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HQ H008630

April 27, 2007




Port Director
U.S. Customs and Border Protection
1515 Poydras Street
New Orleans, LA 70112

RE: Internal Advice Request 07/003; Eligibility of garments under DR-CAFTA tariff preference level for Nicaragua

Dear Mr. Foret:

This decision is in response to your letter of March 13, 2007, forwarding an internal advice request submitted by Meeks & Sheppard on behalf of their client, Clover Garments, Inc. The forwarded request, dated December 15, 2006, argues for eligibility of certain polo shirts for duty free treatment under the Dominican Republic – Central America – United States Free Trade Agreement tariff preference level (TPL) for Nicaragua. On April 26, 2007, counsel for the importer submitted a supplemental letter introducing an additional argument for allowing duty free treatment for the subject polo shirts under the Nicaragua TPL.


The merchandise at issue consists of men’s knit polo shirts. The shirts are made of 100 percent cotton knit fabric with more than 10 stitches per centimeter in both the horizontal and vertical directions. Each shirt has a rib knit collar, a two button placket with a left over right closure, short sleeves with rib knit cuffs, and a hemmed bottom with side slits.

Chinese knit fabric, and in some cases Mexican knit fabric, will be sent to Nicaragua where it is cut to form various components of the knit shirts, i.e., front and back panels, sleeves, and plackets. Foreign thread is used to embroider the front panels with the polo horseman trademark that is owned by Polo Ralph Lauren Corporation.

You indicate that the Polo Ralph Lauren Corporation has authorized your client to use its trademarks in connection with the production and importation of apparel through various ports of entry. Collars and cuffs which have been knit to shape in China from Chinese yarn are imported into Nicaragua. The components cut to shape in Nicaragua are assembled with the Chinese knit to shape collars and cuffs to form the finished men’s polo shirts.


Do the men’s knit polo shirts assembled in Nicaragua of components cut to shape in Nicaragua of foreign fabric and Chinese knit to shape collars and cuffs qualify for duty free treatment under the Dominican Republic – Central America – United States Free Trade Agreement TPL for Nicaragua?


The Dominican Republic – Central America – United States Free Trade Agreement (“DR-CAFTA” 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 DR-CAFTA 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.).

Chapter 3 of the Dominican Republic – Central America – United States Free Trade Agreement provides in Article 3.28 for preferential tariff treatment for non-originating apparel goods of Nicaragua. Annex 3.28 sets out the provisions, i.e., TPLs, applicable to certain apparel goods of Nicaragua. Presidential Proclamation 7996 of March 31, 2006, proclaimed changes to the Harmonized Tariff Schedule of the United States (HTSUS) in order to implement the DR- CAFTA with respect to Honduras and Nicaragua. See 71 Federal Register 16971 (April 4, 2006). These changes included provisions for tariff-rate quotas with respect to certain goods. TPLs are tariff rate quotas.

Subchapter XV of Chapter 99 of the HTSUS implements certain provisions of the DR-CAFTA. Subheading 9915.61.01, HTSUS, specifically implements Annex 3.28 of Chapter 3 of the DR-CAFTA. Subheading 9915.61.01 provides for:

Apparel goods of Nicaragua, of cotton or man-made fibers, or subject to cotton or man-made fiber restraints, the foregoing described in U.S. note 15(b) to this subchapter and imported into the customs territory of the United States in aggregate quantities not to exceed the quantities set forth in U.S. note 15(c) to this subchapter.

U.S. Note 15(b) identifies the apparel goods which are subject to the tariff treatment set forth in subheading 9915.61.01 by subheading and description. The subject polo shirts fall within the description at U.S. Note 15(b)(5). U.S. Note 15(a) sets forth the conditions which must be met by apparel goods eligible to receive the duty treatment set forth in subheading 9915.61.01. U.S. Note 15(a) provides:

The rate of duty provided for in subheading 9915.61.01 in the “Special” subcolumn of rates of duty column 1 shall apply to goods of Nicaragua, in an aggregate quantity not to exceed the annual total quantity set forth in subdivision (c) of this note. Subheading 9915.61.01 applies to the cotton or man-made fiber apparel goods described in this note if the goods meet the applicable conditions for preferential tariff treatment under general note 29 to the tariff schedule, other than the condition that they be originating goods and are both cut or knit to shape, and sewn or otherwise assembled, in the territory of Nicaragua.

[Emphasis added.]

