The applicability of classification in subheading 9801.00.2000, HTS, to wearing apparel from China, warehoused and packed in Canada. 

N006857 February 14, 2007 CLA-2-98:RR:NC:3:358 CATEGORY: Classification TARIFF NO.: 9801.00.2000 Ms. Cindy Taber-Korenberg Sandler, Travis & Rosenberg, P.A. 551 Fifth Avenue New York, NY 10176 RE: The applicability of classification in subheading 9801.00.2000, HTS, to wearing apparel from China, warehoused and packed in Canada.  Dear Ms. Taber-Korenberg: In your letter dated February 7, 2007, on behalf of your clients Manhattan International Trade Inc. and d.e.s. Studio Inc., (here after referred to Manhattan/DES) you requested a ruling on whether wearing apparel was eligible for treatment in subheading 9801.00.2000, Harmonized Tariff Schedule of the United States (HTSUS). The imported product consists of wearing apparel. The wearing apparel is made in China and possibly other countries and imported into the United States by Manhattan/DES, who will pay the appropriate duties upon entry and supply required visas for any merchandise subject to quota. Following importation, Manhattan/DES Inc. will export the wearing apparel to a related company in Canada, 6353878 Canada Inc., who under terms of an agreement will warehouse the merchandise and may provide pick-and-pack services on some or all of the merchandise; there will be no other manipulation of the goods in Canada. Manhattan/DES will then re-import the merchandise as needed into the United States. Separate warehousing agreements for both Manhattan and 6353878 Canada and DES and 6353878 Canada will be executed reflecting the bailor/bailee relationship between Manhattan/DES and 6353878 Canada. Manhattan/DES retains legal ownership of the wearing apparel throughout the warehousing and repackaging process. 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. 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 of 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 same person who imported it into, and exported it from, the United States.” Customs does not consider the mere packaging of a good for retail sale as 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 Headquarters Ruling Letter ("HRL") 555624, dated May 1, 1990, which ruled that perfumes packaged into sample pouches abroad were not advanced in value or improved in condition for purposes of subheading 9801.00.10, HTS, treatment. Section 10.108, Customs Regulations (19 CFR 10.108), provides, in relevant part, that free entry shall be accorded under subheading 9801.00.20, HTS, whenever it is established to the satisfaction of the district director that the article for which free entry is claimed was exported from the United States under a lease or similar use agreement. According to Black's Law Dictionary 179 (5th ed. 1979), a bailment is "a delivery of goods of personal property, by one person to another, 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 purpose of the trust.” Headquarters ruled, in HRL 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, you indicate that the some or all of the wearing apparel, being previously imported and duty paid where applicable, would be subject solely to repackaging 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, Manhattan/DES, would be the importer, exporter and reimporter of the merchandise. Based on the information submitted, the wearing apparel that is manufactured in China and possibly other countries and packaged in Canada will be eligible for duty-free treatment under subheading 9801.00.2000, HTS, when returned to the United States, provided that the district director at the port of entry is satisfied that Manhattan/DES previously imported the wearing apparel and paid duty thereon; they are reimported by or for the account of Manhattan/DES; Manhattan/DES exported the wearing apparel from the U.S. under a lease or a 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 9801.00.2000, HTSUS, the wearing apparel is exempt from quota/visa requirements. 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 Bruce Kirschner at 646-733-3048. Sincerely, Robert B. Swierupski Director, National Commodity Specialist Division