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HQ 965961




January 15, 2003

CLA-2 RR:CR:TE 965961 jsj

CATEGORY: CLASSIFICATION

TARIFF NO.: 6110.20.2065
6110.20.2075

Port Director
U.S. Customs Service
1 East Bay Street
Savannah, Georgia
31401

Attn: Team: IST
Melanie Phillips, Field National Import Specialist

RE: Application for Further Review of Protest No.: 1703-02-100099; African Growth and Opportunity Act; 19 U.S.C. 3721 (b)(3); Limitations on Benefits, Special Rules for Lesser Developed Countries, 19 U.S.C. 3721 (b)(3)(B)(i); Country of Origin of Fabric Not Relevant; Country of Manufacture of Apparel Components Relevant.

Dear Port Director:

The purpose of this correspondence is to address the Application for Further Review (AFR) of Protest Number: 1703-02-100099, dated April 23, 2002. The Importer of Record and Protesting party is Dolgencorp, Inc. The Protestant is represented by counsel.

Dolgencorp entered the merchandise subject to this protest in subheadings 6110.20.2065 and 6110.20.2075, Harmonized Tariff Schedule of the United States Annotated (HTSUSA). Subsequent to entering the merchandise, Dolgencorp filed a Supplemental Information Letter, R-01-00253, in which it sought to claim the benefits of the African Growth and Opportunity Act (AGOA) and asserted classification in subheading 9819.11.12, HTSUS. The Customs Service rejected the Supplemental Information Letter on September 18, 2001, and liquidated the merchandise as entered on April 19, 2002.

Dolgencorp filed a protest with an application for further review challenging the decision of the Port Director not to accord it the benefits of the AGOA and declining to liquidate the merchandise in subheading 9819.11.12, HTSUS. The Importer’s AFR was approved. A review of Customs records indicates that the protest was timely filed pursuant to 19 U.S.C. 1514 (c)(3) (West 1999) and 19 C.F.R. 174.12 (e)(2).

This protest decision is being issued subsequent to the following: (1) A review of the Protest (Customs Form 19); (2) A review of the Customs Protest and Summons Information Report (Customs Form 6445A); A review of the submissions of counsel dated: September 10, 2002, December 12, 2002, and December 17, 2002; (3) A review of entry and production records provided to the Customs Service dated September 11, 2002; and (4) A telephone conference conducted between a member of my staff and counsel for the importer on December 17, 2002.

FACTS

The merchandise in issue is men’s, boys’ and girls’ knit polo shirts, respectively, item numbers: 99102, 99160 and PPS9498. The shirts have three-button openings at the neck, short sleeves and rib-knit cuffs. They are composed of sixty percent cotton fibers and forty percent polyester fibers.

The fabric, collars and cuffs are all formed and cut in Taiwan. Subsequent to the formation and cutting of the fabric, collars and cuffs, the fabric and the components are shipped to Lesotho. The components are assembled into finished garments in Lesotho.

It was initially understood by Customs that the instant shirts had yokes that were formed and cut in Taiwan. Customs further review of the facts of this protest do not reveal yokes in the garments.

The Customs Service was not advised of the country or countries of origin of the yarn.

ISSUE

Did the Customs Service properly liquidate the entry as entered in subheadings 6110.20.2065 and 6110.20.2075, Harmonized Tariff Schedule of the United States Annotated, declining to accord preferential trade benefits of the African Growth and Opportunity Act to men’s, boys’ and girls’ knit shirts assembled in Lesotho from fabric, collars and cuffs formed and cut in Taiwan ?

LAW AND ANALYSIS

The federal agency responsible for initially interpreting and applying federal international trade laws addressing the importation of goods, including the Harmonized Tariff Schedule of the United States Annotated (HTSUSA), is the U.S. Customs Service.