Counsel for the importer argues that there is no authority to deny duty free treatment under the TPL provided for in subheading 9915.61.01 because the article contains minor components which were knit to shape in a country other than Nicaragua. Counsel compares the language of the Nicaragua TPL with the language of the comparable North American Free Trade Agreement (NAFTA) TPL and asserts that since the language of the Nicaragua TPL does not include the language found in the NAFTA TPL, “from fabric or yarn produced or obtained outside the territory of one or more of the NAFTA parties,” after the language “both cut or knit to shape, and sewn or otherwise assembled” that the Nicaragua TPL does not require the use of foreign fabric or yarn nor prohibit the use of foreign components. Counsel’s supplemental submission further argues this point and attempts to bolster the argument by referencing training materials available on the CBP web site. Counsel argues that CBP has made a distinction between the NAFTA TPL and Nicaragua TPL due to the difference in the language of the provisions and that this distinction is evidenced by the “warning” regarding the NAFTA TPL, i.e.: “Knit-to-shape components are not considered ‘fabric’ and therefore garments containing foreign knit-to-shape components do not qualify for the TPL!” No similar “warning” appears in the training material with regard to the DR-CAFTA, or more specifically, with regard to the Nicaragua TPL. The Nicaragua TPL training material indicates that the duty free treatment applies to cotton or man-made fiber apparel that is “cut, sewn and otherwise assembled.” From a review of these training materials, counsel has concluded that “CBP has recognized a distinction between garments that are eligible for duty free treatment under the NAFTA TPL and the Nicaragua TPL under the DR-CAFTA in publications it has released to the trade community” and asserts that “CBP’s attempt to change the rules governing these garments appears to violate the Customs Modernization Act, Pub. L. No. 103-182, 107 Stat. 2057 (1993).”

With regard to the training materials upon which counsel relies, these materials consist only of PowerPoint presentations absent the presenter’s monologue. These materials are not as such “complete” and cannot be relied upon as definitive reflections of the agency’s interpretation and application of the various programs on which the materials were prepared. The “warning” counsel refers to merely reflects a long standing position of CBP that knit to shape components presented in blanket form are not considered fabric. Such a “warning” has relevancy to the NAFTA TPL due to the language of that TPL, and applies to all the subsequent Free Trade Agreements addressed in the PowerPoint presentation including TPLs containing the same language, i.e., “from fabric or yarn produced or obtained outside the territory of one or more of the [ ] parties.” However, as that language does not appear in the Nicaragua TPL, no such “warning” would be relevant. The difference in language of the NAFTA and Nicaragua TPLs pointed out by counsel is a difference with no consequence as our analysis will reveal. Additionally, CBP has not, as alleged by counsel, “changed the rules governing these garments.” CBP has been, and continues to be, consistent in its views regarding each of the TPLs discussed by counsel.

Counsel also attempts to categorize garments into two groups – “cut and sewn” and “knit to shape and sewn.” Arguing that the subject polo shirts are “cut and sewn” garments, counsel asserts the knit to shape collars and cuffs should not be a consideration in determining if the “cut and sewn” polo shirts meet the terms of the TPL. Counsel contends that “U.S. Note 15(a) does not exclude cut and sewn apparel goods that have minor components that are knit to shape in China.” We disagree with counsel’s reading of U.S. Note 15(a) and the limiting interpretation of garments into two categories. Garment construction may include cut to shape and knit to shape components as is evidenced by the subject polo shirts. The language of U.S. Note 15(a) does not require us to decide if a garment would be considered a knit to shape garment as defined by 19 CFR § 102.21(a)(3) of the Customs and Border Protection (CBP) Regulations 19 CFR § 102.21(a)(3) defines knit to shape as follows:

The term knit to shape apples to any good of which 50 percent or more of the exterior surface area is formed by major parts that have been knitted or crocheted directly to the shape used in the good, with no consideration being given to patch pockets, appliqués, or the like. Minor cutting, trimming, or sewing of those major parts will not affect the determination of whether a good is “knit to shape.”; it merely requires us to apply the language of the note.

Counsel for the importer relies on CBP rulings issued with regard to the NAFTA TPL. Citing New York Ruling letter (NY) A87950 of November 21, 1996, and NY 807618 of April 7, 1996, each involving apparel which featured drawstrings, counsel conjectures that the drawstrings were fabric components Counsel cites to Headquarters Ruling letter (HQ) 559794 of June 3, 1996 for the proposition that the drawstrings in NY A87950 and NY 807618 were fabric components. and not discussed in either ruling because they did not affect the eligibility under the NAFTA or the NAFTA TPL. Counsel attempts to liken the collars and cuffs at issue in the subject polo shirts to the drawstrings in NY A87950 and NY 807618. It is true that neither ruling discusses the drawstrings mentioned in each, other than to acknowledge that in NY A87950 the jacket had a drawstring bottom and in NY 807618 the pant had a drawstring in the waistband. However, failure to discuss this feature in detail does not lead us to the same conclusion as that of the counsel for the importer. NY 807618 states “[s]ince the items are cut and sewn in Canada, they would qualify for the [TPL]. One can just as easily surmise that the drawstring in that case was among the items cut and sewn in Canada as reach the conclusion proposed by counsel. The same is true for the drawstring in NY A87950. In addition, while some drawstrings are made of fabric, some are not. See NY 872527 of April 1, 1992, and NY A85478 of July 16, 1996 classifying drawstrings in headings 5609, HTSUS (“Articles of yarn, strip or the like of heading 5404 or 5405, twine, cordage, rope or cables, not elsewhere specified or included”), and 5607, HTSUS, (“Twine, cordage, ropes and cables, whether or not plaited or braided and whether or not impregnated, coated, covered or sheathed with rubber or plastics”). The fact is that without the information contained in the files for those rulings, we cannot say with certainty whether the drawstrings were fabric components or whether they were imported into the territory of a NAFTA party as material or as finished components. As such, these rulings have no relevancy to this matter.

