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HQ 557687


August 25, 1994

CLA-2 CO:R:C:S 557687 MLR

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80; 9802.00.90

Patrick D. Gill, Esq.
Rode & Qualey
295 Madison Avenue
New York, NY 10017

RE: Applicability of subheadings 9802.00.80 and 9802.00.90, HTSUS, to men's and women's shirts; lining strips; trimmings; Special Access Program; former Special Regime Program

Dear Mr. Gill:

This is in reference to your letters of November 12, 1993, and March 16, 1994, on behalf of Capital Mercury Shirt Corp. ("Capital"), regarding the applicability of the Special Access and Special Regime Programs to certain men's and women's shirts containing lining strips, which are assembled in Mexico and various Caribbean countries. As we indicated to you, the Special Regime Program for Mexico has been eliminated, and subheading 9802.00.90, Harmonized Tariff Schedule of the United States (HTSUS), has been created.

FACTS:

The garments under consideration are men's and women's shirts. In a telephone conversation with a member of my staff, you indicated that all of the fabric is formed and cut in the U.S. and will be sewn together in Mexico and various Caribbean countries to create shirts. The shirts will also contain fabric lining strips cut and formed in the U.S., which will be sewn between two pieces of the shirt fabric to reinforce certain portions of the shirt, i.e., the collar, the band (connects the collar to the shirt body), the top center (the edge strip on front of shirt containing buttonholes), and the cuffs. In the past, the shirts have been imported under the Special Access and Special Regime Programs.

ISSUES:

I. Whether the men's and women's shirts will qualify for the partial duty exemption available under subheading 9802.00.80, HTSUS, when returned to the U.S. from a participating Caribbean country.

II. Whether the men's and women's shirts will qualify for the duty exemption available under subheading 9802.00.90, HTSUS, when returned to the U.S. from Mexico.

LAW AND ANALYSIS:

I. Special Access Program

To qualify for the Special Access Program, products must be eligible for entry under subheading 9802.00.80, HTSUS. The requirements for participating in the Special Access Program provide that all fabric components, with the exception of findings, trimmings and certain elastic strips not exceeding 25 percent of the cost of the components of the assembled product, must be formed in the U.S. Such U.S. formed fabric must also be cut to pattern or shape in the U.S.

Customs Directive Number 3500-12 dated September 2, 1986 provides as follows:

[f]indings trimmings, and elastic components of the finished assembled products need not be of United States origin. Products assembled in participating Caribbean countries and made of U.S. formed and cut fabric plus findings, trimmings, and elastic of foreign origin may enter the United States under the program. However, the total value of such foreign findings, trimmings, and elastic components shall not exceed 25 percent of the cost of the components of the assembled product. Products whose foreign findings, etc., exceed 25 percent do not qualify for the Program. Examples of findings and trimmings are sewing thread, hooks and eyes, snaps, buttons, "bow buds," lace trim, zippers, including zipper tapes, and labels.

The initial question to be resolved is whether the imported articles are eligible for the partial duty exemption under subheading 9802.00.80, HTSUS.

Subheading 9802.00.80, HTSUS, provides a partial duty exemption for:

[a]rticles assembled abroad in whole or in part of fabricated components, the product of the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape, or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process, such as cleaning, lubricating and painting.

All three requirements of subheading 9802.00.80, HTSUS, must be satisfied before a component may receive a duty allowance. An article entered under this tariff provision is subject to duty upon the full cost or value of the imported assembled article, less the cost or value of the U.S. components assembled therein, upon compliance with the documentary requirements of section 10.24, Customs Regulations (19 CFR 10.24).

Section 10.14(a), Customs Regulations (19 CFR 10.14(a)), states in part that:

[t]he components must be in condition ready for assembly without further fabrication at the time of their exportation from the United States to qualify for the exemption. Components will not lose their entitlement to the exemption by being subjected to operations incidental to the assembly either before, during, or after their assembly with other components.

Section 10.16(a), Customs Regulations (19 CFR 10.16(a)), provides that the assembly operation performed abroad may consist of any method used to join or fit together solid components, such as welding, soldering, riveting, force fitting, gluing, lamination, sewing, or the use of fasteners.

Operations incidental to the assembly process are not considered further fabrication operations, as they are of a minor nature and cannot always be provided for in advance of the assembly operations. See 19 CFR 10.16(a). However, any significant process, operation or treatment whose primary purpose is the fabrication, completion, physical or chemical improvement of a component precludes the application of the exemption under subheading 9802.00.80, HTSUS, to that component. See 19 CFR 10.16(c).

