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HQ 560074

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October 31, 1996

CLA-02/MAR-05 RR:TC:SM 560074 KKV

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Ms. Cathy Schleiger
A.W. Fenton Company, Inc.
1157 Raring Avenue
Columbus, OH 43219-2357

RE Applicability of partial duty exemption under HTSUS subheading 9802.00.80 to oversocks from the Dominican Republic; further fabrication; cutting garment according to pattern from exported fabric; applicability of duty exemption under U.S. Note 2(b), subchapter II, Chapter 98, HTSUS; CBI (II); CBERA; 19 CFR 102.21

Dear Ms. Schleiger:

We are in receipt of your letter dated August 27, 1996 (and subsequent facsimile dated September 17, 1996). Your letter references New York Ruling 880279, dated November 24, 1992, issued to a predecessor in interest to the current importer, which held that the merchandise was eligible for the partial duty exemption provided in subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS). You incorporate by reference the facts presented in our previous ruling, and inquire whether a change in the location of the cutting operation will affect the eligibility of the merchandise for special treatment. A sample of the merchandise has been submitted for our consideration.

FACTS:

The article at issue is a pair of Gore-Tex fabric socks with an applied sole. The three-ply socks, designed for use over regular socks, are made of U.S.-origin fabric and consist of an outer shell that is 80% nylon and 20% spandex knit fabric, with Gore-Tex laminated to a 76% nylon, 24% spandex knit lining. You propose to export the fabric to the Dominican Republic, where fabric components will be cut, sewn together and the seams sealed prior to exportation of the finished oversock (subheading 6117.80.0035, HTSUS) to the United States.

ISSUE:

I. Whether Gore-Tex oversocks which are cut to pattern from exported U.S. fabric and assembled in the Dominican Republic, will be entitled to the partial duty exemption under subheading 9802.00.80, HTSUS, upon importation into the U.S.

II. Whether the subject Gore-Tex oversocks assembled in the Dominican Republic are eligible for duty-free treatment under U.S. Note 2(b), subchapter II, Chapter 98, HTSUS.

III. What are the marking and visa requirements for Gore-Tex oversocks assembled in the Dominican Republic from U.S.-origin fabric cut to pattern in the Dominican Republic upon importation into the U.S.

LAW AND ANALYSIS:

I. Applicability of 9802.00.80.

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, lubrication, and painting.

All three requirements of HTSUS subheading 9802.00.80 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 value of the imported assembled article, less the cost or value of such U.S. components, 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. 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. In particular, 19 CFR 10.16(c)(2), identifies the cutting of garment parts according to pattern from exported material as an operation which is more than incidental to the assembly process. Under the facts presented, U.S. origin fabric is exported to the Dominican Republic, where it is cut into component parts and subsequently assembled into the subject oversocks. Because the assembled components were not exported in a condition ready for assembly without further fabrication, the partial duty exemption provided under subheading 9802.00.80, HTSUS, is not applicable.

II. Application of U.S. Note 2(b), subchapter II, Chapter 98, HTSUS

Section 222 of the Customs and Trade Act of 1990 (P.L. 101- 382) amended U.S. Note 2, subchapter II, Chapter 98, HTSUS, ("Note 2(b)") to provide for duty-free treatment of articles, other than certain specified products, which are assembled or processed in a Caribbean Basin Economic Recovery Act (CBERA) beneficiary country (BC) wholly of fabricated components or ingredients (except water) of U.S. origin. This amendment was effective with respect to goods entered on or after October 1, 1990.

Specifically, Note 2(b) provides that:

(b) No article (except a textile article, apparel article, or petroleum, or any product derived from petroleum, provided for in heading 2709 or 2710)may be treated as a foreign article, or as subject to duty, if-

(i) the article is--

(A) assembled or processed in whole of fabricated components that are a product of the United
States, or

(B) processed in whole of ingredients (other than water) that are a product of the United
States, in a beneficiary country; and

(ii) neither the fabricated components, materials or ingredients, after exportation from the United
States, nor the article itself, before importation in the United States, enters the commerce of any foreign country other than a beneficiary country.

