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HQ 562241




August 29, 2002

CLA-2 RR:CR:SM 562241 KSG

CATEGORY: CLASSIFICATION

Thomas J. Kovarcik, Esq.
237 Park Avenue, 21st Floor
New York, NY 10017-3142

RE: U.S. - Caribbean Basin Trade Partnership Act; U.S. Note 3(d), Subchapter XX; use of non-U.S. made nylon filament yarn; gimping of yarn as part of yarn formation process; 19 CFR 10.222

Dear Mr. Kovarcik:

This is in response to your letter dated September 21, 2001, on behalf of Regal Manufacturing Company, requesting a binding ruling on the eligibility of apparel made using non-U.S. made nylon filament yarn or U.S.-origin nylon filament yarn that is gimped with the U.S.-origin spandex yarn in Colombia under the preferential trade provisions in the Caribbean Basin Trade Partnership Act (CBTPA).

FACTS:

Yarn will be spun or extruded into nylon filament yarn (other than elastomeric yarn) in either the U.S. or Israel. Spandex will be spun or extruded in the U.S. The two yarns will be shipped to Colombia where they will be gimped together. Regal Manufacturing Company proposes to import the gimped yarn into the U.S. under subheading 9802.00.80, HTSUS, and then form or knit the gimped yarn into fabric in the U.S. The fabric will be used to make finished apparel goods.

ISSUE:

Whether the apparel articles produced from the gimped yarns would qualify for preferential treatment under the CBTPA.

LAW AND ANALYSIS:

Title II of the Trade and Development Act of 2000, (Pub. L. 106-200, 114 Stat. 251), concerns trade benefits for the Caribbean Basin and is referred to as the United States-Caribbean Basin Trade Partnership Act ("CBTPA"). Section 211 of the CBTPA amended section 213 (b) of the Caribbean Basin Economic Recovery Act (CBERA) (19 U.S.C. 2703(b)) to provide expanded trade benefits during a “transition period” to designated countries in the Caribbean Basin.

Section 211 of the CBTPA eliminates tariffs and quantitative restrictions on specific textile and apparel articles and extends North American Free Trade Agreement duty treatment standards to non-textile articles that previously were ineligible for preferential treatment under the CBERA. “Transition period” is defined in 19 U.S.C. 2703(b)(5)(D) as meaning, with respect to a designated CBTPA country, the period that begins on October 1, 2000, and ends on the earlier of September 30, 2008, or the date on which a free trade agreement enters into force with respect to the U.S. and the CBTPA country.

Presidential Proclamation 7351, dated October 2, 2000, published in the Federal Register on October 4, 2000 (65 Fed. Reg. 59329), implemented the CBTPA by designating the eligible CBTPA countries and amending Chapter 98, HTSUS (including the creation of a new subchapter XX) to facilitate the entry of the specific textile and apparel articles eligible for preferential treatment under the CBTPA.

The enhanced trade benefits provided by the CBTPA are available to eligible articles imported directly from a country (1) that is designated as a CBTPA beneficiary country and (2) which the U.S. Trade Representative (“USTR”) has determined has implemented and follows, or is making substantial progress toward implementing and following certain customs procedures that allow U.S. Customs to verify the origin of the articles.

In addition, Interim Customs Regulations to implement the trade benefit provisions of section 211 of the CBTPA were published in the Federal Register as T.D. 00-68 on October 5, 2000 (65 Fed. Reg. 59650). The T.D. invited public comments to be submitted on the Interim Regulations by December 4, 2000.

U.S. Note 3(d), Subchapter XX, HTSUS, provides as follows:

For purposes of U.S. note 7(i) to subchapter II of this chapter and subheading 9820.11.03, 9820.11.06 and 9820.11.18, an article otherwise eligible for preferential treatment under such subheadings shall not be ineligible for such treatment because the article contains nylon filament yarn (other than elastomeric yarn) classifiable under subheading 5402.10.30, 5402.10.60, 5402.31.30, 5402.31.60, 5402.32.30, 5402.32.60, 5402.41.10, 5401.41.90, 5402.51.00, or 5402.61.00 of the tariff schedule that entered free of duty as a product of Israel under the terms of general note 8 to the tariff schedule or as a good of Canada or a good of Mexico under the terms of general note 12 to the tariff schedule.

Further, U.S. Note 7(b), Subchapter II, HTSUS, provides that articles meeting the conditions set forth in U.S. Note 3, Subchapter XX, HTSUS, and meeting the other requirements set forth in U.S. Note 7(b) and subheading 9802.00.80, HTSUS, shall not be ineligible to enter under subheading 9802.00.80, HTSUS.

Accordingly, pursuant to U.S. Note 3(d), Subchapter XX, HTSUS, the use of certain nylon filament yarn (other than elastomeric yarn) classifiable in the subheadings specified in U.S. Note 3(d) that originates in Israel, Canada, or Mexico and is entered duty-free is permitted if the apparel meets the other requirements for classification in subheadings 9820.11.03, 9820.11.06 or 9820.11.18, HTSUS.

The issue raised in this case is whether the yarn meets the "wholly formed" definition set forth in section 10.222 of the Interim Regulations (19 CFR 10.222). Pursuant to section 10.222, the term "wholly formed" with reference to yarn is defined as follows:

'Wholly formed' when used with reference to yarns or thread, means that all of the production processes, starting with the extrusion of filament or the spinning of all fibers into yarn or both and ending with a yarn or plied yarn, took place in a single country.

Counsel argues that gimping is an assembly operation and not a "forming" operation. A ply yarn is defined in Fairchild's Dictionary of Textiles at 444, as "a yarn formed by twisting together two or more single yarns or strands in one operation." Although gimping is not the same as plying, it is similar because it is joining two yarns to form another yarn by wrapping one yarn around another. Therefore, the gimping of two yarns to form a final yarn is part of the formation process like the plying of two yarns to form a single yarn is part of the formation process. The rule set forth in section 10.222 requires that all formation take place in a single country. In this case, it is proposed that the gimping would be done in a second country, which does not satisfy the definition set forth in 19 CFR 10.222. The gimped yarn in this case would not be "wholly formed" as defined in 19 CFR 10.222.

HOLDING:

The gimped yarn, processed as described above, would not satisfy the "wholly formed" definition set forth in 19 CFR 10.222 of the Interim Regulations. Therefore, the apparel articles made from fabric formed from the gimped yarn would not be eligible for CBTPA preferential tariff treatment.

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, Acting Director
Commercial Rulings Division

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