See 19 U.S.C. 1500 (West 1999) (providing that the Customs Service is responsible for fixing the final appraisement, classification and amount of duty to be paid); See also Joint Explanatory Statement of the Committee of Conference, H.R. Conf. Rep. No. 100-576, at 549 (1988) reprinted in 1988 U.S. Code Cong. and Adm. News 1547, 1582 [hereinafter Joint Explanatory Statement]. The Customs Service, in accordance with its legislative mandate, applies federal law and classifies imported merchandise pursuant to the General Rules of Interpretation and the Additional U.S. Rules of Interpretation.

Counsel, in the submission dated December 12, 2002, suggests that it is now the importer’s understanding that the garments in issue “appear” to have been entirely formed, cut and assembled in Lesotho. Counsel’s submission, which includes an affidavit of a representative of the parent company of Dolgencorp, Inc., specifically references collars, but during the telephone conference it was confirmed that the Protestant also intended to suggest that the cuffs were also formed and cut in Lesotho.

It is initially noted that counsel’s submission and the accompanying affidavit fairly represent the fact that Dolgencorp is not able to confirm that the collars and cuffs subject to this protest were formed and cut in Lesotho. The submission and affidavit state that at the time of a factory visit by the Protestant’s representative in November of 2002 the importer was advised that the collars and cuffs used in the assembly of the shirts were formed and cut in Lesotho. The affidavit further stated that at the time of a factory visit by the Dolgencorp representative in November of 2000 no “bundles of complete collars” were observed.

It is Customs conclusion, based on a review of the submission and affidavit, and, more importantly, the entry and production records, that the facts available do not permit a decision that the collars and cuffs were formed and cut in Lesotho. The affidavit only provides second-hand or hearsay statements concerning the source of the collars and cuffs and specifically acknowledges that for the relevant time period the affiant is unable to confirm the source of the collars and cuffs. The entry and production records, particularly documents entitled “Accessory Receipt Note,” suggest the receipt of large numbers of collars and cuffs by the factory in Lesotho. Since this office is unable to resolve the protest based on counsel’s factual suggestion that the collars and cuffs were formed and cut in Lesotho, attention will be turned to interpretation of the African Growth and Opportunity Act.

The federal law subject to interpretation and application in this protest is the African Growth and Opportunity Act. 19 U.S.C. 3701 et seq. The AGOA was enacted as Title I of the Trade and Development Act of 2000, Pub. L. 106-200, 114 Stat. 251 (May 18, 2000) to promote “increased trade and investment between the United States and sub-Saharan Africa.” 19 U.S.C. 3702 (1). The Act provides for the extension of the Generalized System of Preferences (GSP) duty-free treatment to non-textile articles normally excluded from GSP duty-free treatment and for preferential treatment of certain textile and apparel articles described in the Act. The textile and apparel provisions of the AGOA became effective on October 1, 2000, and remain in effect until September 30, 2008. The Customs Service issued Interim Regulations that became effective on October 1, 2001, implementing the AGOA. See T.D. 00-67; 65 Fed. Reg. 59668 (2000).

Preferential treatment of certain textile and apparel articles under the AGOA is available for articles imported directly from: (1) A country that has been designated by the President as a “beneficiary sub-Saharan African country;” and (2) That has satisfied the U.S. Trade Representative that it has met the requirements of 19 U.S.C. 3722 (a) and (b) of having adopted protections against transshipment. A special rule for sub-Saharan African countries designated by the President as “lesser developed beneficiary sub-Saharan African countr[ies]” is set forth in 19 U.S.C. 3721 (b)(3)(B). The Kingdom of Lesotho has been designated a “beneficiary sub-Saharan African country,” a “lesser developed beneficiary sub-Saharan African country” and has been declared by the U.S. Trade Representative to have satisfied the requirements of the Act protecting against transshipment. See Presidential Proclamation 7350, 65 Fed. Reg. 59321 (2000); 66 Fed. Reg. 21192 (2001).