As used in this paragraph, the term "beneficiary country" means a country listed in General Note 7(a), HTSUS. Pursuant to General Note 7(a), HTSUS, the Dominican Republic been designated as a BC for CBERA purposes. Note 2(b) specifies four categories of products which are excluded from duty-free treatment under this provision: textile articles; apparel articles; petroleum; and certain products derived from petroleum. As set forth in NY Ruling 880279, dated November 24, 1992, the finished oversocks are classified under subheading 6117.80.90, HTSUS. For purposes of Note 2(b), Customs has held that "textile" and "apparel" articles are articles classified in provisions of the HTSUS which include a textile category number, i.e., are subject to textile agreements. See Treasury Decision (T.D.) 91-88, dated October 18, 1991. Subheading 6117.80.90, HTSUS includes a textile category number. Therefore, because the finished oversock is an apparel article, the duty exemption provided under U.S. Note 2(b), subchapter II, Chapter 98, HTSUS, is inapplicable to the subject merchandise.

III. Marking and Visa Requirements

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the United States the English name of the country of origin of the article. By enacting 19 U.S.C. 1304, Congress intended to ensure that the ultimate purchaser would be able to know by inspecting the marking on the imported goods the country of which the goods are the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will. United States v. Friedlaender & Co., 27 C.C.P.A. 297, 302 C.A.D. 104 (1940).

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. One of the exceptions to the general marking requirement is codified in 19 U.S.C. 1304(a)(3)(D) (as implemented by 19 CFR 134.32(d)), which provides that an article may be excepted from marking if the marking of its container will reasonably indicate its origin to the ultimate purchaser. As provided in section 134.41, Customs Regulations (19 CFR 134.41), the country of origin marking is considered to be conspicuous if the ultimate purchaser in the United States is able to find the marking easily and read it without strain. The degree of permanence of the marking should be at least sufficient to insure that in any reasonably foreseeable circumstance, the marking shall remain on the article until it reaches the ultimate purchaser unless it is deliberately removed. The marking must survive normal distribution and store handling.

On December 8, 1994, the President signed into law the Uruguay Round Agreements Act. Section 334 of that Act (codified at 19 U.S.C. 3592) provides new rules of origin for textiles and apparel entered, or withdrawn from warehouse, for consumption, on and after July 1, 1996. On September 5, 1995, Customs published Section 102.21, Customs Regulations (19 CFR 102.21), in the Federal Register, implementing Section 334 (60 FR 46188). Thus, effective July 1, 1996, the country of origin for a textile or apparel product is determined by a sequential application of the origin rules set forth in paragraphs (c)(1) through (5) of section 102.21. As a general rule, under the new textile origin rules, where a textile or apparel article is assembled in one country from components cut to shape in another country, the country of assembly will be the origin of the article. Cutting fabric to shape generally will no longer confer origin.

Section 102.21(c)(1), Customs Regulations (19 CFR 102.21(c)(1)), states that "the country of origin of a textile or apparel product is the single country, territory, or insular possession in which the good was wholly obtained or produced." As the subject merchandise is not wholly obtained or produced in a single country, territory, or insular possession, paragraph (c)(1) of section 102.21 is inapplicable.

Section 102.21(c)(2), Customs Regulations (19 CFR 102.21(c)(2)), provides:

[w]here the country of origin of a textile or apparel product cannot be determined under paragraph (c)(1) of this section, the country of origin of the good is the single country, territory, or insular possession in which each foreign material incorporated in that good underwent an applicable change in tariff classification, and/or met any other requirement, specified for the good in paragraph (e) of this section.

Paragraph (e) states that "The following rules shall apply for purposes of determining the country of origin of a textile or apparel product under paragraph (c)(2) of this section:"

6101-6117 (1) If the good is not knit to shape and consists of two or more components parts, a change to an assembled good of heading 6101 through 6117 from unassembled components, provided that the change is the result of the good being wholly assembled in a single country, territory, or insular possession...

