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HQ 562266




January 30, 2002

MAR-05 RR:CR:sm 562266 tjm

Category: MARKING

Mr. Shelly Cohen
Magid Glove and
Safety Manufacturing Co, LLC
2060 North Kolmar Ave
Chicago IL 60639-3483

RE: Country of Origin Marking; Partial Duty Exemption; 9802.00.80, HTSUS; NAFTA Preference; Philippines; Mexico; apparel; industrial pants; 19 CFR 102.21(e); 19 CFR 10.17; 19 CFR 10.25; yarn forward rule; GN 12(t)/62.16.

Dear Mr. Cohen:

This is in reply to your letter dated October 11, 2001, requesting a ruling on the country of origin marking, applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the U.S. (HTSUS), and the eligibility of cotton pants under the North American Free Trade Agreement (NAFTA). Please find our response below.

FACTS:

You represent that the article at issue, cotton fabric pants, will be assembled in Mexico. First, the fabric will be imported from the Philippines and cut into parts of pants in the United States. The cut-to-shape fabric will then be exported to Mexico. There it will be assembled into pants and the pants will be shipped to the United States.

You request a ruling on the proper country of origin marking for the imported pants. You also ask whether the fabric cut in the U.S. will be eligible for the partial duty exemption provided under subheading 9802.00.80, HTSUS. Lastly, you ask whether the pants, after they are assembled in Mexico, will be entitled to the NAFTA preference.

On October 26, 2001, you stated by telephone that the fabric is made in the Philippines where it is also coated with a fire-retardant agent. The pants are assembled in Mexico by sewing the cut parts together. You noted that the thread used to assemble the pants parts may be either U.S.-origin or Mexican-origin. Further, the pants are made for industrial use and predominantly worn by men.

ISSUE:

What is the proper country of origin marking for the above described cotton pants?

Whether the cut fabric qualifies for partial duty exemption under subheading 9802.00.80, HTSUS.

Whether the pants in the instant case qualify for the NAFTA preference.

LAW AND ANALYSIS:

Country of Origin Marking

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 U.S. the English name of the country of origin of the article. Congressional intent in requiring a country of origin marking was “that the ultimate purchaser should be able to know by an inspection of the marking on imported goods the country of which the goods is 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. Friedlander & Co., 27 C.C.P.A. 297 at 302; C.A.D. 104 (1940).

The first issue to be determined is the country of origin of the cotton pants. Assuming that the classification of the pants is in heading 6203, HTSUS, the hierarchy of rules of origin for textile and apparel articles for marking and duty purposes is stipulated in 19 C.F.R. § 102.21. The first level in the rule of origin hierarchy provides 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. See 19 C.F.R. § 102.21(c)(1). In this scenario, because the fabric will be made in the Philippines, the fabric cut in the U.S., and the pants assembled in Mexico, this rule would not apply. The next level in the hierarchy of rules provides that the country of origin of a textile or apparel product is the single country, territory, or insular possession in which each foreign material incorporated in that good undergoes an applicable change in tariff classification specified in 19 C.F.R. § 102.21(e). For heading 6203, the change in tariff classification rule as set forth in 19 C.F.R. § 102.21(e) 6201-6208 (1), states, in pertinent part, that:

If the good consists of two or more component parts, a change to an assembled good of heading 6201 through 6208 from unassembled components, provided that the change is the result of the good being wholly assembled in a single country, territory, or insular possession. (Emphasis added)

This rule is applicable in this case because the fabric will be cut to shape in the U.S. and consists of two or more component parts. The assembly (sewing) will be wholly performed in a single country – Mexico. Therefore, under the rule discussed above, the pants, upon being assembled in Mexico would for marking and duty purposes be considered a product of Mexico and must be marked accordingly. The method of marking must also satisfy the conspicuous, permanent, and legible requirements of Customs marking laws and regulations.

B. Partial Duty Exemption: 9802.00.80, HTSUS

Subheading 9802.00.80, HTSUS, (19 U.S.C. § 1202), provides for partial duty exemption when certain criteria are met:

Articles, except goods of heading 9802.00.90 and goods imported under provisions of subchapter XIX of this chapter and goods imported under provisions of subchapter XX, 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. (Emphasis added)

If the article meets the requirements above, then the duty upon the full value of the imported article, less the cost or value of such products of the United States, will be levied upon entry. See 19 C.F.R. § 10.17 and 19 C.F.R. § 10.18.

