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HQ W968453

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January 19, 2007

CLA-2 RR:CTF:TCM W968453 CMR

CATEGORY: CLASSIFICATION

TARIFF NO.:

Chandri Navarro-Bowman, Esq.
Hogan & Hartson LLP
Columbia Square
555 Thirteenth Street, N.W.
Washington, D.C. 20004

RE: Use of certain yarn in the assembly of garments otherwise eligible for preferential treatment under the CAFTA-DR

Dear Ms. Navarro-Bowman:

This is in response to your request of September 22, 2006, on behalf of your client, Coats North America (“Coats”), for a ruling by Customs and Border Protection (CBP) on the effect of using certain yarns or threads to assemble garments in the territory of parties to the Dominican Republic – Central America – United States Free Trade Agreement (“CAFTA-DR”).

According the your submission, the garments to be assembled in the territories of CAFTA-DR parties would be eligible for preferential treatment under the CAFTA-DR provided the use of the yarns or threads described in your submission does not preclude such eligibility for preferential treatment.

At your request, a meeting was held on December 12, 2006 with CBP personnel to discuss your arguments. A supplemental submission, dated December 22, 2006, to further address issues raised at that meeting was subsequently received by CBP. We have taken into consideration all of the arguments and material presented by you in making our decision.

FACTS:

Coats imports single ply yarn from Mexico or another non-CAFTA country into a CAFTA country. In that CAFTA country, the yarn will be further processed as follows:

Scenario 1

[The single ply yarn] will be dyed to shade according to [the] customers’ specifications as required; [The single ply yarn] will have a sewing thread lubricant applied, which after application will on average comprise 7% by weight of the finished product. The types and amount of lubricants used by Coats on this product are typical of those used in the industry to dress sewing thread; [The single ply yarn] will be rewound from a package onto supports such as cones or tubes weighing not more than 1000 grams and, These supports will then be packaged for sale to CAFTA garment producers.

Scenario 2

[The single ply yarn] will be run through a clearing process to reduce fault levels; [The single ply yarn] will be subjected to a plying process which involves combining together two or more single yarns to form plied yarns. In this process multiple spools of single yarn are combined and wound onto a single spool consisting of multiple plies of yarn [The yarns] will be twisted in a “Z” twist. This process involves taking either a single ply or a spool that has been combined into multiple plies [as described in “b” above] and inserting a twist to the ply/plies in the “Z” direction. The product would come off the twisting equipment as either a dye-tube prepared for dyeing and finishing or on a support made ready for the final winding and/or lubrication process; [The yarns – single ply with a “Z” twist or multiple plies with a “Z” twist] will be dyed to shade per [the] customers’ specifications as required; [The yarns – single ply with a “Z” twist or multiple plies with a “Z” twist] will have a sewing thread lubricant applied, which after application will on average comprise 7% by weight of the finished product. The types and amount of lubricants used by Coats on this product are typical of those used in the industry to dress sewing thread; [The yarns – single ply with a “Z” twist or multiple plies with a “Z” twist] will be rewound from a package onto supports such as cones or tubes weighing not more than 1000 grams; and, These supports will then be packaged for sale to CAFTA garment producers.

In order to qualify as originating goods under General Note (GN) 29(n) of the CAFTA-DR, with certain identified exceptions, textile apparel of chapters 61 and 62 are subject to, among other things, a chapter rule specific to sewing thread.

Men’s and women’s woven boxers, pajamas, and nightwear; brassieres of subheading 6212.10, and certain girls’ woven dresses are excepted from the sewing thread rule set forth in General Note 29, Chapter 62, Rule 4. Chapters 61 and 62 of GN 29(n) each contain a rule 4 For both Chapters 61 and 62, the rule is numbered rule 4. which requires that goods of the chapter, with the exception of certain goods of Chapter 62, containing sewing thread of headings 5204, 5401 or 5508, are considered originating goods only if the sewing thread contained in the goods is “both formed and finished in the territory of one or more of the parties to the [CAFTA-DR].”

You contend that using yarn or thread processed as described under either scenario above to assemble an otherwise qualifying CAFTA-DR garment will not disqualify such garment from being considered originating for purposes of preferential treatment under the CAFTA-DR.

ISSUE:

Will the use of yarn or thread, processed as described above, in the assembly of garments otherwise eligible for preferential treatment under the CAFTA-DR preclude such garments from consideration as originating under the CAFTA-DR?

LAW AND ANALYSIS:

The Dominican Republic--Central America--United States Free Trade Agreement (“CAFTA-DR” or “Agreement”) was signed by the governments of Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and the United States on August 5, 2004. The CAFTA-DR was approved by the U.S. Congress with the enactment on August 2, 2005, of the Dominican Republic-Central America-United States Free Trade Agreement Implementation Act (the “Act”), Pub. L. 109-53, 119 Stat. 462 (19 U.S.C. 4001 et seq.).

