• HQ H185799
• Apr 11, 2013

• Type : Classification • HTSUS :
•  Related:   H068277   

OT:RR:CTF:VS H185799 CMR

Customs and Border Protection
Port Director
101 E. Main Street
Norfolk, VA 23510

RE: Application for Further Review and Protest No. 1401-11-100283; DR-CAFTA; short supply

Dear Mr. Laria:

This is in response to Application for Further Review (AFR) and Protest No. 1401-11-100283, filed on July 19, 2011, and forwarded by you to this office for response. The protest was timely filed by Alston & Bird, on behalf of Sears Holdings Management Corporation, against the liquidation on February 11, 2011, of an entry of certain girls’ garments without benefit of preferential tariff treatment under the U.S. – Dominican Republic – Central America Free Trade Agreement (DR-CAFTA) by your port. FACTS:

The merchandise at issue consists of certain girls’ “hoodies”, i.e. sweatshirt-type garments with hoods. A representative sample garment was submitted with the protest. The garment covers the upper torso, features long sleeves, a hood, a kangaroo front pocket, ribbed cuffs and a ribbed knit bottom. The garment features a large, decorative butterfly appliqué on the front panel above the kangaroo pocket. The fabric of the garment is stated to be 80% cotton/20% polyester knit fabric with a napped back and jersey face. The napped side of the fabric forms the garment’s interior and the jersey face forms the garment’s exterior.

The protestant claims that the garments at issue are classifiable in heading 9822.05.01, Harmonized Tariff Schedule of the United States (HTSUS), as duty-free, as they are made up of fabric designated as not available in commercial quantities (also known as, “short supply”) provided for in U.S. Note 20(a)(78), Subchapter XXII, Chapter 98, and otherwise meet the terms of U.S. Note 20(a). The port sent a garment from the shipment to the Customs and Border Protection (CBP) Office of Laboratories and Scientific Services for testing of the fabric to determine if it met the description of the fabric of which protestant claims the garments are made, specifically, the fabric described in U.S. Note 20(a)(78). The resulting laboratory report indicated that the fabric of the garments did not meet the specifications of the fabric described in U.S. Note 20(a)(78). Specifically, the laboratory report indicated that the sample garment was composed of 76.9% cotton and 23.1% polyester and that this result was the average of two tests. The face yarn of the fabric from which the garment was made was wholly of cotton and the tie yarn was wholly of polyester. The fleece yarn was composed of 72.4% cotton and 27.6% polyester by weight (again an average of two tests). The face yarn had a yarn number of 52 metric; the tie yarn had a yarn number of 165 metric (48 filaments); and, the fleece yarn had been heavily brushed and had a yarn number of approximately 22 metric.

The fabric Master Purchase Order describes the short supply fabrics (other than differences in colors and amounts) as follows:

30S/1C+ 50D Poly +16S/1 CVC 70/30 FLEECE 61/63W 7.37OZ 80CTTN/20POLY [color specified] YLD [numbers indicated] FABRIC Torque: 5 Shrinkage: 5 X 5

The short supply fabric claimed to be used in the production of the garments at issue is described in U.S. Note 20(a)(78), Subchapter XXII, Chapter 98, which provides as follows:

Heading 9822.05.01 shall apply to textile or apparel goods of chapters 50 through 63 and subheading 9404.90 that contain any of the fabrics, yarns or fibers set forth herein, are described in general note 29 to the tariff schedule and otherwise meet the requirements of such general note 29:

* * *

Cotton / Polyester Three Thread Circular Knit Fleece Fabric HTS Subheading: 6001.21Fiber Content: 80% cotton / 20% polyester Yarn Size: 1. Face yarn - 100% combed cotton ring spun, 49/1 to 54/1 metric (29/1 to 32/1), in each of the following configurations*: a.) 100% bleached or dyed cottonb.) 95% undyed cotton / 5% dyed cottonc.) 90% undyed cotton / 10% dyed cotton d.) 80% undyed cotton / 20% dyed cottone.) 70% undyed cotton / 30% dyed cotton f.) 60% undyed cotton / 40% dyed cottong.) 50% undyed cotton / 50% dyed cotton h.) 40% undyed cotton / 60% dyed cottong.) 30% undyed cotton / 70% dyed cottonh.) 25% undyed cotton / 75% dyed cottoni.) 20% undyed cotton / 80% dyed cotton*The percentages stated above may vary by up to two percentage points.2. Tie yarn - 183 to 188 / 48 filament metric filament polyester (49 to 51 / 48 filament denier)3. Fleece yarn - 70% carded cotton / 30% 3600 metric polyester staple, 26/1 to 30/1 metric ring spun (70% cotton / 30% 4.0 denier polyester staple, 15.5/1 to 18/1 ring spun)Machine gauge: 21Weight: 247 to 258 grams per square meter (7.3 to 7.5 ounces per square yard)Width: Not less than 152 centimeters cuttable (Not less than 60 inches cuttable)Finish: Napped on technical back; bleached; dyed; of yarns of different colorsPerformance criteria: Not more than 5% vertical and horizontal shrinkage; not more than 4% vertical torque

ISSUE:

Were the girls’ garments in the entry at issue properly denied preferential treatment under the DR-CAFTA for failure to meet the requirements for classification in heading 9822.05.01, HTSUS?

