The tariff classification and duty treatment under Chapter 98 of men’s pants from Mexico; Article 509

NY K81166 December 8, 2003 CLA-2-62:RR:NC:WA:355 K81166 CATEGORY: Classification TARIFF NO.: 9802.00.50; 9802.00.80 Mr. Bob Cowie GHY USA, Inc. 572 South Fifth St., Suite 2 P.O. Box 155 Pembina, ND 58271 RE: The tariff classification and duty treatment under Chapter 98 of men’s pants from Mexico; Article 509 Dear Mr. Cowie: In your letter dated November 10, 2003, you requested a tariff classification ruling on behalf of Western Glove Works of Winnipeg, located in Manitoba, Canada. Two scenarios of manufacturing and further processing of the goods were presented. Both involve men’s pants which, for purposes of this letter, are assumed to be classified under heading 6203 of the Harmonized Tariff Schedule of the United States. In the first scenario, foreign, non-NAFTA fabric would be imported into Mexico where it would be cut and assembled into trousers. The pants would then be shipped to the United States and entered duty free under the provisions of Additional U.S. Note 3(b), restricted to the limits set forth in Additional U.S. Note 3(g)(i). Quantities in excess of the amounts set forth in the tariff preference level (TPL), would enter under the applicable general rate of duty. Once the goods are entered in the United Sates, they will be registered and then shipped to Canada. In Canada you have stated that the garment will be subjected to a wet washing process, such as stone or acid washing, and then labels and paper labels will be attached. The pants will then be returned to the United States. In this scenario, you ask if the goods will be eligible for tariff treatment under the provisions for tariff preference levels upon the initial importation from Mexico and then eligible for tariff treatment under the provisions of 9802.0050 upon the re-importation into the US from Canada. You also ask what will be the proper country of origin marking for the goods. Additional U.S. Note 3(b) states: “The rate of duty in the “Special” subcolumn of rates of duty column 1 followed by the symbol “MX” in parentheses shall apply to imports from Mexico, up to the annual quantities specified in subdivision (g)(i) of this note, of apparel goods provided by in chapters 61and 62 that are both cut (or knit to shape) and sewn or otherwise assembled in the territory of a NAFTA party from fabric or yarn produced or obtained outside the territory of one of the NAFTA parties.” As the trousers are cut and sewn in Mexico of fabric that is produced outside any of the NAFTA Territories the trousers meet the requirements of Note 3(b) and are eligible for preferential duty treatment. Subheading 9802.00.50, HTS, provides a full or partial duty exemption for articles that are returned after having been exported to be advanced in value or improved in condition by means of repairs or alterations, provided that the documentary requirements of 19CFR 181.64 (for articles returned from Canada or Mexico) are met. Wet washing and attaching labels are acceptable processes under subheading 9802.00.50. See Headquarters letter 557327, dated July 26, 1993, which describes processes similar to those you outline which are held to be acceptable as alterations. In the first scenario, the garments may be entitled to preferential duty treatment upon their initial importation into the United States under the applicable tariff preference level, provided required documentary requirements are met. Once that level is filled, the goods are eligible for importation under the general rate of duty. When the trousers are re-imported to the United States from Canada after having undergone a wet-wash process and labeling, the goods are dutiable only upon the cost or value of the foreign alterations when returned to the U.S., provided the documentary requirements of 19 CFR 10.8 are satisfied. In the second scenario, non-NAFTA foreign fabric will be imported into the United States, cut into component pieces in the U.S., shipped to Mexico for assembly into pants, and returned to the United States. The pants would be entered duty free under the provisions of Additional U.S. Note 3(c), restricted to the limits set forth in Additional U.S. Note 3(g)(ii). Quantities in excess of the amounts set forth in the tariff preference level (TPL), would enter under the applicable general rate of duty. Once the goods are entered in the United Sates, they will be registered and then shipped to Canada. In Canada you have stated that the garment will be subjected to a wet washing process, such as stone or acid washing, and have textile and paper labels attached. The pants will then be returned to the United States. In the second scenario you ask if the goods qualify for treatment under 9802.0080, under the tariff preference levels, upon their importation from Mexico, and again, for treatment under the provision of 9802.0050, upon their re-importation from Canada, and what will the proper marking of country of origin be in this instance. Subheading 9802.00.80, HTS, provides for a partial duty exemption for “articles 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 9c) 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, lubrication, and painting…” As the fabric for the pants is substantially transformed by cutting it into component parts, and becomes “U.S. product” , that requirement of subheading 9802.00.80 is satisfied. Additional U.S. Note 3(c) states: “The rate of duty in the “Special” subcolumn of rates of duty column 1 followed by the symbol “MX” in parentheses shall apply to imports from Mexico, up to the annual quantities specified in subdivision (g)(ii) of this note, of textile or apparel goods provided by in chapters 61, 62 and 63 that are sewn or otherwise assembled in the territory of Mexico, from fabric cut in the territory of the United States, such fabric having been knit or woven outside the territory of the United States or Mexico, which (I) were exported from the United States in condition ready for assembly without further fabrication, (ii) have not lost their physical identity in such articles by change in form, shape or otherwise, and (iii) have not been advanced in value or improved in condition in Mexico except by being assembled and except by operations incidental to the assembly process. This subdivision shall not apply after quantitative restrictions established pursuant to the Multifiber Arrangement or any successor agreement are terminated.” In the second scenario, the garments may be entitled to preferential duty treatment upon their initial importation into the United States under the applicable tariff preference level, provided that all documentary requirements are met. Once that level is filled, the goods are eligible for importation under the general rate of duty. When the trousers are re-imported to the United States from Canada after having undergone a wet-wash process and labeling, the goods are dutiable only upon the cost or value of the foreign alterations when returned to the U.S., provided the documentary requirements of 19 CFR 10.8 are satisfied. In both scenarios the pants are wholly assembled in Mexico. Therefore, the goods should be marked as a product of Mexico. This ruling is being issued under the provisions of Part 181 of the Customs Regulations (19 C.F.R. 181). 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 Camille R. Ferraro at 646-733-3046. Sincerely, Robert B. Swierupski Director, National Commodity Specialist Division