HQ 965186 - Ruling Request on Definition of “Wholly Formed” Yarn under the African Growth and Opportunity Act - United States International Trade Commision Rulings

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HQ 965186

July 3, 2002

CLA- 2 RR:CR:TE 965186 mbg

CATEGORY: CLASSIFICATION

TARIFF NO.:

Ms. Margaret S. Solinger
Customs Counsel
DuPont Legal D-7076A
1007 Market Street
Wilmington, DE 19898

RE: Ruling Request on Definition of “Wholly Formed” Yarn under the African Growth and Opportunity Act

Dear Ms. Solinger:

This letter is in response to your submission dated August 9, 2001, on behalf of DuPont requesting a ruling as to whether the subject yarns are considered to be “wholly formed” in the United States under the African Growth and Opportunity Act (“AGOA”).

FACTS:

You have provided that DuPont manufactures Lycra® at a facility in Waynesboro, Virginia. Lycra® are spandex fibers produced by a solution dry spinning process. An isocyanate terminated prepolymer is formed by the reaction of a polyether glycol with MDI. This prepolymer is put into a solution with DMAc and then reacted with a diamine at near stoichiometry and a small amount of monouctional amine to control final polymer molecular weight. Additives are then mixed in to provide certain desirable properties to the final product.

The fibers are formed in the spinning process where the solution is extruded into filaments in an inert gas and the DMAc solvent is removed. A finish is applied to the fibers to aid in the downstream processing. The raw materials for these fibers are produced in the U.S. with the bulk of those materials manufactured by DuPont. The exception is a mineral additive which must be imported. This additive comprises less than 4 percent of the fiber by weight.

In your Waynesboro facility, the yarn is wound onto cardboard tubes. The tubes are packed into cardboard cartons with 30 to 100 tubes per carton. The cartons are then packed onto pallets and shipped to the Netherlands.

In the Netherlands, the tubes are removed from the cartons and loaded onto a creel (or frame). There are about 1400 to 1600 tubes set onto each creel. The ends are then wound onto a large metal beam.

After the beaming in the Netherlands, the yarn is shipped to fabric knitters in South Africa. The US yarn is held separately by the South African knitters in their physical inventory and on their books throughout the knitting process.

The knitters sell the fabric to garment makers in South Africa who also segregate those fabrics with U.S.A. origin yarn from other fabrics during storage and manufacture. The garment manufacturers will then ship garments made with the U.S. Lycra® to the United States.

ISSUE:

Is yarn that is manufactured in the United States and repackaged in the Netherlands considered “wholly formed” in the U.S. under the AGOA?

LAW AND ANAYLSIS:

Title I of the Trade and Development Act of 2000, Pub. L 106-200, 114 Stat. 251, May 18, 2000, referred to as the African Growth and Opportunity Act (“AGOA”), seeks to promote trade opportunities between the U.S. and the countries of sub-Saharan Africa. The AGOA provides for the extension of duty-free treatment under the GSP to non-textile articles normally excluded from GSP duty-free treatment that are not import sensitive; and the entry of specific textile and apparel articles free of duty. In order to implement the AGOA, Customs issued Interim Regulations in T.D. 00-67, 65 Fed. Reg. 59668, which became effective October 1, 2000. With regard to the textile and apparel provisions, the law became effective on October 1, 2000, and shall remain in effect through September 30, 2008. See Sec. 112(f), AGOA.

The enhanced trade benefits provided by the AGOA are available to eligible textile and apparel articles imported directly from a country (1) that is designated as a beneficiary sub-Saharan African country and (2) which the U.S. Trade Representative (“USTR”) has determined by a proclamation published in the Federal Register has satisfied the requirements of the AGOA and therefore should be afforded the tariff treatment authorized in such Act. Such countries shall be enumerated in U.S. Note 1, Subchapter XIX, Chapter 98, HTSUS, whenever the USTR issues a Federal Register notice as described herein. See Presidential Proclamation 7350, Annex, dated October 2, 2000, 65 Fed. Reg. 59321.

South Africa was designated as a beneficiary sub-Saharan African country under AGOA by Presidential Proclamation. The USTR issued a determination finding that South Africa has adopted an effective visa system and related procedures to prevent unlawful transshipment and the use of counterfeit documents in connection with shipments of textile and apparel articles and has implemented and follows, or is making substantial progress toward implementing and following, the customs procedures required by the AGOA.

Certain provisions of the AGOA provide that duty free and quota free treatment will be granted to certain textile and apparel products which are manufactured in eligible sub-Saharan countries from fabrics that are “wholly formed” in the United States from yarns that are “wholly formed” in the United States. See 19 C.F.R. 10.213(a)(1- 4).

The definition of “wholly formed” is set forth in 19 CFR 10.212 which provides:

“Wholly formed,” when used with reference to yarns or thread, means that all of the production processes, starting with the extrusion of filament or the spinning of all fibers into yarn or both and ending with a yarn or plied yarn, took place in a single country, and when used with reference to fabric(s), means that all of the production processes, starting with polymers, fibers, filaments, textile strips, yarns, twine, cordage, rope, or strips of fabric and ending with a fabric by a weaving, knitting, neddling, tufting, felting, entangling or other process, took place in a single country.

As applied to the facts of this case, the subject Lycra® yarns are manufactured in the United States with all of the production processes, starting with the extrusion of the filaments and ending with a yarn, taking place at your Waynesboro facility. You have stated that the rewinding process occurs in the Netherlands and the purpose for this action is to convert the packaging of the yarn from single end to multiple ends. You have also stated that the multiple end packaging is beneficial to the manufacturers in South Africa because the textile mills have standardized to the European dimensions and the beam dimensions in the United States differ. If the U.S. manufactured yarn were shipped to South Africa on the original tubes, then the warp knitting mills in South Africa would have to modify their warp knitting machines to adjust to the U.S. dimensions.

In essence the action which occurs to the subject yarns in the Netherlands is a repackaging process. Since there are no production processes affecting the yarn formation which occur in the Netherlands nor is there any sort of chemical property change to the yarn which occurs as a result of the repackaging, Customs believes that the subject Lycra® yarns would be considered “wholly formed” in the United States for purposes of AGOA pursuant to 19 C.F.R. 10.212.

HOLDING:

The subject Lycra® yarns are considered “wholly formed” in the United States for purposes of the AGOA.

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 E. Elkins, Chief

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