Section 3721 of Title 19 provides, in part, that preferential treatment “shall apply only to the following textile and apparel products:

(3) APPAREL ARTICLES ASSEMBLED FROM REGIONAL AND OTHER FABRIC. – Apparel articles wholly assembled in one or more beneficiary sub-Saharan African countries from fabric wholly formed in one or more beneficiary sub-Saharan African countries from yarn originating either in the United States or one or more beneficiary sub-Saharan African countries (including fabrics not formed from yarns, if such fabrics are classifiable under heading 5602 or 5603 of the Harmonized Tariff Schedule of the United States and are wholly formed and cut in one or more beneficiary sub-Saharan African countries), subject to the following:

(B) SPECIAL RULE FOR LESSER DEVELOPED COUNTRIES.- IN GENERAL.- Subject to subparagraph (A), preferential treatment shall be extended through September 30, 2004, for apparel articles wholly assembled in one or more lesser developed beneficiary sub-Saharan African countries regardless of the country of origin of the fabric used to make such articles.

Dolgencorp suggests that its merchandise should have been liquidated in subheading 9819.11.12, HTSUS. The Protestant maintains that its merchandise is entitled to preferential treatment pursuant to 19 U.S.C. 3721(b)(3)(B)(i) because its shirts were wholly assembled in Lesotho and the Taiwanese origin of the fabric is not relevant. Dolgencorp directs Customs attention to the Interim Regulations, particularly 19 C.F.R. 10.212, which defines “wholly assembled in” to mean:
that all of the components of the textile or apparel article (including thread, decorative embellishments, buttons, zippers, or similar components) were joined together in one or more beneficiary countries or one or more lesser developed beneficiary countries.

The Protestant asserts that although the collars and cuffs of the finished shirts were formed and cut in Taiwan, they were all assembled in Lesotho, thereby meeting the requirements of the AGOA. As interpreted by the Protestant, Congress did not mandate that components be cut in a lesser developed beneficiary country or countries and in aspects of the AGOA in which cutting was deemed important Congress expressly so stated.

The Customs Service notes that this protest decision will apply the AGOA as in effect at the time of entry, May 31, 2001. See 19 C.F.R. 141.69 (providing that rates of duty applicable are the rates in effect at the time of entry). The AGOA in effect on the date of entry, Pub. L. 106-200, is hereinafter referred to as “AGOA I.” Subsequent to the entry of Dolgencorp’s merchandise, Congress amended the AGOA in Pub. L. 107-210, 116 Stat. 933 (Aug. 6, 2002), hereinafter referred to as “AGOA II.” Any reference to AGOA II in this decision will be as secondary authority intended to derive the purpose of Congress in AGOA I.

It is the decision of the Customs Service that the interpretation of section 3721 (b)(3)(B)(i) of AGOA I and the outcome of this issue is not as easily resolved as suggested by Dolgencorp. Although subparagraph (b)(3)(B)(i) of section 3721 states that the country of origin of the fabric is not relevant and that the apparel article must be wholly assembled in a lesser developed beneficiary country or countries, section 3721 (b)(3)(B)(i) of AGOA I cannot be read and understood in isolation. The intent of Congress may only be understood when subparagraph (b)(3)(B)(i) is read in conjunction with all of paragraph (b)(3).

Subparagraph (b)(3)(B)(i) is, simply stated, a subparagraph of paragraph (b)(3). A reading of paragraph (b)(3) in its entirety, including subparagraph (b)(3)(B)(i), reveals that the legislation is silent as to an origin requirement for garment components. Although subparagraph (b)(3)(B)(i) provides for the use of foreign fabric it does not expressly address whether the components of garments that are assembled in a lesser developed beneficiary country or countries may be made in a country other than a lesser developed beneficiary country. The Customs Service, in this protest decision, will resolve this question.

