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HQ 561659




June 21, 2002

CLA-2 RR:CR:SM 561659 MLR

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Peter Jay Baskin, Esq.
Sharretts, Paley, Carter & Blauvelt, P.C. 75 Broad Street
New York, NY 10004

RE: Applicability of partial duty exemption under HTSUS subheading 9802.00.80 to footwear; U.S. Note 2(b), Subchapter II, Chapter 98

Dear Mr. Baskin:

This is in reference to your letter dated February 24, 2000, requesting a ruling on behalf of Wolverine World Wide, Inc. (“Wolverine”), concerning the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to certain footwear produced by Wolverine in China. We regret the delay in responding.

FACTS:

Wolverine ships various U.S.-origin parts and materials to the Dominican Republic for assembly in footwear uppers. The completed uppers are then shipped to the U.S. It is stated that the uppers are entered under subheading 6406.10, HTSUS, and are afforded preferential tariff treatment under subheading 9802.00.8040, HTSUS, within the purview of U.S. Note 2(b), Subchapter II, Chapter 98, HTSUS (hereinafter “Note 2(b)”).

The uppers will then be exported to China, where they will be assembled with other components into finished footwear. It is claimed that the exported uppers are in condition ready for assembly without further fabrication, and that they are not advanced in value or improved in condition while in China except by assembly or operations incidental to assembly. The finished footwear is then exported from China back to the U.S.

ISSUE:

Whether the uppers from the Dominican Republic may be considered “products of the U.S.” for purposes of subsequent entry of the finished footwear from China under subheading 9802.00.80, HTSUS.

LAW AND ANALYSIS:

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).

For a component to be eligible for subheading 9802.00.80, HTSUS, treatment, it must first be a “product of” the U.S. For purposes of this ruling request, we are assuming that the footwear uppers from the Dominican Republic qualify for duty-free entry under Note 2(b).

Note 2(b) provides that:

No article may be treated as a foreign article, or as subject to duty, if -
the article is – assembled or processed in whole of fabricated components that are a product of the United States, or processed in whole of ingredients (other than water) that are a product of the United States, in a beneficiary country; and neither the fabricated components, materials or ingredients, after exportation from the United States, nor the article itself, before importation into the United States, enters the commerce of any foreign country other than a beneficiary country.

In Headquarters Ruling Letter (HRL) 557803 dated May 11, 1994, Customs held that footwear uppers accorded duty-free treatment under Note 2(b) when imported into the U.S. from the Dominican Republic, and again returned to the Dominican Republic for manufacture into finished footwear, would not disqualify the finished footwear from receiving duty-free treatment under Note 2(b) when re-imported. The reason was that Note 2(b) provides that articles meeting the requirements of this tariff provision may not be treated as “foreign articles,” and, therefore, the footwear uppers were not considered as “foreign.” HRL 557803 relied on HRL 556763 dated March 12, 1990, where Customs held that an article imported into the U.S. free of duty under Note 2(b), and subsequently returned to the same beneficiary country for repair, was eligible for duty-free treatment under Note 2(b) upon re-entry into the U.S. HRL 556763 stated that since Note 2(b) provides eligible articles are not to be treated as “foreign,” it necessarily follows that when the repaired articles were returned to the beneficiary country, they would be considered as products of the U.S. Consequently, the repaired articles returned to the U.S. were considered processed in whole of U.S.-fabricated components.

Similarly in this case, we find that if the uppers are entered duty-free under Note 2(b), they are not considered “foreign articles.” Therefore, they may be considered “products of the United States” for purposes of subsequent entry under subheading 9802.00.80, HTSUS, after assembly into complteted footwear in China. It is claimed that the exported uppers will be in condition ready for assembly without further fabrication, and will not be advanced in value or improved in condition while in China except by assembly or operations incidental to assembly. Since no details were provided concerning the assembly of the finished footwear in China, this ruling does not address whether the footwear is, indeed, eligible for subheading 9802.00.80, HTSUS. However, we find that if the uppers from the Dominican Republic will be entered under Note 2(b), they will not be disqualified from being considered “products of the United States” and from being eligible for a duty allowance under subheading 9802.00.80, HTSUS, upon subsequent importation as part of finished footwear.

An additional issue you raise is whether the same would hold true for uppers imported from the Dominican Republic that qualify for entry under Note 2(b), but for which no entry was made. It is our opinion that is the uppers are not entered under Note 2(b), they may not be considered “products of the United States” for purposes of subsequent entry under subheading 9802.00.80, HTSUS. The reason is that if they are entered under any other subheading, such as subheading 6406.10, HTSUS, they would be considered “foreign” articles pursuant to U.S. Note 2(a), subchapter II, Chapter 98, HTSUS, which provides, in pertinent part, as follows:

Except as provided in paragraph (b), any product of the United States which is returned after having been advanced in value or improved in condition abroad by any process of manufacture or other means, or 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.

Articles are entitled to the benefits of a Chapter 98, HTSUS, provision only if they satisfy the conditions and requirements of that provision and they are entered under that provision. See, for example, Ford Motor Co. v. United States, 29 Cust. Ct. 553 (1952), in which the court stated that the precursor provision to subheading 9801.00.10, HTSUS:
being a grant of a privilege instead of a right, must be strictly construed, its scope and application confined to the special circumstances outlined by its provisions. Pelz-Greenstein Co. v. United States, 17 C.C.P.A. (Customs) 305, T.D. 43718. The paragraph bestows no unlimited and unconditional freedom from assessment of duty. It is hedged and circumscribed not alone by the specificity of the language employed by Congress but also by such regulations as to proof of identity and compliance with its conditions as are prescribed by the Secretary of the Treasury.

HOLDING:

On the basis of the information submitted, the entry of footwear uppers from the Dominican Republic under Note 2(b) will not disqualify the uppers from being considered “products of the United States” and from being eligible for a duty allowance under subheading 9802.00.80, HTSUS, upon subsequent importation into the U.S. from the Dominican Republic as part of finished footwear. This assumes compliance with all conditions and requirements of subheading 9802.00.80, HTSUS.

A copy of this ruling letter should be attached to the entry documents filed at the time the goods are 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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