OT:RR:CTF:VS H263569 EE
Area Port Director
Customs and Border Protection
1624 East Seventh Avenue, Suite 101 Tampa, FL 33605
RE: Modification of HQ H022665; Eligibility of shirt and tie sets under CBTPA and DR-CAFTA
Dear Port Director:
This is in reference to Headquarters Ruling Letter (“HQ”) H022665, dated September 17, 2009. HQ H022665 concerns the eligibility of boys’ shirt and tie sets for duty-free treatment under the Caribbean Basin Trade Partnership Act (“CBTPA”) and the Dominican Republic—Central America—United States Free Trade Agreement (“DR-CAFTA”). We have reviewed HQ H022665 and determined that it is partially incorrect with respect to the CBTPA preference. For the reasons set forth below, we are modifying that ruling letter.
Pursuant to section 625(c)(1), Tariff Act of 1930 (19 U.S.C. §1625(c)(1)), as amended by section 623 of Title VI, notice of the proposed action was published in the Customs Bulletin, Vol. 51, No. 29, on July 19, 2017. No comments were received in response to the notice.
FACTS:
The subject merchandise consists of boys’ shirt and tie sets identified as styles FT 4729, FT 4724 and FT 4184. The shirts are constructed from 55% cotton, 45% polyester 186T or 205T broadcloth, yarn dyed woven fabric containing two or more colors in the warp and/or filling. The weight of the fabric is 108 g/m2. The 186T broadcloth fabric has 43.3 yarns per centimeter in the warp and 29.9 yarns per centimeter in the filling for a total of 73.2 yarns per square centimeter. The 250T broadcloth fabric has 52.4 yarns per centimeter in the warp and 28.3 yarns per centimeter in the filling for a total of 80.7 yarns per square centimeter. All yarns are combed singles and 76 metric. The fabrics are a 1 x 1 plain weave. The looms are broad looms weaving with two harnesses, with no jacquard motion or dobby attachment. The fabrics are bleached white and piece dyed a solid color. The shirts feature a left over right full front opening with seven button closures, a point collar, long sleeves with buttoned cuffs, a pocket on the left chest, and a curved, hemmed bottom. The shirts are packaged with coordinating color, 100% polyester, woven fabric ties. The fabric used to manufacture the shirts is made in China and shipped in rolls to El Salvador where it is cut into component pieces and assembled into finished garments. The removable clip ties are made in China and shipped to El Salvador where they are attached to the shirt. The shirt and tie set is packaged and shipped to the U.S. from El Salvador.
In H022665, CBP ruled that the boys’ shirts cut and sewn in El Salvador, and packaged with a tie are eligible for duty-free entry under CBTPA subheading 9820.11.24 of the Harmonized Tariff Schedule of the United States (“HTSUS”), but not for duty-free entry under DR-CAFTA. Additionally, CBP determined that pursuant to General Rules of Interpretation (“GRI”) 3(b), the boys’ shirt and tie sets were classified in subheading 6205.20.2031, HTSUSA (“Annotated”), which provides for “Men’s or boys’ shirts: Other: Dress shirts: Other: Boys’.”
ISSUE:
Whether the shirt and tie, imported as a set, are eligible for duty-free treatment under the CBTPA and the DR-CAFTA.
LAW AND ANALYSIS:
I. Eligibility under the CBTPA
The CBTPA provides certain specified trade benefits for countries of the Caribbean region. The Act extends North American Free Trade Agreement (“NAFTA”) duty treatment standards to non-textile articles that previously were ineligible for preferential treatment under the Caribbean Basin Economic Recovery Act (“CBERA”) and provides for duty and quota-free treatment of certain textile and apparel articles which meet the requirements set forth in Section 211 of the CBTPA (amended 213(b) of the CBERA, codified at 19 U.S.C. § 2703(b)). Beneficiary countries are designated by the President of the United States after having met eligibility requirements set forth in the CBPTA. Eligibility for benefits under the CBTPA is contingent on designation as a beneficiary country by the President of the United States and a determination by the United States Trade Representative (“USTR”), published in the Federal Register, that a beneficiary country has taken the measures required by the Act to implement and follow, or is making substantial progress toward implementing and following, certain customs procedures, drawn from Chapter 5 of the NAFTA, that allow the United States to verify the origin of products. Once both these designations have occurred, a beneficiary country is entitled to preferential treatment provided for by the CBTPA. El Salvador was designated as a beneficiary country by Presidential Proclamation 7351 of October 2, 2000, published in the Federal Register on October 4, 2000 (65 Fed. Reg. 59329). It was determined to have met the second criteria concerning customs procedures by the USTR and thus eligible for benefits under the CBTPA effective October 2, 2000. See 65 Fed. Reg. 60236.
