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NY M80904

March 8, 2006

CLA-2-98:RR:NC:3:353 M80904


TARIFF NO.: 9801.00.200000

Ms. Cindy Taber-Korenberg
Sandler, Travis & Rosenberg, P.A.
551 Fifth Avenue
New York, NY 10176

RE: The applicability of tariff classification in subheading 9801.00.2000, HTS, to wearing apparel from China, warehoused and packed in Canada. 

Dear Ms. Taber-Korenberg:

This ruling replaces ruling NY M80023, dated February 28, 2006, on behalf of Northern Comfort Corp., where you requested a ruling on whether wearing apparel was eligible for treatment in subheading 9801.00.2000, Harmonized Tariff Schedule of the United States (HTSUS). That ruling contained a clerical error in the description of the merchandise in one paragraph.

The imported product consists of wearing apparel. The wearing apparel is made in China and imported into the United States by Northern Comfort Corp., who will pay the appropriate duties upon entry and supply required visas for any merchandise subject to quota. Following importation, Northern Comfort Corp. will export the wearing apparel to a related company in Canada, Ballin Inc., who under terms of an agreement will warehouse the merchandise and repackage some or all of the merchandise in individual cartons to fill U.S. resale orders. Northern Comfort Corp. will then re-import the merchandise as needed into the United States.

You state that the legal relationship between Northern Comfort Corp. and Ballin Inc. is one of bailor to bailee. Northern Comfort Corp. retains legal ownership of the wearing apparel throughout the warehouse and any repackaging process.

Section 141.2 of the Customs Regulations (19 CFR 141.2) states that "Dutiable merchandise imported and afterwards exported even though duty thereon may have been paid on the first importation, is liable to duty on every subsequent importation into the Customs territory of the United States" unless specifically exempted. Subheading 9801.00.2000, HTS, provides for duty-free treatment for "articles previously imported, with respect to which the duty was paid upon such previous importation or which were previously free of duty pursuant to the Caribbean Basin Economic Recovery Act of Title V of the Trade Act of 1974 if (1) reimported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, after having been exported under lease or similar use agreements, and (2) reimported by or for the account of the same person who imported it into, and exported it from, the United States.”

Customs does not consider the mere packaging of a good for retail sale as an advancement in value or improvement in condition. See John v. Carr & Sons, Inc., 69 Cust.Ct. 78, C.D. 4377 (1972), aff'd, 61 CCPA 52, C.A.D. 1118 (1974). See also Headquarters Ruling Letter ("HRL") 555624, dated May 1, 1990, which ruled that perfumes packaged into sample pouches abroad were not advanced in value or improved in condition for purposes of subheading 9801.00.10, HTS, treatment.

Section 10.108, Customs Regulations (19 CFR 10.108), provides, in relevant part, that free entry shall be accorded under subheading 9801.00.20, HTS, whenever it is established to the satisfaction of the district director that the article for which free entry is claimed was exported from the United States under a lease or similar use agreement. According to Black's Law Dictionary 179 (5th ed. 1979), a bailment is "a delivery of goods of personal property, by one person to another, in trust for the execution of a special object upon or in relation to such goods, beneficial to either the bailor or bailee or both, and upon a contract, express or implied, to perform the trust and carry out such object, and thereupon either to redeliver the goods to the bailor or otherwise dispose of the same in conformity with purpose of the trust.” Headquarters ruled, in HRL 560511, dated November 18, 1997, that "bailment" is a "similar use agreement" for the purposes of subheading 9801.00.2000, HTS.

You assert that your client’s transaction meets all the requirements for consideration of duty free entry under subheading 9801.00.2000, HTS. Specifically, you indicate that the some or all of the wearing apparel, being previously imported and duty paid where applicable, would be subject solely to repackaging operations and would not be otherwise advanced in value or improved in condition by any process or manufacture while in Canada. Further, the subject wearing apparel would be exported under conditions that would constitute exportation pursuant to a lease or similar use agreement and that your client, Northern Comfort Corp., would be the importer, exporter and reimporter of the merchandise.

Based on the information submitted, the wearing apparel that is manufactured in China and packaged in Canada will be eligible for duty-free treatment under subheading 9801.00.2000, HTS, when returned to the United States, provided that the district director at the port of entry is satisfied that Northern Comfort Corp. previously imported the wearing apparel and paid duty thereon; they are reimported by or for the account of Northern Comfort Corp.; Northern Comfort Corp. exported the wearing apparel from the U.S. under a lease or a similar use agreement; and the documentary requirements of section 10.108, Customs Regulations, are satisfied.

This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).

A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Kenneth Reidlinger at 646-733-3053.


Robert B. Swierupski

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