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HQ 562333





March 29, 2002

MAR-2 RR:CR:SM 562333 KSG

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80.44

Rodney G. Hammonds
David Dobbs Enterprises, Inc.
4600 U.S. 1 North
St. Augustine, Florida 32095

RE: U.S.-Caribbean Basin Trade Partnership Act; subheading 9802.00.80.44; imported directly requirement; 19 CFR 10.223(c)

Dear Mr. Hammonds:

This is in response to your letter of December 27, 2001, requesting a binding ruling on the eligibility of T-shirts assembled in Honduras for preferential tariff treatment under the United States-Caribbean Basin Trade Partnership Act (“CBTPA”).

FACTS:

David Dobbs Enterprises, Inc. proposes to assemble T-shirt components in Honduras. The fabric will be knit in the U.S. from yarn produced in the U.S. The T-shirt fabric would then be cut into components in the U.S. and shipped to Honduras for assembly into finished T-shirts. The finished T-shirts would be sent to Mexico to be silk-screened. The T-shirts would then be imported into the U.S. from Mexico.

ISSUE:

Whether the T-shirts, manufactured as described above, are eligible for preferential tariff 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 section 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 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. It is noted that the issue raised in this ruling letter is outside the scope of the comments received. These interim regulations are set forth in 19 CFR 10.221-10.237.

Section 213(b)(2)(A) of the CBERA specifies the textile and apparel articles to which preferential treatment applies under the CBTPA during the transition period. Section 213(b)(2)(A)(i)(I) provides in pertinent part that preferential treatment applies to ---

(i) Apparel articles assembled in one or more CBTPA beneficiary countries from fabrics wholly formed and cut in the United States, from yarns wholly formed in the United States, (including fabrics not formed from yarns, if such fabrics are classifiable under heading 5602 or 5603 of the HTS and are wholly formed and cut in the United States) that are ---

(I) entered under subheading 9802.00.80 of the HTS;

Subheading 9802.00.80, HTSUS, provides for a duty exemption for:

Articlesassembled abroad in whole or in part of fabricated components, the product of 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 (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process, such as cleaning, lubricating and painting.

U.S. Note 7(b)(i), Subchapter II, Chapter 98, HTSUS, provides that:

For purposes of heading 9802.00.80, duty-free treatment shall be accorded to the following articles imported directly from a beneficiary United States-Caribbean Basin Trade Partnership Act (CBTPA) country previously designated by the President in a proclamation issued pursuant to such Act and enumerated in general note 17(a) to the tariff schedule—

(i) apparel articles assembled in one or more such beneficiary countries from fabrics wholly formed and cut in the United States, from yarns wholly formed in the United States (including fabrics not formed from yarns, if such fabrics are classifiable under heading 5602 or 5603 of chapter 56 and are wholly formed and cut in the United States);

Pursuant to 19 CFR 10.223(a)(1), for apparel to receive preferential tariff treatment under the CBTPA under subheading 9802.00.80, the apparel must be imported directly into the customs territory of the United States from a CBTPA beneficiary country. The "imported directly" requirement is defined in 19 CFR 10.223(c) as follows:

For purposes of paragraph (a) of this section, the words "imported directly" mean:

(1) Direct shipment from any CBTPA beneficiary country to the United States without passing through the territory of any country that is not a CBTPA beneficiary country;

(2) If the shipment is from any CBTPA beneficiary country to the United States through the territory of any country that is not a CBTPA beneficiary country, the articles in the shipment do not enter into the commerce of any country that is not a CBTPA beneficiary country while en route to the United States and the invoices, bills of lading, and other shipping documents show the United States as the final destination; or

(3) If the shipment is from any CBTPA beneficiary country to the United States through the territory of any country that is not a CBTPA beneficiary country, and the invoices and other documents do not show the United States as a final destination, the articles in the shipment upon arrival in the United States are imported directly only if they;

(i) Remained under the control of the customs authority of the intermediate country;

(ii) Did not enter into the commerce of the intermediate country except for the purpose of sale other than at retail, and the port director is satisfied that the importation results from the original commercial transaction between the importer and the producer or the producer's sales agent; and

(iii) Were not subjected to operations other than loading or unloading, and other activities necessary to preserve the articles in good condition.

Honduras is designated as a CBTPA beneficiary country (see Presidential Proclamation 7351, dated October 2, 2000, 65 Fed. Reg. 59329), and the second criterion is satisfied (see 65 Fed. Reg. 60236, dated October 10, 2000). As the T-shirts are made from yarns wholly formed in the U.S., and the fabric is formed and cut in the U.S. and assembled in Honduras, the T-shirts would be eligible for duty-free treatment under subheading 9802.00.80.44, HTSUS, pursuant to U.S. Note 7(b)(i), Subchapter II, Chapter 98, HTSUS, if they are imported directly to the U.S. as defined in 19 CFR 10.223(c). In the factual pattern presented, the T-shirts are not shipped directly from Honduras to the U.S. The T-shirts are also not merely shipped through Mexico en route to the U.S. with shipping documents that show the U.S. as the final destination.

The issue presented in this case is whether the processing, as described above, satisfies the "imported directly" requirement set forth in 19 CFR 10.223(c)(3). The Generalized System of Preferences ("GSP") has a similar "imported directly" requirement. In Headquarters Ruling Letter ("HRL") 561386, dated June 15, 1999, Customs considered the issue of whether automotive wheels made in a GSP beneficiary country ("BC") and shipped to a non-BC country to be repacked, inspected and repaired, if necessary, by deburring, sanding, painting, reaming and/or polishing met the "imported directly" requirement of the GSP. Customs held that the automotive wheel did not meet the "imported directly" requirement because the repair operations went beyond the activities that may be necessary to preserve the merchandise in good condition.

This case is like HRL 561386 in that the processing done in Mexico (silk screening) goes beyond the activities necessary to preserve the articles in good condition. Accordingly, we find that the T-shirts are not eligible for preferential tariff treatment under the CBTPA because the "imported directly" requirement is not met.

HOLDING:

The T-shirts, manufactured as described above, are not eligible for preferential tariff treatment under the CBTPA because the "imported directly" requirement is not met.

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,

John Durant, Director
Commercial Rulings Division

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