In the instant case, sewing the pre-cut fabric components together and sewing the lining strips in between certain fabric components are considered acceptable assembly operations pursuant to 19 CFR 10.16(a), because two solid components are being joined (i.e., sewn) together. Furthermore, the shirt fabric and lining strips will both be formed and cut in the U.S. Consequently, the shirts will qualify for the Special Access Program provided any findings, trimmings, and certain elastic strips do not exceed 25 percent of the cost of the components of the assembled shirts. For information concerning the documentary requirements of the Special Access Program, please contact: U.S. Customs Service, Office of Trade Operations, Textiles Products Branch, 1301 Constitution Ave., N.W., Washington, D.C. 20229.

II. Subheading 9802.00.90, HTSUS

Appendix 2.4 of Annex 300-B of the North American Free Trade Agreement ("NAFTA"), provides that:

[o]n January 1, 1994, the U.S. shall eliminate customs duties on textile and apparel goods that are assembled in Mexico from fabrics wholly formed and cut in the United States and exported from and reimported into the United States under:

(a) U.S. tariff item 9802.00.80.10; or
(b) Chapter 61, 62, or 63 if, after such assembly, those goods that would have qualified for treatment under 9802.00.80.10 have been subject to bleaching, garment dyeing, stone-washing, acid-washing or perma-pressing.

Thereafter, the U.S. shall not adopt or maintain any customs duty on textile and apparel goods of Mexico that satisfy the requirements of subparagraph (a) or (b) or the requirements of any successor provision to U.S. tariff item 9802.00.80.10.

Consequently, subheading 9802.00.90, HTSUS, was created to provide for the duty-free entry of:

Textile and apparel goods, assembled in Mexico in which all fabric components were wholly formed and cut in the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process; provided that goods classifiable in chapters 61, 62, or 63 may have been subject to bleaching, garment dyeing, stone-washing, acid-washing or perma-pressing after assembly as provided for herein.

In view of the fact that the enactment of subheading 9802.00.90, HTSUS, specifically was intended to extend duty-free and quota-free status to all goods assembled in Mexico, which previously were eligible for entry under the Special Regime Program administered under U.S. tariff item 9802.00.8010, HTSUS, it is Customs view that all of the policy directives implementing this program should be considered applicable for our administration of subheading 9802.00.90, HTSUS. One such policy under the Special Regime Program included the allowance of "findings, trimmings and certain elastic strips of foreign origin" to be incorporated into the assembled good provided they do "not exceed 25 percent of the cost of the components of the assembled article." See 54 Fed. Reg. 50425 (December 6, 1989).

Therefore, the shirts assembled in Mexico may be entered free of duty, as long as, with the exception of findings, trimmings, and elastic strips not exceeding 25 percent of the total cost of all components, all fabric components contained therein are U.S.- formed (i.e., the fabric is woven or milled in the U.S.), this fabric is cut in the U.S., and the other conditions of the statute are satisfied. Foreign greige fabric that is printed and dyed, then cut in the U.S. does not qualify for entry under this tariff provision.

In this case, since the shirt fabric and lining strips will both be formed and cut in the U.S., and will be sewn together in Mexico, they will qualify for subheading 9802.00.90, HTSUS, treatment, provided any findings, trimmings, and certain elastic strips do not exceed 25 percent of the cost of the components of the assembled shirts. For information concerning the documentary requirements of subheading 9802.00.90, HTSUS, please contact the Textiles Products Branch, Office of Trade Operations at the address above.

HOLDING:

Based upon the information provided, the shirts will qualify either for the partial duty exemption under subheading 9802.00.80, HTSUS, and for the Special Access Program when returned to the U.S. from a participating Caribbean country, or for the duty exemption under subheading 9802.00.90, HTSUS, when returned to the U.S. from Mexico, provided all of the fabric components, with the exception of the findings, trimmings, and certain elastic strips not exceeding 25 percent of the cost of the components of the assembled shirts, are formed and cut to shape or pattern in the U.S. For information concerning the documentary requirements of subheading 9802.00.90, HTSUS, and the Special Access Program, please contact the Textiles Products Branch, Office of Trade Operations at the address above.

Sincerely,

John Durant, Director

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