency to promulgate regulations necessary for the administration of programs it oversees, that authority permits the agency to fill gaps left in the statutory scheme.” See California Industrial Products, Inc. v. United States, 28 C.I.T. 1652, 1656 (September 22, 2004), citing, Contreras v. United States, 215 F.3d 1267, 1274 (Fed. Cir. 2000). CBP filled in the gap perceived in section 334 with regard to the treatment of sets. Passage by Congress of substantially identical language, without substantive change, reasonably results in the same regulatory treatment. Therefore, we disagree with counsel’s arguments that CBP’s application of its regulations applicable to the JFTA is contrary to the JFTA and the JFTA Act.
Five of the entries at issue involve garments with non-textile belts; the remaining seven involve textile belts which would be classifiable in Chapter 62. The avery-webbing belts would be classifiable in heading 6217, HTSUS, as other made up clothing accessories based on the description of the belts as being of polyester webbing material. Without a sample, we can not proffer a classification for the sash belts.
I. “Product of” Requirement
As the pants at issue are cut and sewn in Jordan of foreign origin fabric, the applicable provision under § 102.21 is paragraph (c)(2) which directs that “the country of origin of the good is the single country, territory, or insular possession in which each foreign material incorporated in that good underwent an applicable change in tariff classification, and/or met any other requirement, specified for the good in paragraph (e) of [§ 102.21]. The relevant rule for the pants in paragraph (e) is:
6201-6208 (1) If the good consists of two or more component parts, a change to an assembled good of heading 6201 through 6208 from unassembled components, provided that the change is the result of the good being wholly assembled in a single country, territory, or insular possession.
* * *
“Wholly assembled” is defined in § 102.21(b)(6) as:
. . . when used with reference to a good means 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 provisions of § 102.21, the pants assembled in Jordan are of Jordanian origin. However, the belts, textile and non-textile, when classified with the pants as part of a GRI 3(b) set, retain their foreign origin by application of § 102.21(d).
When considering the pants and belt combination sets, based on § 10.709(c), the belts retain their foreign origin by application of § 102.21. Furthermore, § 10.709(b) directs us to the principles and examples set forth in § 10.195(a)(2). Section 10.195(a)(2) provides, in relevant part:
(2) Combining, packaging, and diluting operations. No article which has undergone only a simple combining or packaging operation . . . shall be entitled to duty-free treatment even though the processing operation causes the article to meet the value requirement set forth in that paragraph.
Therefore, the “good” imported from Jordan, i.e., the pants and belt sets, is not a product of Jordan because both items in the set are not products of Jordan.
This accords with the position taken by the agency in Treasury Decision 91-7, dated January 8, 1991, regarding, among other things, the eligibility of sets, mixtures and composite goods for special tariff treatment programs. See HQ 963453, dated February 26, 2001 (set consisting of a towel, brush and retriever not eligible for preferential tariff treatment under the United States – Israel Free Trade Area Implementation Act as each item in the set is not a product of Israel); and, HQ 556750, dated March 1, 1993 (rechargeable power tool set consisting of a tool, recharger assembly and bit were not eligible for preferential tariff treatment under the GSP as the entire set was not a “product of” Mexico – “neither the sets nor any parts thereof are entitled to duty-free treatment under this program”). We note that the Court of International Trade in Uniden America Corporation v. United States, 24 C.I.T. 1191, 1195, 120 F.Supp. 2d 1091, 1096 (2000), acknowledged the applicability of T.D. 91-7 to goods classifiable as sets under GRI 3.
II. Value Added Requirement
As the merchandise at issue is classifiable as sets and having determined that the pants and belt sets are not “products of Jordan” under GN 18(a) by application of GN 18(d) and the CBP Regulations implementing the JFTA, we need go no further.
HOLDING:
As the pants and belts in the twelve entries at issue are classified as GRI 3(b) sets and each component of the sets is not a “product of Jordan,” the sets are not “products of Jordan” and the port was correct to deny the claim for preferential tariff treatment under the JFTA. The protest is denied.
In accordance with the Protest/Petition Processing Handbook (CIS HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with this decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision Regulations and Rulings of the Office of International Trade will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division