The applicability of tariff classification in subheading 9801.00.2000, HTS, to wearing apparel from China and Hong Kong; reference number 022452.10000

N004253 January 5, 2007 CLA-2-98:RR:NC:TAB:354 CATEGORY: Classification TARIFF NO.: 9801.00.2000 Ms. Cindy Taber-Korenberg Sandler, Travis & Rosenberg, P.A. 551 Fifth Avenue New York, New York 10176 RE: The applicability of tariff classification in subheading 9801.00.2000, HTS, to wearing apparel from China and Hong Kong; reference number 022452.10000 Dear Ms. Taber-Korenberg: In your letter dated November 30, 2006, written on behalf of your client, Retail Associates LLC, you requested a tariff classification ruling. You state that your client, Retail Associates LLC, located in Minnesota, will be the importer of record of wearing apparel from various foreign countries, primarily China and Hong Kong, and will pay the appropriate duties upon entry and supply required visas for any merchandise subject to quota. Following importation, Retail Associates LLC will export some or all of the wearing apparel to an unrelated company in Montreal, Canada, called Raindance Clothing Co., who under 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. Retail Associates LLC will then re-import the merchandise as needed into the United States. A warehousing agreement will be executed between Retail Associates LLC and Raindance Clothing Co. reflecting the nature of the bailor/bailee relationship between them. You also state that a bailment arrangement is a qualified “similar use agreement” for purposes of 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 Retail Associates LLC 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 to 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 with proper adherence to any quotas, 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 your client, Retail Associates LLC, would be the importer, exporter and reimporter of the merchandise. After the goods re-enter the U.S. they will be distributed by Retail Associates LLC to their customers throughout the U.S. 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 Retail Associates LLC previously imported the wearing apparel and paid duty thereon; the merchandise is reimported by or for the account of Retail Associates LLC; that Retail Associates LLC 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