In this case, the issue is whether the cut fabric would be considered fabricated components, product of the United States. According to section 10.12(e), Customs Regulations, (19 CFR § 10.12(e)), a “product of the United States” is an article manufactured within the Customs territory of the U.S. and may consist wholly or partially of foreign components or materials. If the article consists wholly or partially of foreign components or materials, the manufacturing process in the U.S. must be such that the foreign components or materials have been substantially transformed into a new and different article, or have been merged into a new and different article. Section 10.14(b), Customs Regulations (19 CFR 10.14(b)), states that a substantial transformation occurs when, as a result of manufacturing process, a new and different article emerges, having a distinctive name, character or use which is different from that originally possessed by the article or material before being subject to the manufacturing process.

In the instant case, pursuant to 19 U.S.C. § 3592 (b)(1)(C), the fabric imported from the Philippines and cut in the United States is not considered a product of the United States. Nevertheless, 19 U.S.C. § 3592(b)(4)(A), provides that:

[t]he value of a component that is cut to shape (but not to length, width or both) in the United States from foreign fabric and exported to another country, territory, or insular possession for assembly into an article that is then returned to the United States - - shall not be included in the dutiable value of such article, and. . . .

The effect of 19 U.S.C. § 3592(b)(4) is to preserve the tariff treatment afforded by subheading 9802.00.80, HTSUS, that otherwise could no longer be available under the section 334 origin rules because cutting foreign fabric to shape in the U.S. no longer results in the cut fabric being considered a “product of” the U.S.

Section 10.25, Customs Regulations (19 CFR 10.25), implements 19 U.S.C. § 3592(b)(4), and incorporates by reference the same operational, valuation and documentation requirements applicable to goods entered under subheading 9802.00.80, HTSUS. Therefore, imported goods entitled to a duty allowance under 19 C.F.R. § 10.25 are to be entered under subheading 9802.00.8055, HTSUS, and, solely for purposes of calculating the duty allowance under this subheading, Customs treats the textile components cut to shape in the U.S. from foreign fabric as if they were “U.S. fabricated components.”

We note that you have not provided descriptive information concerning the assembly operations performed in Mexico. Assuming that the operations performed in Mexico are acceptable assembly operations or operations incidental thereto (See 19 CFR § 10.16), and the documentation requirements of 19 C.F.R. § 10.24 are satisfied, the cotton pants may be entered under subheading 9802.00.80, HTSUS, with allowances in duty for the cost or value of the fabric components cut to shape in the U.S. from Filipino fabric.

C. NAFTA Preference

You also inquire whether the pants after being assembled in Mexico can be claimed for the NAFTA preference, that is, duty-free status. For the NAFTA preference eligibility, General Note (GN) 12, HTSUS, governs. Assuming that the pants as imported from Mexico are classifiable in heading 6203.42, HTSUS, GN 12(t)/62.16, HTSUS, applies in this case. GN 12(t)/62.16 provides for NAFTA eligibility for goods that undergo:

[a] change to subheadings 6203.41 through 6203.49 from any other chapter, except from headings 5106 through 5113, 5204 through 5212, 5307 through 5308 or 5310 through 5311, chapter 54, or heading 5508 through 5516, 5801 through 5802 or 6001 through 6002, provided that the good is both cut and sewn or otherwise assembled in the territory of one or more of the NAFTA parties.

This provision requires a change from another chapter except from certain headings, including headings 5205 through 5207, which provide for cotton yarn. Therefore, under this so-called “yarn forward” rule, imported articles qualify for NAFTA preferential treatment only if they are cut and sewn or otherwise assembled in one or more NAFTA parties from fabric formed in one or more NAFTA parties from yarn formed in one or more NAFTA parties. Under the facts provided in this case, the pants do not qualify for the NAFTA preference.

HOLDING:

Based on the foregoing reasons, for purposes of marking requirements, the pants would be considered a product of Mexico and should be marked accordingly. The cutting to shape in the United States of the fabric imported from the Philippines qualifies the cut-to-shape fabric for the partial duty exemption provided in subheading 9802.00.80, HTSUS, assuming compliance with the documentation requirements of 19 C.F.R. §10.24. Finally, with the given facts, the pants do not qualify for the NAFTA preference.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents are 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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