GN 29 of the Harmonized Tariff Schedule of the United States (HTSUS) implements the CAFTA-DR. GN 29(b) sets forth the criteria for determining whether a good (other than agricultural goods provided for in GN 29(a)(ii)) is an originating good for purposes of the CAFTA-DR. GN 29(b) states:

For the purposes of this note, subject to the provisions of subdivisions (c), (d), (m) and (n) thereof, a good imported into the customs territory of the United States is eligible for treatment as an originating good under the terms of this note if – (i) the good is a good wholly obtained or produced entirely in the territory of one or more of the parties to the Agreement;

(ii) the good was produced entirely in the territory of one or more of the parties to the Agreement, and –
each of the nonoriginating materials used in the production of the good undergoes an applicable change in tariff classification specified in subdivision (n) of this note; or
the good otherwise satisfies any applicable regional value content or other requirements specified in subdivision (n) of this note;
and the good satisfies all other applicable requirements of this note; or

(iii) the good was produced entirely in the territory of one or more of the parties to the Agreement exclusively from originating materials.

It is apparent from your submission that the garments which would otherwise be eligible for preferential treatment under the CAFTA are subject to that eligibility under GN 29(b)(ii)(A) which requires consideration of GN 29(n)/Ch. 61/Rule 4 and GN 29(n)/Ch. 62/Rule 4.

As already stated above, Rule 4, in the case of both Chapters 61 and 62, requires that a good of the chapter “containing sewing thread of headings 5204, 5401 or 5508, shall be considered originating only if such sewing thread is both formed and finished in the territory of one or more of the parties to the Agreement.”

“Sewing thread” of headings 5204, 5401 and 5508 is defined by Note 5, Section XI, HTSUS, as follows:

For the purposes of headings 5204, 5401 and 5508, the expression “sewing thread” means multiple (folded) or cabled yarn:

Put up on supports (for example, reels, tubes) of a weight (including support) not exceeding 1,000 g;

Dressed for use as sewing thread; and

With a final “Z” twist.

In the first scenario presented by you, the single ply yarn is dyed, lubricated with a dressing “typical of those used in the industry to dress sewing thread,” and put up on supports weighing not more than 1000 grams. However, the single ply yarn is not classifiable as “sewing thread” of 5204, 5401 or 5508 (assuming it is of cotton or of man-made fibers) because it does not meet the definition of “sewing thread” in Note 5, Section XI. It is not a multiple (folded) or cabled yarn nor, based on the information provided, does it have a “Z” twist. As the single ply yarn is not “sewing thread” of 5204, 5401 or 5508, its use to assemble garments otherwise eligible for preferential treatment under the CAFTA-DR will not preclude such garments from being considered originating for purposes of the CAFTA-DR. See New York Ruling letter (NY) M84172 of July 13, 2006, wherein Customs and Border Protection (CBP) held that a garment, assembled with yarn of Indian, Chinese or United States origin wherein the yarn was finished in India, China, the United States, Canada, or a CAFTA country, qualified for preferential treatment under the CAFTA-DR because GN 29(n)/Ch. 61/Rule 4 did not apply. The yarn in NY M84172 did not meet the definition of sewing thread set forth in Note 5, Section XI, HTSUS, as it was a single multifilament yarn.

In the second scenario described above, the single ply yarn imported from Mexico or another non-CAFTA country is processed in a CAFTA country so as to meet the definition of sewing thread set forth in Note 5, Section XI, HTSUS. In other words, the yarn is plied to create a multiple (folded) or cabled yarn with a “Z” twist, dyed, lubricated with a dressing “typical of those used in the industry to dress sewing thread,” and put up on supports weighing not more than 1000 grams. You assert that because the single ply yarn imported into the CAFTA country becomes classifiable as sewing thread according the requirements of Note 5, Section XI, HTSUS, as a result of processing in the CAFTA country, the resultant “sewing thread” is “formed and finished” in the territory of the CAFTA country.

As you note, “formed” is not defined in the CAFTA-DR. You argue that because “wholly formed” is used in General Note 29(n)/Ch. 63/Rule 2 which states that goods of Chapter 63 containing sewing thread of headings 5204, 5401 or 5508 originate only if the sewing thread is “wholly formed” in one or more of the CAFTA countries, then “formed” must be something lesser than “wholly formed.” You state, “one must presume that the Congress and the CAFTA negotiators knew that different phrases, having different meanings, were being used on purpose.” Your explanation of the use of the different terms is that the “CAFTA negotiators and the Congress must have meant that ‘forming’ thread . . . means making yarn into thread by means of those processes which make a yarn a sewing thread: cabling, Z twisting, dressing for use . . ., and putting up on supports for use as sewing thread . . . .” You proffer an interpretation of the difference between “wholly formed” yarn and “formed” thread for purposes of the Caribbean Basin Trade Partnership Act (CBTPA) explaining that the deletion of the reference to “thread” in the definition of “wholly formed” “was to allow thread ‘formed’ in the U.S. not to have to be spun or extruded in the U.S.” With regard to your interpretation of the amendment to the definition of “wholly formed” in the CBP regulations implementing the provisions of the CBTPA, we would strongly advise you to seek a ruling as to whether your interpretation is valid.

