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HQ 966319




June 12, 2003

CLA-2 RR:CR:TE 966319 TMF

CATEGORY: CLASSIFICATION

TARIFF NO.: 9821.11.25

Mr. Matt Reynolds
Chief Operating Officer
Indigenous Designs Corporation
975 Corporate Center Parkway, #110
Santa Rosa, CA 95407

RE: Andean Trade Promotion and Drug Eradication Act; Cotton Hand-knitted Scarf; Handmade Apparel; 19 U.S.C. 3203(b)(3)(B)(iii); Subheading 9821.11.16, HTSUSA; Subheading 9821.11.25, HTSUSA; Sewn or Otherwise Assembled in One or More ATPDEA Beneficiary Countries

Dear Mr. Reynolds:

This is in response to your letter of February 12, 2003, requesting a binding ruling on the classification and eligibility of a cotton, hand-knitted scarf for preferential treatment under the Andean Trade Promotion and Drug Eradication Act (hereinafter referred to as “ATPDEA”). You submitted a sample to aid us in our determination.

FACTS:

Style #2009-PD62 is described by you as an “Organic Cotton Scarf” which is made in Peru of 100 percent cotton and manufactured in an “oatmeal” color. The manufacturer is MINKA S.R.L. You stated that the article will be imported through San Francisco, California.

Your website defines organic cotton as: “Cotton grown without any harmful pesticides herbicides or artificial fertilizers.” Your website also states that “Indigenous Designs only uses certified organic cotton.”

In a telephone conversation with a member of my staff, you indicated that the care and brand labels are made of nylon primarily in Peru, but sometimes the brand labels are made in the United States. You also stated that all of the labels are made of fabrics from wholly formed U.S. or Peruvian yarns. All of the labels are sewn onto the scarf in Peru with Peruvian-origin thread.

You also provided us with the total cost of the scarf but indicated that the raw material cost is unknown and that the cost of the labels are minor. Finally, you state that the scarf will be imported directly into the United States from Peru.

You submit that the scarf is eligible for preferential treatment under the ATPDEA in subheading 9821.11.16 of the Harmonized Tariff Schedule of the United States Annotated (HTSUSA).

ISSUE:

Whether the cotton, hand-knitted scarf is eligible for preferential treatment under the ATPDEA in subheading 9821.11.16, HTSUSA?

LAW AND ANALYSIS:

The Andean Trade Promotion and Drug Eradication Act (ATPDEA) provides certain specified trade benefits for Andean countries. These benefits include duty-free treatment to specified non-textile articles previously ineligible for preferential treatment under the Andean Trade Preference Act (ATPA), duty- and quota-free treatment of certain imports of tuna, and duty- and quota-free treatment for certain textile and apparel articles which meet the requirements set forth in Section 3103 of the ATPDEA (codified at 19 U.S.C. 3203(b)(3)). Beneficiary countries are designated by the President of the United States after having met the eligibility requirements of the ATPDEA. Presidential Proclamation 7616 of October 21, 2002, published in the Federal Register (67 Fed. Reg. 67284), proclaimed necessary changes to the Harmonized Tariff Schedule of the United States (HTSUS) to implement the ATPDEA and designated Bolivia, Colombia, Ecuador and Peru as ATPDEA beneficiary countries which had met the requirements of the ATPDEA relating to the implementation of certain customs procedures, drawn from Chapter 5 of the NAFTA, that allow the United States to verify the origin of products.

The provisions implementing the textile provisions of the ATPDEA in the HTSUS are contained, for the most part, in subchapter XXI, Chapter 98, HTSUS (one provision may be found in subheading 9802.00.80, HTSUS). The regulations pertinent to the textile provisions of the ATPDEA may be found at §§ 10.241 through 10.248 of the Customs Regulations (19 CFR 10.241 through 10.248).

Articles meeting the description in subheading 9821.11.16, HTSUSA, are eligible for preferential treatment under the ATPDEA. This subheading provides as follows:

Handloomed, handmade or folklore textile and apparel goods, under the terms of U.S. note 3(b) to this subchapter.

U.S. note 3(b) to subchapter XXI, Chapter 98, HTSUS, reads as follows:

For purposes of subheading 9821.11.16, goods entered under this provision must be certified, by a competent authority of a designated ATPDEA beneficiary country enumerated in U.S. note 1 to this subchapter, as eligible products of such country, in accordance with requirements established by the appropriate U.S. government authority.

