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HQ 966643




October 23, 2003

CLA-2 RR:CR:TE 966643 SG

CATEGORY: CLASSIFICATION

TARIFF NO.: 9819.11.12

Ms. Rita Pitts, Classification Specialist Dillard's, Inc.
1600 Cantrell
Little Rock, Arkansas 72201

RE: African Growth and Opportunity Act; Boys Knit Pullover; Lesser Developed Country; Madagascar; Knit-to-Shape Component or Fabric

Dear Ms. Pitts:

This is in response to your letter dated June 16, 2003 and supplemental letter of July 25, 2003, requesting a binding ruling on the eligibility of a boys' knit pullover garment for preferential treatment under the African Growth and Opportunity Act (AGOA).

FACTS:

You have submitted a sample of a boys' knit pullover garment. It features a round rib knit crew neckline; long, hemmed sleeves; rib knit inserts on the sides and the under-sleeves; blue and white rack stitch outer-sleeve inserts; and a straight hemmed bottom. The front and back body and the major portions of the sleeves are composed of a 100 percent cotton, double knit fabric that measures 12 stitches per two centimeters in the horizontal direction. The side inserts and the under-sleeve inserts are constructed from 100 percent cotton, 3x1 rib knit fabric that measures 13 inches per two centimeters counted in the horizontal direction. The rack stitch outer-sleeve inserts are 100 percent cotton and measures 7 stitches per two centimeters. The collar is composed of a 1x1 rib fabric.

You advise that the double knit front and back panels, the rib knit side and under-sleeve inserts, and the rib knit collar band are cut and sewn in Madagascar from bolts of fabric knit in China. The blue and white rack stitch outer-sleeve inserts are knit in China on a flat knitting machine in connected strips in a continuous piece.

A sample length containing five rack stitch strips, each four inches in width, was submitted. You state that the blue and white rack knit strips are knit in China in a continuous length of 25 inches (measured horizontally across the machine) and four inches wide (measured vertically). Red waste yarns link each strip. The red waste yarn (linking thread) is then cut in China, allowing separation of the individual strips, which are bundled for shipment to Madagascar. At the factory in Madagascar, the knit strips are cut to size (length and width) based upon a paper pattern and the sleeve length specifications for each size. The garment is sewn in Madagascar. Photocopies of pictures showing the cutting process in Madagascar were submitted. Also submitted was a single knit strip illustrating the condition of the strips as they are bundled and sent to Madagascar for cutting and assembly.

ISSUE:

Whether the pullover is eligible for preferential tariff and quota treatment under the African Growth and Opportunity Act (AGOA)?

LAW AND ANALYSIS:

The African Growth and Opportunity Act (AGOA) provides certain specified trade benefits for countries of sub-Saharan Africa. These benefits include duty-free treatment for certain non-textile articles previously excluded from preferential treatment under the Generalized System of Preferences, and duty- and quota-free treatment for certain textile and apparel articles which meet the requirements set forth in Section 112 of the Act (codified at 19 U.S.C. 3721). Beneficiary countries are designated by the President of the United States after having met eligibility requirements set forth in the AGOA. Once designated, a beneficiary country is entitled to the duty-free treatment for the designated non-textile articles determined not to be import-sensitive in the context of imports from the beneficiary sub-Saharan Africa countries. A second designation by the United States Trade Representative (USTR), published in the Federal Register, that a beneficiary country has taken the measures required by the Act to prevent unlawful transshipment and has adopted an effective visa system, is necessary before a beneficiary country may enjoy the duty- and quota-free benefits extended to textile and apparel articles under the Act. Madagascar was designated a beneficiary country by Presidential Proclamation 7350, published in the Federal Register on October 4, 2000 (65 Fed. Reg. 59321). It was determined to be eligible for textile benefits under the AGOA by the USTR effective March 6, 2001 (66 Fed. Reg. 14242). Madagascar is also designated as a lesser developed beneficiary country as provided for in U.S. Note 2(d), Subchapter XIX, HTSUSA. See also, Presidential Proclamation 7350, supra.

The provisions implementing the textile provisions of the AGOA in the HTSUS are contained, for the most part, in subchapter XIX, Chapter 98, HTSUS (one provision may be found in subheading 9802.00.80, HTSUS). The regulations pertinent to the textile
provisions of the AGOA may be found at ยงยง10.211 through 10.217 of the Customs Regulations (19 CFR 10.211 through 10.217).

