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HQ 562605




April 9, 2003

CLA-2 RR:CR:SM 562605 ALH

CATEGORY: CLASSIFICATION

Mr. Arthur W. Bodek
Ms. Ellen A. DiLapi
Counselors at Law
Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt, LLP 245 Park Avenue, 33rd Floor
New York, New York 10167-3397

RE: United States-Caribbean Basin Trade Partnership Act; subheading 9820.11.06; women's jeans

Dear Mr. Bodek and Ms. DiLapi:

This is in response to your letter dated December 16, 2002, on behalf of your client, American Eagle Outfitters ("AEO"), requesting a binding ruling on the eligibility of women's jeans for preferential tariff treatment under the United States-Caribbean Basin Trade Partnership Act ("CBTPA"). You submitted samples for our examination.

FACTS:

The subject merchandise is a pair of women's jeans. The jeans are composed of 84% cotton and 16% polyester denim fabric. The fabric is wholly formed in the United States from U.S. dyed yarns. The thread used in the assembly of the jeans is formed in the United States. The U.S. manufactured fabric and thread is sent to Guatemala. In Guatemala, the fabric is cut into component parts and the parts are assembled into women's jeans. After assembly, the jeans undergo finishing operations performed in Guatemala to give the jeans an appearance of natural "wear." These operations include sandblasting, bleaching, splattering, and grinding designated areas of the jeans to achieve a lightening effect, discoloration, the appearance of spilled paint, and breakage of the jeans' edges such as the bottom hem, front and rear pockets, and waistband.

You maintain that the jeans are entitled to duty and quota-free treatment under subheading 9820.11.16, Harmonized Tariff Schedule of the United States ("HTSUS"). ISSUE:

Whether the subject merchandise is eligible for preferential tariff treatment under the CBTPA.

LAW AND ANALYSIS:

Title II of the Trade and Development Act of 2000, (Pub. L. 106-200, 114 Stat. 251), concerns trade benefits for the Caribbean Basin and is referred to as the United States-Caribbean Basin Trade Partnership Act ("CBTPA"). Section 211 of the CBTPA amended section 213(b) of the Caribbean Basin Economic Recovery Act ("CBERA") (19 U.S.C. 2703(b)) to provide expanded trade benefits during a "transition period" to designated countries in the Caribbean Basin. Section 3107(a) of the Trade Act of 2002 (Pub.L. 107-210, 116 Stat. 933 [August 6, 2002]) modified the treatment accorded to certain textile and apparel articles imported from designated CBTPA countries under section 213(b) of the CBERA. (See 19 U.S.C. 2703(b)(2)(A)).

Section 211 of the CBTPA eliminates tariffs and quantitative restrictions on specific textile and apparel articles and extends North American Free Trade Agreement duty treatment standards to non-textile articles that previously were ineligible for preferential treatment under the CBERA. "Transition period" is defined in 19 U.S.C. 2703(b)(5)(D), with respect to a designated CBTPA country, as the period that begins on October 1, 2000, and ends on the earlier of September 30, 2008, or the date on which a free trade agreement enters into force with respect to the U.S. and the CBTPA country.

Presidential Proclamation 7351, dated October 2, 2000, published in the Federal Register on October 4, 2000 (65 Fed. Reg. 59329), implemented the CBTPA by designating the eligible CBTPA countries and amending Chapter 98, HTSUS, (including the creation of new subchapter XX) to facilitate the entry of the specific textile and apparel articles eligible for preferential treatment under the CBTPA. Presidential Proclamation 7626 dated November 13, 2002, published in the Federal Register on November 18, 2002 (67 FR 69459), implemented the changes made to the CBTPA by section 3107(a) of the Trade Act of 2002.

The enhanced trade benefits provided by the CBTPA are available to eligible articles imported directly from a country: (1) that is designated as a CBTPA beneficiary country, and (2) which the U.S. Trade Representative ("USTR") has determined has implemented and follows, or is making substantial progress toward implementing and following, certain customs procedures that allow U.S. Customs to verify the origin of the articles. Guatemala is designated as a CBTPA beneficiary country (see Presidential Proclamation 7351, dated October 2, 2000, 65 Fed. Reg. 59329) and has satisfied the second criterion (see 65 Fed. Reg. 60236, dated October 10, 2000).