LAW AND ANALYSIS:

The Dominican Republic--Central America--United States Free Trade Agreement (DR-CAFTA) was signed by the governments of Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and the United States on August 5, 2004. The CAFTA-DR was approved by the U.S. Congress with the enactment on August 2, 2005, of the Dominican Republic-Central America-United States Free Trade Agreement Implementation Act (the Act), Pub. L. 109-53, 119 Stat. 462 (19 U.S.C. 4001 et seq.).

GN 29 of the Harmonized Tariff Schedule of the United States (HTSUS) implements the DR-CAFTA. GN 29(b), subject to the provisions of subdivisions (c), (d), (m) and (n) of GN 29, sets forth the criteria for determining whether a good (other than agricultural goods provided for in GN 29(a)(ii)) is an originating good for purposes of the DR-CAFTA.

Subdivision (m), GN 29, provides at paragraph (viii)(B):

An apparel good of chapter 61 or 62 of the tariff schedule and imported under heading 9822.05.01 of the tariff schedule shall be considered originating if it is cut or knit to shape, or both, and sewn or otherwise assembled in the territory of one or more of the parties to the Agreement, and if the fabric of the outer shell, exclusive of collars and cuffs where applicable, is wholly of—

(1) one or more fabrics listed in U.S. note 20 to subchapter XXII of chapter 98; . . . .

Emphasis added.

In this case, it is claimed that the outer shells of the garments at issue are wholly of a fabric listed in U.S. Note 20, Subchapter XXII, Chapter 98, specifically, U.S. Note 20(a)(78). Heading 9822.05.01, HTSUS, provides that the provision shall apply to apparel goods of chapters 61 and 62 that “contain any of the fabrics, yarns or fibers” listed in the note.

Protestant has filed this protest arguing that the determination of eligibility for classification in heading 9822.05.01, HTSUS, should be based upon the condition of the greige fabric used in making the imported garments and not on the condition of the fabric of the finished garments. It is argued that the request and approval of the fabric for inclusion in U.S. Note 20(a) was based upon its construction and condition in the greige state prior to dyeing, finishing and other processing. Further, it is argued the descriptions of the yarns from which the fabric is made were based on their condition prior to knitting and the other processes following knitting. Therefore, it is argued that CBP should rely upon documentation presented by the protestant to show that the fabric, in its greige state, met the description of the fabric in U.S. Note 20(a)(78). The submitted documentation consists of copies of the purchase order and sales contract for the fabrics (different colors ordered) and purchase orders and commercial invoices for the yarns used in the production of the fabrics. We were also provided with copies of the purchase order, commercial invoice, and packing list for the imported garments. The short supply fabric description indicates a fiber content of 80% cotton/20% polyester for the knit fabric; a fiber content of 70% cotton/30% polyester for the fleece yarn; a yarn number of 183 to 188 metric/48 filaments for the tie yarn; and a yarn number of 26/1 to 30/1 for the fleece yarn. The finish provided for the fabric in the short supply fabric description is “napped on technical back; bleached; dyed; of yarns of different colors.”

The CBP laboratory report provided to the port indicated that the sample garment is composed of 76.9% cotton and 23.1% polyester knitted, dyed fabric. The fabric of the garment is made of a face yarn, tie yarn and fleece yarn. The face yarn is wholly of cotton; the tie yarn is wholly of polyester; and the fleece yarn is 72.4% cotton and 27.6% polyester by weight. The face yarn has a yarn number of 52 metric; the tie yarn has a yarn number of 165 metric (48 filaments); and the fleece yarn has a yarn number of approximately 22 metric.

Counsel argues that we must look to the documentation regarding the greige fabric used in the production of the garments and the documentation regarding the yarns used in the production of the greige fabric to determine whether the garments at issue qualify for preferential tariff treatment under heading 9822.05.01, HTSUS, and not look to the finished fabric comprising the outer shell of the garments at the time of importation. To support his argument, counsel refers to the “Procedures for Considering Commercial Availability Requests” (revised September 15, 2008), issued by the Committee for the Implementation of Textile Agreements (CITA). Among other comments, counsel refers to the use of the term “inputs” in the CITA procedural notice as significant and indicative that the description is that of the yarns as used by the fabric producer in manufacturing the fabric. Further, counsel argues that “it is standard practice in the textile and apparel industry to specify the characteristics of yarns present in dyed and finished fabrics to be the characteristics of those yarns in their original, as-manufactured state, prior to fabric formation.” Counsel asserts that eligibility for preferential treatment under heading 9822.05.01, HTSUS, is not a matter of tariff classification, but “a matter of meeting the terms of CITA’s designation, whatever those terms require.” Counsel’s argument centers on the timing of consideration of the fabric of the outer shell of the garment for purposes of determining eligibility for preferential treatment under GN 29(m)(viii)(B) and heading 9822.05.01, HTSUS, otherwise known as the short supply provisions of the DR-CAFTA.

