HQ 965909 - Caribbean Basin Trade Partnership Act; Elastic Fabric; Not Findings - United States International Trade Commision Rulings

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HQ 965909

January 7, 2003

CLA-2 RR:CR:TE 965909 JFS

CATEGORY: CLASSIFICATION

TARIFF NO.: 9820.11

Teresa M. Polino, Esq.
Sandler, Travis & Rosenberg, P.A.
1300 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-3002

RE: Caribbean Basin Trade Partnership Act; Elastic Fabric; Not Findings

Dear Ms. Polino:

This is in response to your letter dated August 29, 2002, requesting a binding ruling on behalf of your client Levi Strauss & Co., concerning whether certain fabric substrates are considered “findings or trimmings” under the United States-Caribbean Basin Trade Partnership Act (CBTPA). You submitted one sample for our examination.

Subsequent to the filing of the instant ruling request, your firm filed a Commercial Availability Petition, dated November 27, 2002, with the Committee for the Implementation of Textile Agreements (CITA), Department of Commerce, concerning the subject substrate fabrics. As part of the Petition, one sample of each of the fabrics was submitted in their condition prior to assembly into wearing apparel. Customs examined those samples and discovered that there is an issue as to whether the fabrics are “elastic strip” under the findings or trimmings provision of the CBTPA. Your subsequent submission on the “elastic strip” issue was received and considered. It is important for parties requesting rulings to advise Customs of other avenues being pursued with other U.S. agencies. Such notice allows Customs to coordinate, if necessary, with the other agency, and facilitates a more informed and expeditious decision.

FACTS:

Two fabric substrates that are incorporated into the waistband of men’s twill pants are under consideration. The sample submitted consists of a portion of the waistband that contains the substrate fabrics under consideration. Both fabrics are knit in countries other than the U.S. or a CBTPA beneficiary country. The fabrics will be assembled into twill pants in the Dominican Republic. The fabrics are subjected to a series of finishing and baking processes that enhance their ability to stretch and give underlying support to the fabric of the outer shell. You describe the outer substrate fabric as follows:

The outer substrate is made in the United Kingdom utilizing a patented process. The substrate is first knitted, then passed through a unique and patented “Pro-fit” machine in the United Kingdom. This machine compacts the substrate so as to take the shrinkage out of it so that it will not shrink when it is fused to the pant twill fabric. The substrate is then coated on one side in the United Kingdom with a special patent-pending adhesive that allows the substrate to adhere to the twill pant fabric in the waistband area even at over 300º heat when the substrate is baked during the pant assembly processing. The adhesive also is formulated so that once it is applied, the substrate can withstand the washing (wrinkle free) and pressing that occurs in the assembly process. The outer substrate reinforces the twill pant fabric and also exclusively contributes to the “stretchability” of the twill pant fabric in the waistband area.

In the Commercial Availability Petition, the outer substrate is referred to as “Fusible Interlining 1.” The fabric is described as follows:

An ultra-fine Lycra crochet outer-fusible material with a fold line that is knitted into the fabric. A patent is pending for this fold-line fabric.

Specifically the fabric is a 45 mm wide base substrate, crochet knitted in narrow width, primarily polyester based (an 80% nylon type 6/20% spandex) with a weight of 4.4 oz. and a 110/110 stretch and a dull yarn), stretch elastomeric material with adhesive coated with the following characteristics.

. . .

In the length it exhibits excellent stretch and recovery properties at low extension levels.

. . .

In your ruling request, you describe the inner substrate as follows:

The inner substrate is made, in part in Italy utilizing a patented process. The substrate is first knitted in a wide width of 59 inches. The substrate is then coated on one side with a special patent-pending adhesive in either Italy or the United Kingdom. The adhesive allows the substrate to adhere to the waistband lines during the pant assembly process. In the United Kingdom, the substrate then is cut to the width required. Thereafter, it is passed through a “pro-fit” machine that compacts it so that there is no shrinkage later. This substrate appears in two places on the enclosed sample pant part: (1) on the underside of the waistband lining fabric that is folded above the interior logo tape that circles the waistband; and (2) on the underside of the waistband lining fabric that is folded below the interior logo tape that circles the waistband. . . .

The substrate reinforces the waistband lining, which is made from pocketing-type fabric, and also exclusively contributes to that fabric’s “stretch ability.” It also serves to “firm up” the seam area of the waistband lining so that the fabric will not rip or otherwise be damaged during the assembly/sewing process.

In the Commercial Availability Petition, the inner substrate is referred to as “Fusible Interlining 2.” The fabric is described as follows:

A fine Lycra crochet inner-fusible material with an adhesive coating that is applied after going through a process to take out all of the shrinkage out of the product. This process of imparting stretch to fabrics is patented, U.S. Patent 5,987,721.

Specifically the fabric is a 400 mm knitted polyester based stretch elastomeric fusible (an 80% nylon type 6/20% spandex) with a weight of 4.4 oz. and a 110/110 stretch and a dull yarn), with the following characteristics:

. . .

ISSUE:

Whether the substrate fabrics are findings or trimmings under the CBTPA?

LAW AND ANALYSIS:

The Trade and Development Act of 2000 (Act) was signed into law on May 18, 2000 (Pub. L. 106-200, 114 Stat. 251). Title II of the Act concerns trade benefits for Caribbean Basin countries 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 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.

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. “Transition period” is defined in 19 U.S.C. 2703(b)(5)(D) as meaning, with respect to a designated CBTPA country, 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.

