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HQ 563080




October 26, 2004

CLA-02:RR:CR:SM 563080 NL

Category: CLASSIFICATION

Stephen M. Zelman, Esq.
888 Seventh Avenue, Suite 4500
New York, NY 10106

Re : Tariff Treatment of Imported Sample Garments as Prototypes under subheading 9817.85.01, HTSUS

Dear Mr. Zelman:

This is in reply to your letter dated July 19, 2004 in which you request a binding prospective ruling on the eligibility of certain prototype garments for classification under subheading 9817.85.01, Harmonized Tariff Schedule of the United States (HTSUS). A request for a ruling as to appraised value is being answered separately by this office under file No. 548566.

FACTS:

Tahari Ltd., the importer in the United States, employs designers to prepare sketches of new styles, together with detailed specifications as to fabric construction, fiber content and color. It forwards these sketches and specifications to an Italian company (the supplier) that has special expertise in making garments by hand.

For each suggested garment design the supplier constructs one industry-standard size 6 hand made garment. Each garment is sent to Tahari in the U.S. for evaluation. Tahari may decide to adopt it for commercial production, instruct the supplier to make specific modifications, or discard that design concept.

If a design prototype is accepted, Tahari’s U.S. specialists will prepare paper patterns and detailed specifications to be used in commercial production. These patterns and specifications are in turn sent to producers in Asia who are instructed to produce a single “counter sample,” which Tahari evaluates for proportion, color and shading, balance and acceptability of the fabric. Once a “counter sample” is accepted by Tahari, possibly following further adjustments by the Asian producer, Tahari instructs construction of a “pre-production sample”. This sample incorporates all specification revisions and is made with the actual fabric that has been purchased in bulk in anticipation of commercial production. The “pre-production sample” may be revised again by Tahari. Finally, the producer makes a “reference sample” at the beginning of the commercial run which is retained as the standard for the style.

ISSUE:

Are the pre-production garment models listed below eligible for classification and tariff treatment as prototypes under subheading 9817.85.01 when imported into the U.S. by Tahari, Ltd?
design and evaluation prototypes counter samples pre-production samples reference samples

LAW & ANALYSIS:

Pursuant to §1433 of the Product Development and Testing Act of 2000 (PDTA), enacted as part of the Tariff Suspension and Trade Act of 2000 (Pub. L. 106-476), articles classified as “prototypes” under the Act may be imported duty free. To provide for duty-free entry of prototypes, section 1433 of the PDTA inserted a new subheading 9817.85.01 in Subchapter XVII of Chapter 98, HTSUS, providing for:

Prototypes to be used exclusively for development, testing, product evaluation, or quality control purposes

The PDTA also added a new Note 6 in Subchapter XVII of Chapter 98. Note 6 defines prototypes for the purposes of HTSUS subheading 9817.85.01 and sets forth certain conditions and limitations governing classification in the subheading. This Note provides:

(a) For purposes of this subchapter, including heading 9817.85.01, the term “prototypes” means originals or models of articles that – (i) are either in the pre-production, production, or postproduction stage and are to be used exclusively for development, testing, product evaluation, or quality control purposes; and (ii) in the case of originals or models of articles that are either in the production or postproduction stage, are associated with a design change from current production (including a refinement, advancement, improvement, development, or quality control in either the product itself or the means for producing the product).

For purposes of clause (i), automobile racing for purse, prize, or commercial competition shall not be considered to be “development, testing, product evaluation, or quality control.”

(b)(i) Prototypes may be imported only in limited noncommercial quantities in accordance with industry practice. (ii) Except as provided for by the Secretary of the Treasury, prototypes or parts of prototypes may not be sold after importation into the United States or be incorporated into other products that are sold.

(c) Articles subject to quantitative restrictions, antidumping orders, or countervailing duty orders may not be classified as prototypes under this note. Articles subject to licensing requirements, or which must comply with laws, rules, or regulations administered by agencies other than the United Sates Customs Service before being imported, may be classified as prototypes if they comply with all applicable provisions of law and otherwise meet the definition of “prototypes” under paragraph (a).

Based on the information you have provided, the garments are articles in pre-production stages. The submission makes clear that they are imported for use by the importer exclusively for product development, testing, product evaluation, or quality control purposes. This office finds that the garments satisfy the conditions set forth for classification under HTSUS subheading 9817.85.10.

The quantities of the subject merchandise are as stated in the submission: single examples of particular garment designs. The submission indicates that these quantities are the normal “noncommercial quantity in accordance with industry practice” as required by subparagraph (b)(i) of Note 6 and that the entire quantity would be used for prototype purposes.

In further compliance with the conditions set forth for classification under HTSUS subheading 9817.85.10, the models will not be commercially sold without governmental approval in accordance with subparagraph (b)(ii) of Note 6.

It is noted that eligibility for prototype treatment also requires that the models not be subject to any of the restrictions in subparagraph (c) of Note 6, i.e. quantitative restrictions, antidumping or countervailing duty orders. The submission states that the garments are not subject to any of the enumerated restrictions.

HOLDING:

Based on the descriptions of the garments and the representations as to their intended uses, the articles are classifiable in subheading 9817.85.01, HTSUS as prototypes to be used exclusively for development, testing, product evaluation or quality control purposes.

A copy of this ruling letter should be attached to the entry documents filed at the time the goods are 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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