The provisions implementing the textile provisions of the CBTPA in the HTSUS are contained, for the most part, in subchapter XX, Chapter 98, HTSUS (two provisions may be found in subheading 9802.00.80, HTSUS). The regulations pertinent to the textile provisions of the CBTPA may be found at §§ 10.221 through 10.228 of the CBP Regulations (19 C.F.R. §§ 10.221 through 10.228).
In H022665, counsel stated that the Chinese origin fabric used to manufacture the shirts was in “short supply.” The provision commonly referred to as the “NAFTA short supply” provision is contained in subheading 9820.11.24, HTSUS. We note that there is no definitive list of “short supply” fabrics or yarns for purposes of the North American Free Trade Agreement (“NAFTA”). The determination of these short supply fabrics or yarns is based upon the various provisions of NAFTA and whether, under NAFTA, for the particular apparel article at issue, certain fabrics or yarns may be sourced from outside the NAFTA parties for use in the production of an “originating” good. If sourcing of certain fabrics or yarns outside the NAFTA parties is allowed, then those fabrics or yarns are deemed to be in “short supply.”
In H022665, counsel referred to New York Ruling Letter (“NY”) M80139, dated February 2, 2006 and NY L84803, dated June 2, 2005, both issued to the broker for KT Group, in which CBP determined the shirt and tie sets were not eligible for duty-free treatment under the CBTPA. Insofar as M80139 did not address whether the fabric used to manufacture the shirt was in “short supply”, it is not dispositive of the issue presented herein. Moreover, we have been advised that insufficient information was presented to make a determination whether the fabric used to make the shirt at issue in L84803 was in short supply. As such, the determination in L84803 was issued based on the understanding that neither the shirt nor the tie at issue therein were originating and were therefore ineligible for preferential treatment under the CBTPA.
General Note (“GN”) 12(t), HTSUS, sets out the tariff shift rules for determining whether non-originating materials used in the production of a good have been transformed into originating goods under NAFTA, and by extension under the CBTPA.
To determine the applicable tariff shift rule, we must determine the proper classification of the shirt and tie packaged together. The shirts are classifiable under heading 6205, HTSUS, as men’s cotton dress shirts and the ties are classifiable under heading 6215, HTSUS, as ties of man-made fabric.
GRI 3 provides for goods that are, prima facie, classifiable in two or more headings. GRI 3(b) provides that goods put up in sets for retail sale shall be classified as if they consisted of the material or component which gives them their essential character. The shirt and tie are considered a set for purposes of classification because they are prima facie classifiable in more than one heading, are put together to meet a particular need or carry out a specific activity, and they are packed for sale directly to users without repacking. The essential character of the set is imparted by the shirt because the tie merely accessorizes the shirt.
GN 12 Chapter 62 Rule 3 states in part:
For purposes of determining origin of a good of this chapter, the rule applicable to that good shall only apply to the component that determines the tariff classification of the good and such component must satisfy the tariff change requirements set out in the rule for that good.
As the shirt provides the essential character to the shirt and tie sets, only the shirt must undergo the tariff shift requirements.
GN 12(t) Chapter 62 states in part:
(30) A change to subheading 6205.20 through 6205.30 from any other chapter, except from headings 5106 through 5113, 5204 through 5212, 5307 through 5308 or 5310 through 5311, chapter 54, or headings 5508 through 5516, 5801 through 5802 or 6001 through 6006, provided that the good is both cut and sewn or otherwise assembled in the territory of one or more of the NAFTA parties.
Subheading rule (c) to Gn12(t) Chapter 62 (30) states: Men’s or boys’ shirts of cotton (subheading 6205.20) or of man-made fibers (subheading 6205.30) shall be considered to originate if they are both cut and assembled in the territory of one or more of the parties and if the fabric of the outer shell, exclusive of collars or cuffs, is wholly of one or more of the following: …( c ) Fabrics of subheadings 5210.21 or 5210.31, not of square construction, containing more than 70 warp ends and filling picks per square centimeter, of average yarn number exceeding 70 metric.
The boys’ shirts are constructed from fabric of subheading 5210.31, HTSUS. The fabric contains either 73.2 total yarns per square centimeter or 80.7 total yarns per square centimeter and 76 metric yarns. As such, the boys’ shirt and tie sets are eligible for duty-free treatment under subheading 9820.11.24, HTSUS, provided they are cut and assembled in El Salvador and they are imported directly to the United States from El Salvador, a CBTPA beneficiary country. We note that El Salvador was removed from the enumeration of designated beneficiary countries under the CBERA and the CBTPA when DR-CAFTA entered into force with respect to El Salvador on March 1, 2006. The imported merchandise in question was entered before and after March 1, 2006. As such, only the entries before March 1, 2006 and on or after October 2, 2000 are eligible for duty-free treatment under the CBTPA.