It is the decision of the Customs Service that Congress in enacting AGOA I intended that receipt of the benefits of the “Special Rule for Lesser Developed Countries” requires that the apparel be assembled in a lesser developed beneficiary country or countries from components manufactured in a lesser developed beneficiary country or countries. Although the country of origin of the fabric is not a relevant consideration, it is Customs conclusion that the country or countries of origin of the garment components is relevant.

Subparagraph (b)(3)(B)(i) is an exception to the general AGOA provisions. In the language of the AGOA, it is a “Special Rule” and will be construed to effectuate congressional intent. Congress in section 102 of the Act specifically acknowledged the value of promoting “stable and sustainable economic growth and development,” as well as encouraging “direct investment” in the region. 19 U.S.C. 3701 (1) and (9). Since the AGOA I expressly authorizes the use of fabric without regard for the country of origin of the fabric, but is silent as to an origin requirement for garment components, Customs concludes for the purposes of subparagraph (b)(3)(B)(i) that garment components must be from a lesser developed beneficiary sub-Saharan African country or countries.

It is Customs determination that a reading of AGOA II supports this decision. Subparagraph (b)(3)(B)(i), as amended in AGOA II, provides that the special benefits available to lesser developed beneficiary countries are only available for “apparel articles wholly assembled, or knit-to-shape and wholly assembled, or both, in one or more lesser developed beneficiary sub-Saharan African countries regardless of the country of origin of the yarn or fabric used to make such articles.” (Emphasis added). Paragraph (b)(3), as amended in AGOA II, provides that apparel components must be manufactured in a beneficiary country. Interpreting AGOA II, section 3721 (b)(3), in conjunction with section 3721 (b)(3)(B)(i), the special rule for lesser developed countries is only available for apparel the components of which are manufactured in one or more lesser developed beneficiary countries.

Dolgencorp, through counsel, specifically argues that section 3721 (b)(3)(B)(i) of AGOA I makes “no mention at all” of the site of cutting of an apparel article assembled in a lesser developed beneficiary country and that Congress, when it intended cutting to be a relevant factor, noted cutting as a prerequisite for preferential treatment. Submission of Counsel, p. 5 (Sept. 10, 2002). It is Customs determination, as previously addressed, that subparagraph (b)(3)(B)(i) of AGOA I may only be properly interpreted when read as a part of paragraph (b)(3). A reading of section 3271 (3)(b) in its entirety confirms Customs interpretation that all apparel components must be manufactured in a designated lesser developed beneficiary country or countries.

HOLDING

The protest of Dolgencorp, Inc. is DENIED.

The men’s and boys’ knit shirts assembled in Lesotho from fabric, collars and cuffs formed in Taiwan are not entitled to preferential treatment pursuant to the African Growth and Opportunity Act and are classified in subheading 6110.20.2065, Harmonized Tariff Schedule of the United States Annotated (2001).

The General Column 1 Rate of Duty for subheading 6110.20.2065, HTSUSA (2001) is seventeen and eight-tenths (17.8) percent, ad valorem.

The textile quota category is 338.

The girls’ knit shirts assembled in Lesotho from fabric, collars and cuffs formed in Taiwan are not entitled to preferential treatment pursuant to the African Growth and Opportunity Act and are classified in subheading 6110.20.2075, Harmonized Tariff Schedule of the United States Annotated (2001).

The General Column 1 Rate of Duty for subheading 6110.20.2075, HTSUSA (2001) is seventeen and eight-tenths (17.8) percent, ad valorem.

The textile quota category is 339.

In accordance with Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, section 3 A. (11) (b), you are to mail this decision and the Protest (Customs Form 19) to the Protesant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with this decision must be accomplished prior to mailing the decision.

The Office of Regulations & Rulings will make this decision available to Customs personnel and to the public on the Customs Service Home Page on the World Wide Web, www.customs.gov, by means of the Freedom of Information Act and by other methods of public distribution sixty days from the date of this decision.

Sincerely,

Myles B. Harmon, Director
Commercial Rulings Division

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