Apparel articles wholly assembled in a sub-Saharan African lesser developed beneficiary country (LDC) and directly imported into the U.S. are entitled to duty free status, subject to certain restrictions. Such articles are entered under subheading 9819.11.12, HTSUS, which provides as follows:

Apparel articles wholly assembled, or knit-to-shape and wholly assembled, or both, in one or more such lesser developed countries enumerated in U.S. note 2(d) to this subchapter, subject to the provisions of U.S. note 2 to this subchapter, regardless of the country of origin of the fabric or the yarn used to make such articles, if entered during the period beginning on the date announced in a Federal Register notice issued by the United States Trade Representative and continuing through September 30, 2004, inclusive.

U.S. Note 2(d) lists Madagascar as a LDC. U.S. Note 2, Subchapter XIX, Chapter 98, HTSUS, provides for a quantitative restriction for apparel articles classified in subheading 9819.11.12, HTSUS.

The term "wholly assembled in", when used with reference to a textile or apparel article in the context of one or more beneficiary countries or one or more lesser developed beneficiary countries, means:

[A]ll 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. See 19 C.F.R. 10.212.

The term "Knit-to-shape components", when used with reference to textile components, means:

Components that are knitted or crocheted from a yarn directly to a specific shape containing a self-start edge. Minor cutting or trimming will not affect the determination of whether a component is "knit-to-shape." Id.

To determine if the rack stitch material you submitted may be used in apparel that will qualify for preferential treatment under the AGOA, we must first decide whether the sample strip inserted into the pullover's sleeves is foreign fabric or a foreign formed textile component (knit to shape or cut to shape).

In the instant case, the foreign origin fabric is imported into Madagascar for the body, collar, and cuffs. The body fabric arrives in rolls of unmarked fabric and is subsequently
cut to shape to form various body components (described as front, back, and sleeves). The strips used as inserts in the sleeves are knit in China in a continuous length of 25 inches (measured horizontally across the machine) and four inches wide (measured vertically). Each strip separated by red waste yarns. The red waste yarn (linking thread) is cut in China, allowing separation of the individual strips. Each of the four-inch wide strips used in the pullover has four unfinished edges, none of which is self-starting. At the factory in Madagascar, the knit strips are cut to size (length and width) based upon a paper pattern and the sleeve length specifications for each size. We note that the strip insert actually used on the sample garment is two inches wide and approximately twenty inches long. Further, without the additional cutting by application of a pattern, the subject strips, in their condition as imported into Madagascar, are nothing more than pieces of knit fabric. Until laid on a table, cut to the shape and size actually used in the pullover, it is not suitable as a garment component. We believe that the cutting process, which involves cutting on all sides of the strip, and which occurs in Madagascar, confers the identity of the component. Accordingly, the strips as imported are not knit-to-shape components, as the strips as used in the pullover are not knitted directly into the specific size and shape used in the pullover, and do not contain a self-start, finished edge.

It is our view that in their condition as imported the subject strips are not knit-to shape components of the pullover, and that it is the cutting performed in Madagascar that transforms the strips into components of the pullover. The blue and white rack stitch strips are therefore foreign fabric when imported into Madagascar.

Subheading 9819.11.12, HTSUS, specifically provides that the country of origin of the fabric is not a consideration. Since the country of origin of the fabric is not relevant to the receipt of AGOA lesser developed beneficiary country preferential tariff and quota treatment, provided the other requirements of the Act are met, the fact that the fabric originates in China does not have an affect on benefit eligibility.

The pullovers meet the requirements of subheading 9819.11.12, HTSUS, and are, therefore, eligible to receive the preferential tariff and quota benefits provided for by the African Growth and Opportunity Act.

HOLDING

The boys' knit pullovers are eligible to receive the lesser-developed beneficiary country preferential tariff and quota benefits of the African Growth and Opportunity Act. They are classified in subheading 9819.11.12, Harmonized Tariff Schedule of the United

States. They should be entered under Preference Group E and Visa Group 5. The Column 1 Special Rate of Duty is FREE.

Sincerely,

Myles B. Harmon, Director

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