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. See Presidential Proclamation 7351, dated October 2, 2000, 65 Fed. Reg. 59329 (listing designated CBTPA beneficiary countries); and 65 Fed. Reg. 60236, dated October 10, 2000 (listing countries determined by the USTR to have met certain requirements for verifying origin). . The Dominican Republic is designated as a CBTPA beneficiary country (see Presidential Proclamation 7351) 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. It is noted that the issues raised in this ruling letter are outside the scope of the comments received.

Section 3107 of the Trade Act of 2002 (Pub. L. 107-210, 116 Stat. 3107), enacted on August 6, 2002, amended the CBTPA to modify the treatment accorded to certain textile and apparel articles imported from beneficiary CBTPA countries. Presidential Proclamation 7626, dated November 13, 2002, published in the Federal Register on November 18, 2002 (67 Fed. Reg. 69459), implemented the amendments to the CBTPA to facilitate the entry of the specific textile and apparel articles eligible for preferential treatment under the CBTPA.

As amended by section 211 of the CBTPA, 19 U.S.C. 2703(b)(2)(A) (vii)(I)(aa), permits the use of foreign origin findings or trimmings, provided that such findings and trimmings do not exceed 25 percent of the cost of the components of the assembled article. (Also cited at U.S. Note 3(a)(i), Subchapter XX, HTSUS). Section 211 specifically states that “[e]lastic strips are considered finding or trimming only if they are each less than 1 inch in width and are used in the production of brassieres.” The Interim Regulations, regarding findings and trimmings further provide:

An article otherwise described under paragraph (a) of this section will not be ineligible for the preferential treatment referred to in [19 C.F.R.] § 10.221 because the article contains:

(A) Findings and trimmings of foreign origin, if the value of those findings and trimmings does not exceed 25 percent of the cost of the components of the assembled article. For purposes of this section "findings and trimmings" include, but are not limited to, hooks and eyes, snaps, buttons, "bow buds", decorative lace trim, elastic strips (but only if they are each less than 1 inch in width and are used in the production of brassieres), zippers (including zipper tapes), labels, and sewing thread except in the case of an article described in paragraph (a)(3) or (a)(12) of this section.

19 C.F.R. § 10.223(b)(1)(i)(A) (emphasis added). Thus the law is clear that only elastic strip that is less than one inch in width and that is used in the manufacture of brassieres will be considered a finding or trimming. Because the subject garment incorporating the elastic fabric is not a brassiere, the remaining issue is whether the instant elastic fabric is considered “elastic strip” under the provisions of the CBTPA.

The instant fabrics are manufactured with elastomeric yarns and exhibit significant stretch and recovery properties. Indeed, their elastomeric properties are one of their significant features, providing the waistband into which they are assembled with a “memory board” that causes the waistband to return to its initial form.

In the Conference Report for the CBTPA, Conf. Rep. No. 606, 106th Cong., 2nd Sess. 102 (2000), the Senate states that it:

[I]ntends that this new program of textile and apparel benefits will be administered in a manner consistent with the regulations that apply under the "Special Access Program" for textiles and apparel articles from Caribbean and Andean Trade Preference Act countries, as described in 63 Fed. Reg. 16474-16476 (April 3, 1998). Thus, the requirement that products must be assembled from fabric formed in the United States applies to all textile components of the assembled products, including linings and pocketing, subject to the exceptions that currently apply under the "Special Access Program."

The scope of the exception for findings, trimmings and elastic strips under the Special Access Program (SAP) and the CBTPA are similar. Therefore, it is instructive to examine what CITA stated concerning the use of foreign elastic strips in the SAP. The meaning of the language in the SAP involving elastic strip, as set forth in a CITA directive, published in 52 Fed Reg 26057, July 10, 1987, was as follows:

Elastic strips were included in recognition of the existing operations producing brassieres in Caribbean Basin countries. Because the foreign origin exception for elastic strips was intended by CITA to be limited to elastic strips for use as brassiere straps and not to include elastic fabrics such as those used in waistbands, effective October 1, 1987, the foreign origin exception for elastic strips is clarified as limited to narrow elastic fabric less than one inch in width used in the production of brassieres only.

Emphasis added. In short, CITA stated that, except for use in the manufacture of brassieres, elastic fabric was not to be considered a finding under the SAP.

In Headquarters Ruling Letter (HQ) 561868, dated March 22, 2002, Customs ruled that polyurethane strip was not considered “elastic strip” as contemplated in the CBTPA language. Customs relied upon the above CITA directive, stating that the elastic strip provision applies to elastic fabric. Because the polyurethane strip was not “elastic fabric,” it was not subject to the provision. Customs similarly ruled in HQ 562018, July 10, 2001, regarding rubber strip used in the manufacture of swim wear. Customs stated:

In this case, the submitted rubber tape sample, which is classified in subheading 4008.21, HTSUS, clearly is not elastic fabric. As previously indicated, the "elastic strip" exception and the language limiting the scope of that exception to strips less than one inch in width used in the manufacture of brassieres concerned only elastic fabric. Therefore, we believe that the fact that the rubber tape at issue here does not fall within the "elastic strip" exception does not preclude consideration of whether it qualifies as a finding or trimming.

The instant material is clearly elastic fabric as contemplated by CITA. Thus, its inclusion in an otherwise CBTPA eligible garment will disqualify the garment from receiving CBTPA benefits.

HOLDING:

The pants are ineligible for preferential treatment under the CBTPA due to the inclusion of the elastic substrate fabrics, which are excluded from the findings and trimmings provision.

Sincerely,

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