Eligibility of cotton denim trousers and accompanying belt; DR-CAFTA; set

HQ H058768 June 5, 2009 CLA-2 OT:RR:CTF:VS H058768 KSG CATEGORY: Classification Elise Shibles, Esq. Sandler, Travis & Rosenberg, P.A. 505 Sansome Street Suite 1475 San Francisco CA 94111 Re: Eligibility of cotton denim trousers and accompanying belt; DR-CAFTA; set Dear Ms. Shibles: This is in reply to your letter dated April 17, 2009, concerning the eligibility of certain cotton denim trousers with an attached belt for preferential tariff treatment under the Dominican Republic Central America Free Trade Agreement (“DR-CAFTA”). FACTS: This case involves cotton denim trousers for men, women, and children which you state are classified in subheadings 6203.42 and 6204.62, of the Harmonized Tariff Schedule of the United States (“HTSUS”). You have provided a sample for our review. You state that the trousers are made of chief weight cotton denim fabric formed in a DR-CAFTA country, of yarn formed in a DR-CAFTA country. The origin of the fiber is unknown. The pocket bag fabric for the trousers will be formed and finished in a DR-CAFTA country, of yarn wholly formed in a DR-CAFTA country. The sewing thread will be formed and finished in a DR-CAFTA country. The narrow elastic strips on the inside of the waistband, used to adjust the waist, will be formed and finished in a DR-CAFTA country. The trousers will be cut and sewn in Nicaragua. A polyester webbing belt of a dark olive-green color with a dark metal buckle will be made in Pakistan. The belt is shipped to Nicaragua, where it is threaded through the belt loops of the trousers prior to packing and shipping. You state that the value of the belt will be 10% or less of the adjusted value of the trousers and belt combined. The finished trousers and belt will be shipped directly to the U.S. LAW and ANALYSIS: The DR-CAFTA was signed on August 5, 2004, and includes as parties the United States, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and Costa Rica. The provisions of the DR-CAFTA were adopted by the U.S. in the Dominican Republic Central America Free Trade Agreement Implementation Act, Public Law 109-53 (2005). General Note 29, of the Harmonized Tariff Schedule of the United States (“HTSUS”) sets forth the rules of origin for the DR-CAFTA. Interim regulations for the DR-CAFTA are set forth in 73 FR 33673, dated June 13, 2008 and are found at 19 CFR 10.581 et seq. Pursuant to GN 29(b), goods are eligible for treatment as an originating good if— (i) the good is a good wholly obtained or produced entirely in the territory of one or more of the parties to the Agreement; (ii) the good was produced entirely in the territory of one or more of the parties to the Agreement and— (A) each of the nonoriginating materials used in the production of the good undergoes an applicable change in tariff classification specified in subdivision (n) of this note; or (B) the good otherwise satisfies any applicable regional value content or other requirements specified in subdivision (n) of this note; and the good satisfies all other applicable requirements of this note; or (iii) the good was produced entirely in the territory of one or more of the parties to the Agreement exclusively from originating materials. Further, GN 29(c)(v) provides that for goods classifiable as goods put up in sets for retail sale as provided under General Rule of Interpretation (“GRI”) 3, such goods shall not be considered originating goods unless each of the goods in the set is an originating good; or in the case of a textile or apparel good, the total value of the nonoriginating goods in the set does not exceed 10% of the adjusted value of the set. Counsel asserts that the trouser and belt in this case would be considered a composite good and not as goods put up in sets for retail sale. Counsel cites to other rulings in which CBP held that pants and a belt were considered a composite good. As support for this position, counsel states that the belt in this case is not of a type normally sold separately. GRI 3 states, in pertinent part: When … goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: (b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a) [which requires that goods be classified, if possible, under the more specific of the competing provisions], shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable. The Explanatory Notes to the HTSUSA constitute the official interpretation of the System at the international level. Explanatory Note (IX) to GRI 3 provides: For the purposes of [GRI 3(b)], composite goods made up of different components shall be taken to mean not only those in which the components are attached to each other