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HQ 559553




March 14, 1996

CLA-2 RR:TC:SM 559553 DEC

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.90

Mr. Thomas Caldecot Chubb, III
Associate General Counsel
Oxford Industries, Incorporated
222 Piedmont Avenue, N.E.
Atlanta, Georgia 30308

RE: Eligibility of certain shirts for duty-free treatment under subheading 9802.00.90;
HRL 555409; U.S. Note 2, subchapter II, Chapter 98, HTSUS

Dear Mr. Chubb:

This is in response to your letter dated November 9, 1995, concerning the eligibility of certain shirts for duty-free treatment under subheading 9802.00.90, Harmonized Tariff Schedule of the United States (HTSUS).

FACTS:

The shirts at issue are assembled in Mexico for Oxford Industries, Incorporated (Oxford). The fabric components used in the assembly of the shirts are formed and cut in the United States. The shirts are then imported into the United States pursuant to subheading 9802.00.90, HTSUS. Oxford has planned to perma-press these shirts at its Vidalia, Georgia facility. However, since the Vidalia facility is experiencing a massive production backlog, Oxford is now contemplating the exportation of these shirts to Juarez, Mexico for perma-pressing in Mexico and the re-importation of the shirts into the United States through the Port of El Paso, Texas pursuant to subheading 9802.00.90, HTSUS.

ISSUE:

If an imported article has received duty-free treatment under subheading 9802.00.90, HTSUS, is the article entitled to the duty exemption again when the article is subsequently re-imported?

LAW AND ANALYSIS:

Annex 300-B of the North American Free Trade Agreement ("NAFTA") is applicable to textile and apparel goods. Appendix 2.4 of Annex 300-B provides that:

[o]n January 1, 1994, the U.S. shall eliminate customs duties on textiles 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 or 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, provided that such fabric components, in whole or in part (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 subheading 9802.00.80, 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.

Where an article originally entered under subheading 9802.00.80, HTSUS, is exported for further assembly operations abroad with U.S. components, then those components exported for assembly are entitled to allowances in duty under this tariff provision upon return of the article. However, those components that were afforded duty allowances when the article was initially imported are not entitled to the duty exemption a second time since, in their condition as exported for further assembly, they are not U.S. fabricated components "ready for assembly", but an already- assembled foreign article. U.S. Note 2(a), subchapter II, Chapter 98, HTSUS (Note 2(a)) is the most instructive regarding this issue. Note 2(a) provides, in relevant part, that:
any imported article which has been assembled abroad in whole or in part of products of the United States, shall be treated for the purposes of this Act as a foreign article, and, if subject to a duty which is wholly or partly ad valorem, shall be dutiable, except as otherwise prescribed in this part, on its full value determined in accordance with section 402 of the
Tariff Act of 1930, as amended. (Emphasis added).

Customs has previously held that it is clear from a reading of Note 2(a) that when an article assembled abroad of U.S. fabricated components is entered under subheading 9802.00.80, HTSUS, it is considered a "foreign article" for tariff purposes. See Headquarters Ruling Letter (HRL) 555409, dated March 12, 1990. Note 2(a) supra is equally applicable to articles assembled in Mexico from U.S. formed and cut fabric components which are entered under subheading 9802.00.90, HTSUS. Therefore, the shirts that were entered under 9802.00.90, HTSUS, are foreign articles for tariff purposes.

In HRL 555409, Customs addressed whether capacitors assembled in Mexico and imported into the U.S. pursuant to subheading 9802.00.80, HTSUS, were eligible for re-importation under subheading 9802.00.80, HTSUS, if they were returned to Mexico and later imported back into the U.S. Subsequent to the first importation of the capacitors, the importer shipped the articles to various U.S. customers. Some of the capacitors were returned for failure to meet certain specifications or were defective. These capacitors were shipped back to the Mexican facility to be tested. If they were deemed not to be defective, they were put back into finished inventory to await re-shipment. If they were defective, they would be reworked and then put back into the inventory.

The capacitors were granted the duty benefit under subheading 9802.00.80, HTSUS, on the value of the U.S. components assembled therein when initially imported after foreign assembly. At that point, the capacitors were considered foreign articles pursuant to Note 2(a). Therefore, as the capacitors were not transformed into products of the U.S. while in the U.S., and were not then further assembled abroad, the plain meaning of subheading 9802.00.80, HTSUS, and Note 2(a) compelled the conclusion in HRL 559409 that the capacitors were not again entitled to the duty exemption when re-imported.

In the case at hand, you have presented an analogous situation in that the shirts that have been previously imported under subheading 9802.00.90, HTSUS, and are now going to be exported only for perma-pressing, are deemed to be foreign articles pursuant to Note 2(a). Since the shirts are deemed to be foreign articles when they initially enter the U.S. pursuant to subheading 9802.00.90, the subject shirts that are perma-pressed in Mexico will be ineligible for classification under subheading 9802.00.90, HTSUS, when re-imported.

HOLDING:

The shirts that are sent to Mexico for perma-pressing as described above may not be entered free of duty under subheading 9802.00.90, HTSUS, since they are deemed to be foreign articles when the subject shirts are initially entered into the U.S. prior to their exportation to Mexico for perma-pressing.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

John Durant, Director

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