II. Eligibility under the DR-CAFTA
The 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 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.). The Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua and the United States are currently parties to the agreement. GN 29 of the 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 –
(i) originating goods or goods described in subdivision (a)(ii), subject to the provisions of subdivisions (b) through (n) of this note, that are imported into the customs territory of the United States and entered under a provision –
* * *
(B) in chapter 98 or 99 of the tariff schedule where rate of duty or other treatment is specified,
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 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, in relevant part:
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 –
* * * (ii) the good was produced entirely in the territory of one or more of the parties to the Agreement, and –
(A) 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
(B) 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
* * *
Subdivision (n) referred to in GN 29(b) sets forth the tariff shift method of qualifying as an originating good under DR-CAFTA. GN 29(m)(viii)(B) is a “short supply” provision that provides an alternative method for an apparel good to qualify as an “originating” good under DR-CAFTA. GN 29(m)(viii)(B) provides:
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; or
(2) one or more fabrics formed in the territory of one or more of the parties to the Agreement from one or more of the yarns listed in U.S. note 20 to such subchapter XXII; or
(3) any combination of the fabrics referred to in subdivision (B)(1), the fabrics referred to in subdivision (B)(2) or one or more fabrics originating under this note. The originating fabrics referred to in subdivision (B)(3) may contain up to 10 percent by weight of fibers or yarns that do not undergo an applicable change in tariff classification set out in subdivision (n) of this note. Any elastomeric yarn contained in a fabric referred to in subdivision (B)(1), (B)(2) or (B)(3) must be formed in the territory of one or more of the parties to the Agreement. Subchapter XXII, chapter 98, U.S. Note 20(a) provides: 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:
* * * (8) Fabrics classified in subheading 5210.21 or 5210.31, not of square construction, containing more than 70 warp ends and filling picks per square cm, of average yarn number exceeding 70 metric[.]
As previously stated, the boys’ shirts are constructed from fabric of subheading 5210.31, HTSUS. The fabric contains either 73.2 total yarns per square centimeter or 80.7 total yarns per square centimeter and 76 metric yarns. As such, the boys’ shirts constructed from a short supply fabric meet the terms of Subchapter XXII, chapter 98, U.S. Note 20(a). However, the coordinating ties of heading 6215, HTSUS, which are packaged with the shirts do not meet the terms of Note 20(a) because they are not constructed from a fabric listed therein.
GN 29(c)(v), which governs the eligibility of goods put up in retail sets provides, in pertinent part:
Goods classifiable as goods put up in sets.--Notwithstanding the rules set forth in subdivision (n) of this note, goods classifiable as goods put up in sets for retail sale as provided under general rule of interpretation 3 to the tariff schedule shall not be considered to be originating goods unless—
(A) each of the goods in the set is an originating good; or
(B) the total value of the nonoriginating goods in the set does not exceed--
(1) in the case of a textile or apparel good, 10 percent of the adjusted value of the set…
In H022665, counsel stated that the adjusted value of the coordinating ties is approximately 13%. Insofar as Note 29(c)(v) limits the value of the non-originating textile component to 10% of the adjusted value of the set, the shirt and tie set is not eligible for preferential treatment under the terms of GN 29(c)(v).
HOLDING:
The boys’ shirts cut and sewn in El Salvador, and packaged with a tie are eligible for duty-free treatment under CBTPA if entered before March 1, 2006 and on or after October 2, 2000, but not for duty-free entry under DR-CAFTA.
Pursuant to GRI 3(b), the boys’ shirt and tie sets are classified in heading 6205, HTSUS. They are specifically provided for in subheading 6205.20.2031, HTSUSA (Annotated), which provides for “Men’s or boys’ shirts: Other: Dress shirts: Other: Boys’.” The 2009 general, column one rate of duty is 19.7% ad valorem. The textile category code is 340.
EFFECT ON OTHER RULINGS:
HQ H022665, dated September 17, 2009, is hereby MODIFIED with respect to the eligibility of the boys’ shirt and tie sets for duty-free treatment under the CBTPA; however, the non-eligibility of the boys’ shirt and tie sets under DR-CAFTA and their classification remain in effect.
In accordance with 19 U.S.C. §1625(c), this ruling will become effective 60 days after its publication in the Customs Bulletin.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division