In addition, Interim Customs Regulations to implement the trade benefit provisions of section 211 of the CBTPA were published in the Federal Register as T.D. 00-68 on October 5, 2000 (65 Fed. Reg. 59650). The T.D. invited public comments to be submitted on the Interim Regulations by December 4, 2000.

Certain textile articles are designated eligible for preferential tariff treatment within subheading 9820.11.06, HTSUS, as provided for in subchapter XX, U.S. Note 2(a), Chapter 98, HTSUS, which provides:

Except as provided in this note, textile and apparel articles described in subheading 9820.11.03 through 9820.11.30, inclusive, of this subchapter that are imported directly into the customs territory of the United States from a designated beneficiary CBTPA country enumerated in general note 17(a) to the tariff schedule shall be eligible to enter free of duty and free of any quantitative limitations, except as provided in this subchapter, under the terms of the provisions set forth in such subheadings and applicable legal notes, as indicated by the rate of duty of "Free" in the Special rates of duty subcolumn for such provisions. For purposes of subheadings 9820.11.03, 9820.11.06, 9820.11.18, and 9820.11.33, apparel articles entered on or after September 1, 2002, that are assembled in a beneficiary CBTPA country from knitted or crocheted fabrics or from woven fabrics shall be eligible to receive the duty treatment provided for in this note only if all dyeing, printing and finishing of such fabrics from which the articles are assembled is carried out in the United States.

The relevant apparel provision is set forth in subheading 9820.11.06, HTSUS, which provides that preferential treatment shall apply to:

Apparel articles sewn or otherwise assembled in one or more such countries with thread formed in the United States from fabrics wholly formed in the United States and cut in one or more such countries from yarns wholly formed in the United States, or from components knit-to-shape in the United States from yarns wholly formed in the United States, or both (including fabrics not formed from yarns, if such fabrics are classifiable under heading 5602 or 5603 of the tariff schedule and are wholly formed in the United States), under the terms of U.S. note 2(a) to this subchapter.

In regard to the facts of this case, the jeans that are cut and assembled in Guatemala with thread that is wholly formed in the United States and fabric that is wholly formed in the United States from yarn that is wholly formed in the United States, would satisfy the conditions set forth in subheading 9820.11.06, HTSUS.

However, subchapter XX, U.S. Note 2(a), Chapter 98, HTSUS, sets forth an additional requirement for apparel articles entered under subheading 9820.11.06 that is effective for articles entered on or after September 1, 2002. Apparel articles that are assembled in a beneficiary CBTPA country from woven fabrics shall be eligible to receive the duty treatment provided for in this note only if all dyeing, printing and finishing of such fabrics from which the articles are assembled is carried out in the United States. In the present case, there is no dyeing, printing and finishing operations performed in any location at the fabric stage. The finishing operations carried out in Guatemala are performed on the assembled pair of jeans and not on the fabric prior to the cutting and assembly operations. In fact, the natural "wear" look of the jeans may only be achieved if these finishing operations occur after the fabric has been cut and assembled. Therefore, based on the facts presented here, since no dyeing, printing and finishing of the jean fabric from which the finished jeans are assembled occurs in any location then U.S. Note 2(a) is satisfied.

HOLDING:

Based upon the information provided, the women's jeans that are cut and assembled in Guatemala from fabric wholly formed in the United States, from yarn wholly formed in the United States, with thread wholly formed in the United States would be eligible for CBTPA treatment under subheading 9802.11.06, HTSUS, upon importation into the United States. The foregoing assumes that the jeans are imported directly into the United States and satisfy the applicable documentation requirements.

A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If you have any questions regarding the foregoing, please let us know.

Sincerely,

Myles B. Harmon
Director
Commercial Rulings Division


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