General Note (GN) 3(h) provides definitions for various terms used in the tariff schedule. In relevant part, GN 3(h)(v) provides:

Definitions. For the purposes of the tariff schedule, unless the context otherwise requires—

* * * (v) the terms “wholly of”, “in part of”, and “containing”, when used between the description of an article and a material (e.g., “woven fabrics, wholly of” cotton”), have the following meanings”

‘wholly of” means that the goods are, except for neglible or insignificant quantities of some other material or materials, composed completely of the named material;

“in part of” or “containing” mean that the goods contain a significant quantity of the named material.

In addition, GN 29(d)(vi) states:

With respect to a textile and apparel good as defined in subdivision (d)(v) of this note, the term “wholly” means that the good is entirely of the named material.

We must apply the definitions provided in the GN 3(h) and in GN 29(d)(vi) when we consider the language of GN 29(m)(viii)(B) that requires the fabric of the outer shell (exclusive of collars and cuffs where applicable) of a garment to be “wholly of” one or more of the fabrics listed in U.S. note 20 to subchapter XXII of chapter 98 to be eligible for preferential tariff treatment under the DR-CAFTA.

It is a basic tenet of tariff classification that goods are classified in their condition as imported. See Archer Daniels Midland Co. v. United States, 32 CIT 343, 352, wherein the court stated this principle of classification and cited:

Worthington v. Robbins, 139 U.S. 337, 341, 11 S. Cr. 581, 35 L. Ed 181 (1891) (“The dutiable classification of articles imported must be ascertained by an examination of the imported article itself, in the condition in which it is imported.”); see also Mita Copystar Am. v. United States, 21 F.3d 1079, 1082 (Fed. Cir. 1994) (citing United States v. Citroen, 223 U.S. 407, 414-15, 56 L. Ed. 486, 32 S. Ct. 259, Treas. Dec. 32298 (1911)) (“It is well settled law that merchandise is classified according to its condition when imported.”)

CBP has addressed the issue of merchandise claiming eligibility under DR-CAFTA based on the use of short supply fabric in Headquarters Ruling Letter (HQ) H068277, dated December 30, 2010, and stated therein:

. . ., whether merchandise is eligible for preferential treatment based on a claim that it is cut and sewn in the region from short supply fabric is dependent on the condition of the merchandise as imported. CBP also stated in HQ H068277, “[b]y the express terms of U.S. Note 20(a)[,] we must examine the article in its condition as imported and determine whether the finished apparel contains a short supply fabric.” Emphasis added. Further, we must determine whether the fabric of the outer shell (exclusive of collars and cuffs) of the imported garment is wholly of the fabric listed in U.S. Note 20(a)(78).

In this case, the CBP laboratory test found that the fabric of the garment differed from the short supply description in multiple ways – (1) the fiber content of the fabric; (2) the metric number of the tie yarn (a 9.8% difference); (3) the metric number of the fleece yarn (a 15.4% difference); and the fiber content of the fleece yarn. Counsel argues these differences can be explained by the processing to which the yarns and subsequent fabric were subjected after knitting, including the dyeing, framing, napping and compacting processes. The napping process is especially singled out as an explanation for why the fiber content of the yarns in the finished fabric may not match the fiber content of the yarns as used in the knitting process to create the fabric because the napping process causes “[t]he fibers of the fleece yarn [to] separate or break unevenly and some may even separate entirely from the yarn so that they are no longer incorporated in the finished fabric.” In discussing the fiber content of the fabric, counsel refers to the napping process again in stating that “the fiber content testing of napped fabrics is particularly difficult and therefore imprecise.” Counsel argues “[i]f designation 78 were literally read to require fiber content of precisely 80 percent cotton and 20 percent polyester, no fabric would ever qualify.”

However, CBP is tasked with applying and enforcing the provisions of the tariff schedule. When the language of the tariff is precise and unambiguous, CBP has no authority to deviate from it. Tariff terms are to be construed in accordance with their common and commercial meanings which are presumed to be the same (Nippon Kogaku, Inc. v. United States, 69 CCPA 89, 92, 673 F. 2d 380 (1982); see also Nylos Trading Company v. United States, 37 CCPA 71, 73, C.A.D. 423 (1949), "Congress is presumed to know the language of commerce, and the object of the tariff act is to classify substances according to the general usage and denominations of trade[;] [t]he first and most important thing to be ascertained in construing a tariff act with regard to an article therein mentioned is its commercial designation").

The short supply fabric at issue herein is described in U.S. Note 20(a)(78) as having a fiber content of 80% cotton and 20% polyester. The fabric of the outer shell of a sample garment from the shipment at issue was found to contain 76.9% cotton and 23.1% polyester. This alone is a basis for denial of the protest as the tariff is precise and unambiguous in describing the fiber content of the short supply fabric set forth in U.S. Note 20(a)(78).

HOLDING:

The protest should be 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