Eligibility of coveralls for preferential treatment under NAFTA; 9802.00.80; General Note 12(l); transshipment; Article 509

HQ 558977 March 31, 1995 CLA-2 CO:R:C:S 558977 WAS CATEGORY: Classification TARIFF NO.: 9802.00.80 Mr. Thomas Scott Watkins Fritz Companies, Inc. 2080 Talleyrand Avenue Jacksonville, FL 32206 RE: Eligibility of coveralls for preferential treatment under NAFTA; 9802.00.80; General Note 12(l); transshipment; Article 509 Dear Mr. Watkins: This is in reference to your letter dated December 1, 1994, on behalf of Garment Corporation of America, concerning the eligibility of coveralls for preferential duty treatment under the North American Free Trade Agreement (NAFTA). FACTS: You state that Garment Corporation has a plant located in the Dominican Republic which operates as an assembly plant for U.S.-origin cut goods. U.S.-origin cut components will be exported from the U.S. and assembled in the Dominican Republic plant into coveralls of a 65/35 polyester-cotton blend. You further state that, after assembly, the coveralls will be shipped to the U.S. and a partial duty exemption will be claimed for the cost of value of the U.S.-origin components under subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS). Garment Corporation proposes to export the coveralls to a buyer located in Canada pursuant to NAFTA. ISSUE: Whether coveralls which are assembled in the Dominican Republic from U.S.-origin components and eligible for a partial duty exemption under subheading 9802.00.80, HTSUS, when returned to the U.S., are eligible for NAFTA preferential treatment when exported from the U.S. to Canada. LAW AND ANALYSIS: Subheading 9802.00.80, HTSUS, provides a partial duty exemption for: [a]rticles assembled 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. All three requirements of subheading 9802.00.80, HTSUS, must be satisfied before a component may receive a duty allowance. An article entered under this tariff provision is subject to duty upon the full cost or value of the imported assembled article, less the cost or value of the U.S. components assembled therein, upon compliance with the documentary requirements of section 10.24, Customs Regulations (19 CFR 10.24). For purposes of this ruling letter, we are assuming that the coveralls qualify for the partial duty exemption under subheading 9802.00.80, HTSUS, when returned to the U.S. The issue that we are asked to address is whether the U.S. is the country of origin of the merchandise so that the coveralls may qualify for preferential tariff treatment under NAFTA when exported to Canada. General Note 12(l), HTSUS, provides that: A good shall not be considered to be an originating good by reason of having undergone production that satisfies the requirements of this note if, subsequent to that production, the good undergoes further production or any other operation outside the territories of the NAFTA parties, other than unloading, reloading or any other operation necessary to preserve it in good condition or to transport the good to the territory of Canada, Mexico and/or the United States. In the instant case, even assuming arguendo that the "U.S. origin" cut fabric components are "originating goods" under the NAFTA [See General Note 12(b), HTSUS], the assembly of these components in the Dominican Republic into the finished coveralls clearly constitutes a "further production" of the components outside the territories of the NAFTA parties. Therefore, when the coveralls are returned to the U.S. and subsequently exported to Canada, they will not be considered "originating goods" for purposes of qualifying for preferential tariff treatment under NAFTA. HOLDING: Based on the information presented, the coveralls which are assembled in the Dominican Republic from U.S.-origin cut components and are entered under subheading 9802.00.80, HTSUS, will not be considered "originating goods" when they are subsequently exported to Canada, for purposes of qualifying for preferential tariff treatment under NAFTA. 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