“Wholly formed” is not defined for purposes of Rule 4 of GN 29/Ch. 61 or 62, but is defined at GN 29(d)(iv)(2) with regard to “thread wholly formed in the United States” for purposes of subdivision (d) of GN 29. Therein it is defined as follows:

[A] thread is wholly formed in the United States if all the production processes, starting with the extrusion of filaments, strips, film or sheet, and including slitting a film or sheet into strip, or the spinning of all fibers into thread, or both, and ending with thread, took place in the United States.

However, yarns “wholly formed in the territory of a party of the Agreement” is defined at GN 29(d)(ii)(B) for purposes of subdivision (d) of GN 29 as:

[A] yarn is wholly formed in the territory of a party to the Agreement if all of the production processes and finishing operations, starting with the extrusion of filaments, strips, film or sheet, and including slitting a film or sheet into strip, or the spinning of all fibers into yarn, or both, and ending with a finished yarn or plied yarn, took place in the territory of a party to the Agreement.

In comparing the terms at issue, CBP would look to the entire phrase “formed and finished” (which is also not defined in the CAFTA-DR) and compare it to the term “wholly formed.”

“Form” is defined, in part, in Webster’s Third New International Dictionary (1993), at 893, as: “1a. to give form or shape to:. 2.a. to give a particular shape to: shape, mold, or fashion into a certain state or condition or after a particular model." “Wholly” is defined in Webster’s Third New International Dictionary (1993), at 2612, as: “1. To the full or entire extent: without limitation or diminution or reduction : ALTOGETHER, COMPLETELY, TOTALLY. 2. to the exclusion of other things: solely.” Similar definitions of both terms may be found in various lexicographic sources.

“Finishing” is defined in Webster’s Third New International Dictionary (1993), at 854, as: “the act or process of completing: the final work upon or ornamentation of a thing. specif : the processing applied to cloth after it is taken from the loom." In the Dictionary of Fiber & Textile Technology (KoSa 1999), at 86, "finishing" is defined as: "All the processes through which fabric is passed after bleaching, dyeing, or printing in preparation for the market or use. Finishing includes such operations as heat-setting, napping, embossing, pressing, calendering, and the application of chemicals that change the character of the fabric. The term finishing is also sometimes used to refer collectively to all processing operations above, including bleaching, dyeing, printing, etc." In Fairchild’s Dictionary of Textiles (Second printing, 1970), at 230, "finishing" is defined as: "All processes through which fabric passes after being taken from [the] loom. This covers bleaching, dyeing, sizing, and processes which give the desired surface effect, e.g., napping, calendering, embossing, etc. ...”. A CBP review of the above definitions reveals that the definition of "finishing" found in the cited technical sources is consistent with the common meaning of the term as defined in general lexicographic sources. Thus, "finishing" in regard to fabric has been understood in the textile industry, as reflected by the various definitions cited above, as referring to processes which occur to fabric after it has been formed. Therefore, we believe that “finishing” in regard to yarn would also refer to processes which occur after the yarn has been formed.

You would distinguish “formed and finished” and “wholly formed” based on the starting point of the formation process. You argue “wholly formed” begins from the starting point of yarn formation, but “formed” may begin after yarns have been formed and may begin at the plying process with regard to thread “formed” in the context of the CAFTA-DR. If CBP believed that for purposes of the CAFTA-DR a distinction was intended, we would see it as not drawing a distinction between the starting point in yarn formation, but in the ending point. Yarn formation begins with the extrusion of filament or the spinning of fibers to form a yarn. Thread is a form of yarn and so it begins its formation in the same way.

You argue that “[c]ase law has uniformly held that ‘a change of legislative language must be presumed to evidence an intent on the part of the Congress to effect a change of meaning.’ See United States v. Post Fish Co., 13 Ct. Cust. Appls. 155, T.D. 41022.” CBP agrees that the use of differently terminology in a rule generally means a difference in intended meaning. However, in Stroheim & Romann v United States, 13 Ct. Cust. App. 489, 492-93 (1926), the Customs Court stated:

In the enactment of a tariff law, if Congress uses different language from that used by it in previous enactments, while treating the same subject matter, it is the duty of those who are called upon to determine the meaning of its provisions to proceed primarily, upon the theory that the change was not made by accident, but that it was intentional, and that by making such a change in expression Congress used the term in a different sense from that in which the former expression was used. The same rule of construction likewise is often applied to changes in arrangement, or consolidation of paragraphs. This rule is, however, not absolute, and does not compel the conclusion that a change in meaning was meant. It merely indicates such intention. Ofttimes the changed expression is wholly different from its predecessor, and yet the fact that they both have the same meaning, and were so intended by Congress, is too plain to admit of doubt. The rule applies where its application is not barred by more convincing considerations, and does not apply where it would lead to incongruity and confusion. [Emphasis in original].

See also Starkey Laboratories v. United States, 24 C.I.T. 504, 508, 110 F. Supp. 2d 945, 949 (2000) citing Stroheim & Romann; and, Andrews & Co. v. United States, 8 Ct. Cust. App. 68 (1917) citing section 401 of Sutherland on Statutory Construction which states: * * * Whether the change be by omission, addition, or substitution of words, the principle applies. Where changes have been introduced by amendment it is not to be assumed that they are without design. Every change of phraseology, however, does not indicate a change of substance and intent. The change may be made to express more clearly the same intent or merely to improve the diction. The change is often found to be the result of carelessness or slovenliness of the draftsman. The changes of phraseology many (sic) result from the act being the production of many minds, and from being compiled from different sources. Hence, the presumption of a change of intention from a change of language is of no great weight, and must mainly depend on the intrinsic difference as resulting from the modification. A mere change in the words of a revision will not be deemed a change in the law unless it appears that such was the intention. The intent to change the law must be evident and certain; there must be such substantial change as to import such intention, or it must otherwise be manifest from other guides of interpretation, or the difference of phraseology will not be deemed expressive of a different intention.

Although in this case we are not dealing with an amendment of a law but differences in phrasing within the language implementing a Free Trade Agreement, we believe that the explanation of changes in phraseology contained in section 402 of Sutherland on Statutory Construction applies in this case and “formed and finished” and “wholly formed” are not to be read as conveying different meanings. Truly many minds worked on the drafting of the CAFTA-DR and the finalization of the Agreement language.

The language of Rule 4 at issue here is “formed and finished in the territory of one or more of the parties to the Agreement.” The language states clearly that not only must the formation of the sewing thread occur in the Parties, but also the finishing of the sewing thread. Although the equivalent rule in GN 29(n)/Ch. 63/Rule 2 uses the phraseology “wholly formed in the territory of one or more of the parties to the Agreement,” CBP believes that in this case “wholly formed” is intended to mean “formed and finished” as used in Rule 4. This is based on a reading of GN 29 as a whole and in consideration of the guidance of the Court in Stroheim & Romann, cited above, that the general rule that the use of different language must lead to a different meaning “does not apply where it would lead to incongruity and confusion.”

As defined in GN 29(d)(ii)(B), a yarn is “wholly formed in the territory of a party to the Agreement” if all of the production processes and finishing operations took place in the territory of a party to the Agreement. In other words, a yarn is “wholly formed” if it is “formed and finished” in the territory of a party. Although the definition of “wholly formed yarn” is for purposes of subdivision (d) of GN 29, GN 29 must be read as a whole and to ignore this definition and apply a different meaning in GN 29(n) would lead to incongruity and confusion. The definition of thread “wholly formed in the United States” in GN 29(d)(iv)(2) is specific to formation of the thread in the United States and, no doubt, was drafted to allow finishing of thread within the other CAFTA-DR parties. The language of Rule 4 is not limited to a single CAFTA-DR party but includes processing in one or all of the parties. Therefore, we do not believe the definition of thread “wholly formed in the United States” in GN 29(d)(iv)(2) precludes our conclusion that for purposes of GN 29, with regard to GN 29(n)/Ch. 61 and Ch. 62/Rule 4 and GN 29(n)/Ch. 63/Rule 2, sewing thread “formed and finished” or “wholly formed” requires the complete formation and finishing of the sewing thread to occur in the territory of one or more of the parties to the Agreement.

Based upon the analysis set forth above, the use of sewing thread processed as described in scenario 2 would preclude otherwise qualifying garments from being originating garments for purposes of receiving preferential treatment under the CAFTA-DR.

HOLDING:

The use of yarn processed as described in scenario 1 above in the assembly of garments which otherwise qualify for preferential treatment under the CAFTA-DR will not preclude such garments from being considered originating for purposes of the CAFTA-DR. However, the use of yarn processed as described in scenario 2 above in the assembly of garments which otherwise qualify for preferential treatment under the CAFTA-DR will preclude such garments from being considered originating for purposes of the CAFTA-DR.

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 CBP officer handling the transaction.

Sincerely,

Gail A. Hamill, Chief
Tariff Classification and Marking Branch

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