to form a practically inseparable whole but also those with separable components, provided these components are adapted to one another and are mutually complementary and that together they form a whole which would not normally be offered for sale in separate parts. Explanatory Note (X) to GRI 3 provides, in pertinent part: For the purposes of [GRI 3(b)], the term “goods put up in sets for retail sale” shall be taken to mean goods which: consist of at least two different articles which are, prima facie, classifiable in different headings….; consist of products or articles put up together to meet a particular need or carry out a specific activity; and are put up in a manner suitable for sale directly to users without repacking…. Factors considered in prior CBP rulings included whether the belt was made of the exact same fabric and color/pattern as the garment, color-coordinated and constructed of the same fabric as the garment, or in a design where the belt was otherwise unique to the garment and would not be sold separately. See Headquarters Ruling Letter 966897, dated March 29, 2004, in which a garment accompanied with a textile self-fabric belt was treated as a composite good as compared to a garment accompanied by a polyurethane belt, which was treated as a good put up in sets for retail sale. See also HRL 966639, dated October 22, 2003. Based on the styling of the garment in this case, denim trousers with a polyester webbing belt of a solid dark olive green color with a metal buckle, we find that the belt could be sold separately from the denim trousers and is not unique to the design of the garment. Therefore, the trousers and belt would be considered as goods put up in sets for retail sale and not a composite good. Therefore, the sets rule in GN 29(c)(v) is applicable. The imported trousers and belt are not wholly obtained or produced entirely in the territory of the DR-CAFTA countries. The tariff shift rule for the trousers classified in subheading 6203.42 and 6204.62 set forth in GN 29(n), HTSUS, states as follows: A change to subheadings 6203.41 through 6203.49 from any other chapter, except from headings 5111 through 5113, 5204 through 5212, 5310 through 5311, chapter 54, heading 5508 through 5516, 5801 through 5802 or 6001 through 6006, provided that the good is cut or knit to shape, or both, and sewn or otherwise assembled in the territory of one or more of the parties to the Agreement. A change to subheadings 6204.61 through 6204.69 from any other chapter, except from headings 5111 through 5113, 5204 through 5212, 5310 through 5311, chapter 54, heading 5508 through 5516, 5801 through 5802 or 6001 through 6006, provided that the good is cut or knit to shape, or both, and sewn or otherwise assembled in the territory of one or more of the parties to the Agreement. Additionally, the trousers must meet the requirements of GN 29(n), HTSUS, Chapter rules 3, 4, and 5 pertaining to narrow elastic fabric, sewing thread and pocket bag fabric. Chapter rule 3 requires that certain narrow elastic fabric must be formed from yarn and finished in the territory of the DR-CAFTA parties. Chapter rule 4 requires certain sewing thread to be formed and finished in the territory of the DR-CAFTA parties. Chapter rule 5 requires pocket bag fabric to be formed and finished in the territory of the DR-CAFTA parties from yarn wholly formed in the territory of the DR-CAFTA parties. The fiber from which the denim fabric is made would be classifiable in subheading 5201-5203, HTSUS. Since the cotton fiber of unknown origin is not within the exceptions to the tariff shift rule and undergoes a chapter change in a DR-CAFTA country, the trousers which are cut and sewn in Nicaragua, would satisfy the tariff-shift rule and be treated as originating for the purposes of the set rule. However, the belt does not satisfy the tariff shift rule and would not be considered originating. Nonetheless, for purposes of the sets rule, provided the belt is valued at 10% or less of the adjusted value of the set, it will be treated as originating. Therefore, the trousers and belt would be treated as an originating good for the purposes of eligibility under the DR-CAFTA. HOLDING: The trousers and belt would be a good put up for retail sale as a set under GRI 3. Pursuant to the sets rule set forth in GN 29(c)(v), provided that the nonoriginating belt is valued at 10% or less of the adjusted value of the set, the trousers and belt would be considered originating goods for the purposes of the DR-CAFTA. 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 CBP official handling the transaction. Sincerely, Monika R. Brenner, Chief Valuation and Special Programs Branch