The applicability of tariff classification in subheading 9801.00.2000, HTS, to wearing apparel imported from the Far East and subsequently exported to Canada to be subject to a pick-and-pack operation.

N003900 December 21, 2006 CLA-2-98:RR:NC:TAB:354 CATEGORY: Classification TARIFF NO.: 9801.00.2000 Mr. Stephen J. Leahy Attorney At Law 175 Derby Street Suite 9 Hingham, MA 02043 RE: The applicability of tariff classification in subheading 9801.00.2000, HTS, to wearing apparel imported from the Far East and subsequently exported to Canada to be subject to a pick-and-pack operation. Dear Mr. Leahy: In your letter dated November 24, 2006, written on behalf of your client, Omnitrans of Montreal, Quebec, Canada, you requested a tariff classification ruling. This ruling is being requested on behalf of Omnitrans, who is a Canadian Customs broker, on behalf of several of Omnitrans’ clients. You state that your office represents Omnitrans in matters related to Customs, tariff and international law. Each of the clients of Omnitrans is a Canadian entity and will import merchandise into the United States where the importer of record will be the non-resident Canadian entity. You state that the requirements with regard to 19 C.F.R. 141.37 concerning non-resident importers will be complied with. Each non-resident Canadian company will be importing wearing apparel from the Far East and will pay the appropriate duties upon entry and supply required visas for any merchandise subject to quota. Following importation, the non-resident importer will export the wearing apparel to a related company in the Province of Quebec, Canada who, under the terms of an agreement will warehouse the merchandise and provide pick-and-pack services on some or all of the merchandise. You state that there will be no other manipulation of the goods in Canada. The non-resident importer of record will then re-import the merchandise as needed into the United States. You note that the non-resident importer of record will import specific merchandise, export that merchandise which was imported, and re-import the merchandise originally imported and exported by the non-resident importer of record. Therefore, the same entity will serve as importer of record for both importations into the United States. With regard to the non-resident importer of record, a warehouse agreement will be executed between the non-resident importer of record and a related party in Canada reflecting the nature of a bailor/bailee relationship between the two parties. As noted above, the goods would be subject to a pick-and-pack operation and re-imported into the United States. You state that the bailment arrangement represents a “similar use agreement” as defined by subheading 9801.00.20, HTS. 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 therefrom under the HTS. In this regard, 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 or 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 person who imported it into, and exported it from, the United States.” Similarly, Section 10.108, Customs Regulations (19 CFR 10.108), provides, in relevant part, that free entry shall be accorded under subheading 9801.00.20, HTSUS, whenever it is established to the satisfaction of the port director that the article for which free entry is claimed was duty paid on a previous importation, is being reimported by or for the account of the person who previously imported it into, and exported it from, the United States without having been advanced in value or improved in condition by any process of manufacture or other means, and was exported from the U.S. under a lease or similar use agreement. Customs does not consider merely packaging of a good for retail sale to be 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 HQ 555624 dated May 4, 1990. You contend that the situation under which the non-resident Canadian company will export the apparel to Canada is one of bailment, and that this is a “similar use agreement” for purposes of subheading 9801.00.20, HTS. According to Black’s Law Dictionary (6th ed. 1990), the definition of bailment is a delivery of goods of personal property, by one person (bailor) to another (bailee), 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 the purpose of the trust. Headquarters ruled, in HQ 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, it is indicated that the wearing apparel, being previously imported and duty paid where applicable, would be subject solely to packaging 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 the same non-resident Canadian company will be the importer, exporter and reimporter of the merchandise. Based on the information submitted, wearing apparel packaged in Canada will be eligible for duty-free treatment under subheading 9801.00.20, HTS, when returned to the U.S., provided that the same importer previously imported the wearing apparel and paid duty thereon; the merchandise is reimported by or for the account of the person who imported it into, and exported it from, the U.S.; that the said party exported the wearing apparel from the U.S. under a lease or similar use agreement; and the documentary requirements of section 10.108, Customs Regulations, are satisfied. Based on directives from the Committee for the Implementation of Textile Agreements (CITA), if entered under subheading 9801.00.20, HTS, the wearing apparel is exempt from quota/visa requirements. Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on World Wide Web at http://www.usitc.gov/tata/hts/. 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 Deborah Marinucci at 646-733-3054. Sincerely, Robert B. Swierupski Director, National Commodity Specialist Division