VAL-2 OT:RR:CTF:VS H236917 CMR
Chandri Navarro, Esq.
Hogan Lovells US LLP
Columbia Square
555 Thirteenth Street, NW
Washington, D.C. 20004
RE: Request for ruling on the DR-CAFTA eligibility of certain hosiery garments containing elastomeric yarn
Dear Ms. Navarro:
This is in response to your request, dated December 21, 2012, on behalf of your client, INVISTA S.a.r.l. (“INVISTA”), requesting that we re-entertain your request, dated May 17, 2010, on behalf of INVISTA, for a ruling on the eligibility for preferential tariff treatment under the Dominican Republic – Central America – United States Free Trade Agreement Implementation Act (DR-CAFTA) of certain hosiery containing elastomeric yarn. The merchandise at issue will be imported through various ports of entry, including the Port of Miami.
FACTS:
INVISTA manufactures spandex yarn in the United States and affiliated companies within the INVISTA group manufacture spandex in other non-DR-CAFTA countries. Gimped yarns of subheading 5606.00.0010, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), are manufactured in the United States using spandex core yarns of subheading 5402.44.0000, HTSUSA, that are wholly formed in a non-DR-CAFTA country by INVISTA. The gimped yarns are shipped from the United States to a DR-CAFTA country where they are knit to shape into hosiery products of heading 6115, HTSUS. The hosiery is then imported directly from the DR-CAFTA country into the United States through various ports of entry.
In your submission, you provide information with regard to spandex yarns. Specifically, you provide the Federal Trade Commission definition of spandex and the definition of spandex from the Dictionary of Fiber and Textile Technology. You submit that all spandex core yarns classified in subheading 5402.44.0000, Harmonized Tariff Schedule of the United States (HTSUS), meet the definition set forth in Note 13, Section XI, HTSUS, for elastomeric yarn. Subheading 5402.22.0000, HTSUS, provides for: “Synthetic filament yarn (other than sewing thread), not put up for retail sale, including synthetic monofilament of less than 67 decitex: Other yarn, single, untwisted or with a twist not exceeding 50 turns/m: Elastomeric.” You further indicate that CBP has classified gimped yarns, similar to the yarn at issue, in subheading 5606.00.0010, HTSUS, which provides for, among other things, gimped yarn containing elastomeric filaments.
ISSUE:
Whether hosiery of heading 6115 produced in a DR-CAFTA party using gimped yarns produced in a DR-CAFTA party utilizing non-originating spandex core yarns is eligible for preferential tariff treatment under the DR-CAFTA.
LAW AND ANALYSIS:
The Dominican Republic--Central America--United States Free Trade Agreement (“DR-CAFTA” or “Agreement”) 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 DR-CAFTA 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(a) states, in relevant part:
Goods for which entry is claimed under the terms of the Dominican Republic-Central America-United States Free Trade Agreement are subject to duty as set forth herein. For the purposes of this note –
originating goods or goods described in subdivision (a)(ii), subject to the provisions of subdivisions (b) through (n) or this note, that are imported into the customs territory of the United States and entered under a
provision –
(A) in chapters 1 through 97 of the tariff schedule for which a rate of duty appears in the “Special” subcolumn of column 1 followed by the symbol “P” or “P+” in parentheses, or
* * *
are eligible for the tariff treatment and quantitative limitations set forth therein in accordance with sections 201 through 203, inclusive, of the Dominican Republic-Central America-United States Free Trade Agreement Implementation Act (Pub. L. 109-53; 119 Stat. 462)[.]
* * *
GN 29(b) 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. GN 29(b) states:
For the purposes of this note, subject to the provisions of subdivisions (c), (d), (m) and (n) thereof, a good imported into the customs territory of the United States is eligible for treatment as an originating good under the terms of this note if –
(i) the good is a good wholly obtained or produced entirely in the territory of
one or more of the parties to the Agreement;
(ii) the good was produced entirely in the territory of one or more of the
parties to the Agreement, and –
each of the nonoriginating materials used in the production of the good undergoes an applicable change in tariff classification specified in subdivision (n) of this note; or
the good otherwise satisfies any applicable regional value content or other requirements specified in subdivision (n) of this note;
and the good satisfies all other applicable requirements of this note; or
(iii) the good was produced entirely in the territory of one or more of the
parties to the Agreement exclusively from originating materials.
[Bold added.]