The oversocks satisfy the rule in section 102.21(e) for 6101-6117(1). Based upon the information provided, the merchandise is not knit to shape, it consists of two or more component parts and the component parts are changed to an assembled good of heading 6117 as a result of being wholly assembled in the Dominican Republic. Accordingly, pursuant to 19 CFR 102.21, the country of origin of the oversocks for country of origin marking and visa purposes will be the Dominican Republic.

Additionally, it is stated that the fabric from which the oversocks are assembled, is either woven or knit in the U.S. While you have not provided the tariff classification provision of the fabrics woven or knit in the U.S., it appears that the origin of the fabric to be used (i.e., 80% nylon and 20% spandex knit fabric and 76% nylon, 24% spandex knit fabric) will be the country where the fabric-making process occurs which is defined as "any manufacturing operation that begins with polymers, fibers, filaments (including strips), yarns, twine, cordage, rope, or fabric strips and results in a textile fabric." Accordingly, the fabric woven or knit in the U.S. will be considered to be of U.S.-origin.

We presume that the authority relied upon for currently marking the oversocks "Assembled in the Dominican Republic of U.S. Components" is 19 CFR 10.22, as it appears that the finished garments were previously eligible for the partial duty exemption under subheading 9802.00.80, HTSUS, because the oversocks were assembled in the Dominican Republic from fabric made and cut to shape in the U.S. Please note that the "Rules for Determining Country of Origin of a Good for Purposes of Annex 311, of the North American Free Trade Agreement" (T.D. 96-48), published at 61 FR 28932, 28955 (June 6, 1996), has removed 19 CFR 10.22, applicable to goods entered, or withdrawn from a warehouse, for consumption on or after August 5, 1996. Accordingly, effective August 5, 1996, you may no longer rely upon 19 CFR 10.22 as authority for marking the goods "Assembled in the Dominican Republic of U.S. Components."

On the other hand, effective August 5, 1996, section 134.43(e), Customs Regulations (19 CFR 134.43(e), provides, in pertinent part that:

Where an article is produced as a result of an assembly operation and the country of origin of such article is determined under this chapter to be the country in which the article was finally assembled, such article may be marked, as appropriate, in a manner such as the following:

(1) Assembled in (country of final assembly);

(2) Assembled in (country of final assembly) from components of
(name of country or countries of origin of all components); or

(3) Made in, or product of, (country of final assembly).

See 61 FR 28936 and 28957. [We note that once the article has been correctly marked with the country of origin, there is no additional marking requirement for indicating the location of other manufacturing steps or the origin of any components utilized]. In this case, because the oversocks are produced as a result of an assembly operation and the country of origin of such garments has been determined under 19 CFR 102.21 to be the country of final assembly, the Dominican Republic, the garments may be marked "Assembled in the Dominican Republic" or "Assembled in the Dominican Republic from U.S. Fabric." In the alternative, the garments may also be marked, "Dominican Republic," "Made in the Dominican Republic,""Product of the Dominican Republic" or words of similar meaning.

HOLDING:

Gore-Tex oversocks which are cut to pattern abroad from exported U.S. fabric and assembled in the Dominican Republic, will not be entitled to the partial duty exemption under subheading 9802.00.80, HTSUS, upon importation into the U.S.

Textile articles subject to textile agreement, such as the Gore-Tex oversocks, are not eligible for duty-free treatment under U.S. Note 2(b), subchapter II, Chapter 98, HTSUS.

On the basis of the information submitted, the country of origin of the oversocks will be the Dominican Republic for country of origin marking and visa purposes pursuant to 19 CFR 102.21(c)(2).

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.

Sincerely,

John Durant, Director
Tariff Classification

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See also:

• Tariff No.: 6117.80.90 - Made up clothing accessories(excl shawls, scarves, mufflers, mantillas, veils and the like; ties and cravat), con under 70% wt of silk, k/c
• Tariff No.: 9802.00.80 - U.S. articles assembled abroad, which have not lost their physical identity or have not advanced in value or improved in condition abroad