Moreover, the ATPDEA legislation mandates the President consult with representatives of the ATPDEA beneficiary countries concerned for the purpose of identifying particular textile and apparel goods that are mutually agreed upon as being handloomed, handmade or folklore goods. See 19 U.S.C. §3203(b)(3)(C).

At this time, there is no bilateral agreement in place between Peru and the United States concerning handloomed, handmade or folklore articles. Thus, the scarf is not eligible for duty free treatment under subheading 9821.11.16, HTSUSA.

Although the scarf does not qualify for duty free treatment under 9821.11.16, HTSUSA, as you claim, it is eligible for duty free treatment under subheading 9821.11.25, HTSUSA. That provision requires the sewing or assembly of fabrics, fabric components or components knit to shape. Subheading 9821.11.25, HTSUSA, reads:

Apparel articles sewn or otherwise assembled in one or more such countries from fabrics or from fabric components formed or from components knit-to-shape in one or more such countries, from yarns wholly formed in the United States or in one or more such countries (including fabrics formed from yarns, if such fabrics are classifiable in heading 5602 or 5603 of the tariff schedule and are formed in one or more such countries); the foregoing apparel articles imported under the terms of U.S. note 3(d) and U.S. note 3(e) to this subchapter.

U.S. note 3(d) to subchapter XXI, Chapter 98, HTSUSA, provides that the duty-free treatment afforded to goods under subheading 9821.11.25 is limited to specific aggregate quantities for certain time periods as set forth therein. In addition, U.S. note 3(e) provides the following:

For purposes of subheading 9821.11.25, duty-free treatment shall be afforded to goods imported under such subheading whether or not the apparel articles are also made from any of the fabrics, fabric components formed or components knit-to-shape described in subheadings 9821.11.01 through 9821.11.10, inclusive, unless such articles are made exclusively from any of the fabrics, fabric components formed or components knit-to-shape described in such subheadings.

The term “wholly formed yarns” is defined in the regulations as follows:

“Wholly formed,” when used with reference to yarns, means that all of the production processes, starting with the extrusion of filament, strip, film, or sheet and including drawing to fully orient a filament or slitting a film or sheet into strip, or the spinning of all fibers into yarn, or both, and ending with a yarn or plied yarn, took place in the United States or in one or more ATPDEA beneficiary countries. Section 10.242 of the interim Customs Regulations (19 CFR §10.242).

Section 10.242 of the interim Customs Regulations (19 CFR §10.242) defines “Assembled or sewn or otherwise assembled in one or more ATPDEA beneficiary countries” as follows:

“Assembled” and “sewn or otherwise assembled” when used in the context of production of an apparel or other textile article in one or more ATPDEA beneficiary countries has reference to a joining together of two or more components that occurred in one or more ATPDEA beneficiary countries, whether or not a prior joining operation was performed on the article or any of its components in the United States.

The sample hand-knitted cotton scarf you submitted is knit to the shape of the final good and is a single component. However, Customs and Border Protection (“CBP”) has held that sewing a label onto an item is considered an acceptable assembly operation for purposes of subheading 9802, HTSUSA (Articles assembled abroad with components produced in the United States). See Headquarters Ruling Letter (HQ) 555565, dated May 14, 1990 (The operations of sewing beaded weights and a patch or label onto a towel are considered acceptable assembly operations pursuant to 19 CFR 10.16(a)).

Moreover, the labels sewn onto the scarf in this case are considered components that are subject to special rules. Section 10.243(c)(1)(i)(A) of the interim Customs Regulations (19 CFR §10.243(c)(1)(i)(A)) states that an article will not be ineligible for preferential treatment because it contains:

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, sewing thread, hooks and eyes, snaps, buttons, “bow buds,” decorative lace trim, elastic strips, zippers (including zipper tapes), and labels.

In this case, following HQ 555565 we find that sewing the labels onto the subject scarf is an acceptable assembly operation for purposes of subheading 9821.11.25, HTSUSA. Moreover, as the subject scarf is knit to shape in Peru from wholly formed Peruvian yarns and is subject to an assembly operation in Peru, the scarf satisfies the requirements of subheading 9821.11.25, HTSUSA, and is eligible for duty free treatment under the ATPDEA.

HOLDING:

Provided the subject scarf is manufactured as described above, it is eligible for duty free treatment under subheading 9821.11.25, HTSUSA, provided it is imported directly into the customs territory of the U.S. from an ATPDEA beneficiary country and it meets the remaining requirements of the relevant ATPDEA provisions.

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,

Myles B. Harmon, Director


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