Hosiery produced as described above incorporating gimped yarns containing non-originating spandex core yarns is subject to the rules set forth in subdivision (n) of GN 29, The applicable rule for hosiery of heading 6115 is set forth in Rule 39, Chapter 61, GN 29(n). The rule provides:
A change to headings 6114 through 6116 from any other chapter, except from headings 5111 through 5113, 5204 through 5212, 5310 through 5311, chapter 54, headings 5508 through 5516 or 6001 through 6006, provided that the good is cut or knit to shape, or both, and sewn or otherwise assembled in the territory of one or more of the parties.
The gimped yarns of heading 5606 are non-originating because, although produced in the United States, the spandex core yarns are non-originating yarns and they do not make the tariff shift required by the applicable rule set forth in GN 29(n) which states:
A change to headings 5601 through 5609 from any other chapter, except from headings 5111 through 5113, 5204 through 5212 or 5310 through 5311 or chapters 54 through 55.
As the spandex core yarns are classifiable in Chapter 54, the gimped yarns of heading 5606 are non-originating. However, the tariff shift rule applicable to the hosiery of heading 6115, allows a tariff shift from heading 5606 to heading 6115. Accordingly, the tariff shift rule for the imported good is satisfied
INVISTA claims, however, that even though the imported hosiery satisfies the terms of the tariff shift rule, it is ineligible for preferential tariff treatment. INVISTA argues that there is a requirement in the tariff that elastomeric yarns be wholly formed in a DR-CAFTA party. INVISTA relies on GN 29(d)(i) which provides as follows:
A textile or apparel good that is not an originating good under the terms of this note, because certain fibers or yarns used in the production of the component of the good that determines the tariff classification of the good do not undergo an applicable change in tariff classification set out in subdivision (n) of this note, shall be considered an originating good if—
(A) the total weight of all such fibers or yarns in that component is not more
than ten percent of the total weight of that component; or
(B) such yarns are nylon filament yarns (other than elastomeric yarn) provided
for in subheading 5402.10.30, 5402.10.60, 5402.31.30, 5402.31.60,
5402.32.30, 5402.32.60, 5402.41.10, 5402.41.90, 5402.51.00 or
5402.61.00 of the tariff schedule from a country that is a party to an
agreement with the United States establishing a free trade area which
entered into force before January 1, 1995.
Notwithstanding the preceding sentence, a textile or apparel good containing
elastomeric yarns in the component of the good that determines the tariff
classification of the good shall be considered to be an originating good only if
such yarns are wholly formed in the territory of a party to the Agreement.
INVISTA claims that despite the fact that the language concerning elastomeric yarns is in a paragraph that references the de minimis rule, it should be understood as being applicable even when, as here, the imported product satisfies the tariff shift rule and the de minimis rule is not applicable. You state:
To limit the “notwithstanding” clause to instances only where the de minimis clause is at issue leads to the completely incongruous and unintended result that small amounts of non-originating elastomeric yarn would render garments ineligible for CAFTA tariff treatment, while large amounts are permitted to be used, as is the result provided in Customs New York ruling letter N028235 of May 20, 2008.
You also cite to the language of the Agreement itself, Note 3 of Section XI – Textile and Textile Articles of Chapters 50 through 63 of Annex 4.1 which is implemented in GN 29(m)(viii)(B) and to the language of the implementing legislation, codified at 19 U.S.C. § 4033(f)(3). The manner in which the elastomeric yarn rule and the de minimis rule are presented in these provisions, in your view, reflects that the elastomeric yarn rule was not meant to merely be an exception to the de minimis rule, but is a separate rule which stands on its own.
We disagree. It is undisputed that the imported hosiery satisfies the terms of the applicable tariff shift rule. We find this very significant. Moreover, the context and location of the language concerning elastomeric yarn within the section of the statute entitled “De minimis amounts of nonoriginating materials,” whether in the Agreement itself, the U.S. Code, or the implementing CBP regulations, are likewise quite important. The de minimis rule, of course, effectively relaxes or forgives the failure to meet the tariff shift rule when certain amounts of material do not satisfy the tariff shift rule. This relaxation is subject to an exception in the case of elastomeric yarn which fails to meet a tariff shift rule when the de minimis rule is triggered. It does not apply if the tariff shift rule for the article at issue is met.
As to your argument regarding GN 29(m)(viii)(B) (reflected in the Agreement as Note 3, Section XI – Textile and Textile Articles of Chapters 50 through 63 of Annex 4.1), the note only applies to goods imported under subheading 9822.05.01, HTSUS, and thus is inapplicable to the goods at issue.
HOLDING:
The hosiery at issue containing non-originating elastomeric yarn qualifies as originating goods under the DR-CAFTA.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch