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HQ 558896 March 10, 1995 CLA-2 CO:R:C:S 558896 MLR CATEGORY: Classification TARIFF NO.: 9802.00.90 Mr. Philip Freeman Cain Customs Brokers Progreso International Bridge P.O. Box 10 Progreso, TX 78579 RE: Applicability of subheading 9802.00.90, HTSUS, to boys' athletic shirts; sewing; assembly; NAFTA; Article 509; polyester; country of origin marking Dear Mr. Freeman: This is in reference to your letter of October 28, 1994, requesting a ruling on behalf of Indiana Knitwear Corporation ("Indiana"), regarding the applicability of subheading 9802.00.90, Harmonized Tariff Schedule of the United States (HTSUS), to certain boys' athletic shirts which will be assembled in Mexico. You also inquire whether these shirts may be considered originating goods under the North American Free Trade Agreement (NAFTA), and how the shirts should be marked. Samples of a complete shirt and the components of a shirt were submitted with your request. FACTS: The garment under consideration is a boy's 100 percent polyester mesh (#18 cloth) woven Shimmel length shirt with a polyester rib knit collar and serged short sleeves. The shirt may have a number screen printed on the front, which is performed in the U.S. Two styles are proposed for assembly in Mexico: (1) "Sears style #4-3472" will have a serged bottom; and (2) "Sears style #3-3396" will have a hemmed bottom. The record contains manufacturer's affidavits which state that the sewing thread, and labels are made in the U.S., and that the 100 percent polyester material is "made in the U.S. of USA materials." The material will be cut into shirt components in the U.S. and sent to Mexico. The operations in Mexico include serging the edges of the sleeves, sewing the front and back pieces together at the shoulders, pre-stitching the crew neck collar and sewing it and labels to the neckline, sewing the sleeves to the shirt armholes, sewing the side seams, and either hemming or serging the bottom of the shirt. Serging is an over-edge stitch formation using a 3-thread serge format that is used to sew 2 plies together. One label contains the fiber content information and the marking "Assembled in Mexico From Material of U.S. Origin." The other label states "Max Active Worldwide." You state that New York Ruling Letter (NYRL) 803926 dated December 6, 1994, classified the shirts under subheading 6110.30.3050, HTSUS. In that ruling, reference is made to a telephone conversation in which you stated that the polyester yarn and fabric used to make the shirts originated in the U.S. ISSUES: I. Whether the boys' athletic shirts will qualify for the duty exemption available under subheading 9802.00.90, HTSUS, when returned to the U.S. from Mexico. II. Whether the boys' athletic shirts are considered originating goods under the NAFTA. III. Whether the boys' athletic shirts may be marked "Assembled in Mexico From Material of U.S. Origin." LAW AND ANALYSIS: I. Subheading 9802.00.90, HTSUS Appendix 2.4 of Annex 300-B of the NAFTA, provides that: [o]n January 1, 1994, the U.S. shall eliminate customs duties on textile and apparel goods that are assembled in Mexico from fabrics wholly formed and cut in the United States and exported from and reimported into the United States under: (a) U.S. tariff item 9802.00.80.10; or (b) Chapter 61, 62, or 63 if, after such assembly, those goods that would have qualified for treatment under 9802.00.80.10 have been subject to bleaching, garment dyeing, stone-washing, acid-washing or perma-pressing. Thereafter, the U.S. shall not adopt or maintain any customs duty on textile and apparel goods of Mexico that satisfy the requirements of subparagraph (a) or (b) or the requirements of any successor provision to U.S. tariff item 9802.00.80.10. Consequently, subheading 9802.00.90, HTSUS, was created to provide for the duty-free entry of: Textile and apparel goods, assembled in Mexico in which all fabric components were wholly formed and cut in the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape or otherwise, and have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process; provided that goods classifiable in chapters 61, 62, or 63 may have been subject to bleaching, garment dyeing, stone-washing, acid-washing or perma-pressing after assembly as provided for herein. In view of the fact that the enactment of subheading 9802.00.90, HTSUS, specifically was intended to extend duty-free and quota-free status to all goods assembled in Mexico, which previously were eligible for entry under the Special Regime Program administered under U.S. tariff item 9802.00.8010, HTSUS, it is Customs view that all of the policy directives implementing this program should be considered applicable in the administration of subheading 9802.00.90, HTSUS. Therefore, the shirts assembled in Mexico may be entered free of duty, as long as, with the exception of findings, trimmings, and elastic strips not exceeding 25 percent of the total cost of all components, all fabric components contained therein are U.S.-formed (i.e., the fabric is woven or milled in the U.S.), this fabric is cut in the U.S., and the other conditions of the statute are satisfied. In this case, a manufacturer's affidavit has been submitted as proof that the sewing thread and labels are made in the U.S., and that the polyester material is made in the U.S. from U.S. materials. Furthermore, the polyester material will be cut into shirt components in the U.S., and these components are joined (i.e., sewn) together in a manner acceptable under subheading 9802.00.80, HTSUS. See 19 CFR 10.16(a) (sewing is a proper assembly operation). Consequently, the shirts will qualify for duty-free treatment under subheading 9802.00.90, HTSUS. II. NAFTA Originating Goods In regard to your question whether the shirts may be considered NAFTA originating goods, General Note 12, HTSUS, incorporates Article 401 of the NAFTA, into the HTSUS. Note 12(b) provides in pertinent part: For the purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as "goods originating in the territory of a NAFTA party" only if-- (I) they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or (ii) they have been transformed in the territory of Canada, Mexico and/or the United States so that-- (A) except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivisions (r),(s) and (t) of this note or the rules set forth therein, or, (B) the goods otherwise satisfy the applicable requirements of subdivisions (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note; or (iii) they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials.... First, it is not clear whether the shirts are wholly obtained or produced entirely in the territory of Canada, Mexico and/or the U.S. Therefore, we turn to the rule applicable to goods of subheading 6110.30.30, HTSUS, which is provided for in General Note 12(t)/61.35. It provides: [a] change to headings 6109 through 6111 from any other chapter, except from ... chapter 54, or headings 5508 through 5516 or 6001 through 6002.... While we do not have the precise classification of the fabric, the fabric from which the sample shirt is constructed is knit with filament yarns. Chapter 54, HTSUS, includes within its coverage filament yarns. Since a change from chapter 54 is excepted from the tariff shift rule applicable to the subject goods, in order for Customs to determine if those goods are originating goods for NAFTA duty preference purposes, as we stated in a telephone conversation to you on March 1, 1995, we will require the following information: (1) where the yarns were produced; and (2) where the fabric was formed. A general statement that the shirts are made of U.S. materials, as you provided in NYRL 803926, is not sufficient for us to determine if the shirts are eligible for NAFTA duty preference treatment. III. Country of Origin Marking In regard to country of origin marking, since the good at issue is subjected to processing in the territories of NAFTA parties, it will be subject to the country of origin marking rules set out in the interim amendments to the Customs Regulations (19 CFR Part 102). The interim amendments to the Customs Regulations were published as T.D. 94-4 (59 Fed. Reg. 109, January 3, 1994) with corrections (59 Fed. Reg. 5082, February 3, 1994) and T.D. 94-1 (59 Fed. Reg. 69460, December 30, 1993). These interim amendments took effect on January 1, 1994, to coincide with the effective date of the NAFTA. Section 102.11 sets forth the general rules of origin. Section 102.11(a) states that the country of origin of a good is the country in which: (1) The good is wholly obtained or produced; (2) The good is produced exclusively from domestic materials; or (3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied. "Domestic material" is defined in section 102.1(d) as a material whose country of origin as determined under these rules is the same country as the country is which the good is produced. "Foreign material" is defined in section 102.1(e) as a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced. Accordingly, since the shirts are not wholly obtained or produced in Mexico, or produced exclusively from domestic materials in Mexico (since the fabric was made in the U.S.), we must determine whether under section 102.11(a)(3) each foreign material incorporated in the shirt undergoes an applicable change in tariff classification set out in section 102.20 in Mexico. According to NYRL 803926, the shirt is classified under subheading 6110.30.3050, HTSUS. Section 102.20(k) provides the applicable tariff shift rule for this subheading as follows: "A change to heading 6110 from any other chapter, or...." The foreign materials incorporated in the shirt are the cut 100 percent polyester components of the shirt, sewing thread and labels. While the classification of these items has not been provided, it appears that the cut components of the shirt are classifiable under subheading 6117.90.90, HTSUS, as "other made up clothing accessories, knitted or crocheted; knitted or crocheted parts of garments or of clothing accessories: parts: other." Accordingly, the cut components of the shirt do not meet the required tariff shift. Section 102.20(k), section XI (Chapters 50 through 63), contains Notes applicable to the various tariff shift requirements contained therein. Note 3 provides: [f]or the purposes of section 102.11(b) of the General Rules ..., where a good classifiable in Chapters 61 through 63 does not meet the tariff shift and/or other requirements of the heading or subheading under which it is classifiable, the country of origin of that good shall be the single country where the component which determines the classification of that good was cut or formed (e.g. knit to shape). The fabric is cut in the U.S. However, section 102.14 states that no good, last advanced in value or improved in condition outside the U.S. has U.S. origin, and if under any provision of part 102 it is determined that a good has U.S. origin, that determined will be disregarded and the country of origin of the goods will be the last foreign country in which the good was advanced in value or improved in condition. Accordingly, pursuant to 19 CFR 134.43(3)(1), where the country of origin of an article is determined in accordance with 19 CFR 102.14, the good may be marked "Assembled in (name of foreign country) from U.S. components." Accordingly, the proposed marking "Assembled in Mexico from Material of U.S. Origin" is appropriate. HOLDING: Based upon the information provided, the shirts will qualify for the duty exemption under subheading 9802.00.90, HTSUS, when returned to the U.S. from Mexico. Pursuant to 19 CFR 102.14, the shirts may be marked "Assembled in Mexico from Material of U.S. Origin." Sincerely, John Durant, Director Commercial Rulings Division |