NY H81909 of July 6, 2001, which dealt with the eligibility of various garments for preferential treatment under the NAFTA, is also cited by counsel. CBP determined that the garments at issue therein qualified for the NAFTA TPL because the garments were cut and sewn in Mexico of foreign (non-NAFTA) fabric. Counsels points to the presence of a logo appliqué present on all the garments. As the logo appliqué was not discussed in the ruling, counsel infers it was not significant in determining if the goods were eligible for duty free treatment under the NAFTA TPL. We believe counsel’s inference is correct. Nonetheless, a logo appliqué which falls within the scope of “findings and trimmings” is clearly distinguishable from a collar or cuff which forms part of a garment. Thus, NY H81909 is not relevant to the issue at hand.

As there is no dispute that the apparel at issue is sewn or otherwise assembled in the territory of Nicaragua, the language in the TPL which is at issue is that the goods “are both cut or knit to shape,” in the territory of Nicaragua. The reference to “both cut or knit to shape,” refers to the formation of the components of the good which will be assembled in Nicaragua. As pointed out earlier, apparel may consist of both cut to shape components and knit to shape components. For the reasons addressed above, counsel for the importer would have CBP choose cutting as the only requirement that need be met in the case and have us ignore “or knit to shape.”

The importer’s counsel would have CBP read the term “or” in the TPL with reference to “both cut or knit to shape,” in the disjunctive. We, however, read it in the conjunctive in this case, i.e., meaning “and.” The courts have addressed the interpretation of “and” and “or” in several cases. See L. H. Butcher Co. v. United States, 8 Cust. Ct. 136 (1942) (discussing the meaning of “or” in a tariff provision providing for arsenious acid or white arsenic); Dumont v. United States, 98 U.S. 142 (1878) (wherein the Supreme Court stated: “The word ‘or’ is frequently construed to mean ‘and,’ and vice versa, in order to carry out the evident intent of the parties.”); United States v. Fisk, 70 U.S. 445 (1866) (in considering the interpretation of the term “or” in an amendment to the 79th section of the Internal Revenue Act of 1865 which defined the term “broker”, the court began by stating: “In the construction of statutes, it is the duty of the court to ascertain the clear intention of the legislature. In order to do this, courts are often compelled to construe ‘or’ as meaning ‘and,’ and again ‘and’ as meaning ‘or.’)”; and, Smith v. United Television, Inc. 474 F.3d 1033 (8th Cir. 2007) (the court considered the meaning of “or” in the phrase “salary or bonus opportunity” and concluded it would be reasonable to read it to mean “and.” Citing Financial Security Assurance, Inc. v. Stephens, Inc., 450 F.3d 1257, 1265 (11th Cir. 2006), the court wrote: “Stated another way, ‘courts need not mechanically interpret every “or” as disjunctive, but rather . . . courts should interpret the word “or” according to context.’”

We cannot agree with counsel’s interpretation of the language of the TPL. Had the drafters of this language intended “or” to be disjunctive in meaning, i.e., either the good is cut to shape or the good is knit to shape, there would be no need for the term “both.” The inclusion of the term “both” leads to the conclusion that “or” is intended to be conjunctive in meaning or inclusive, i.e. the good may be cut to shape and knit to shape, or the good may be cut to shape, or knit to shape, or both.


Based on the language of U.S. Note 15(a), Subchapter XV, Chapter 99, the subject polo shirts assembled in Nicaragua of components cut to shape in Nicaragua and collars and cuffs knit to shape in China do not qualify for the preferential tariff treatment set forth in subheading 9915.61.01, HTSUS.

You are to mail this decision to counsel for the internal advice applicant no later than 60 days from the date of this letter. On that date Regulations and Rulings of the Office of International Trade will take steps to make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.


Myles B. Harmon, Director
Commercial and Trade Facilitation Division

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