CBP Ruling H135361

HQ H135361 July 26, 2011 OT:RR:CTF:VS H135361 CMR CATEGORY: Classification Ms. Rebecca Cheung Macy’s Merchandising Group 11 Penn Plaza New York, NY 10001 RE: Modification of New York Ruling Letters N013984 and N019427; eligibility of composite goods consisting of shorts with a belt and pants with a belt for preferential tariff treatment under General Note 3(a)(v) of the Harmonized Tariff Schedule of the United States (HTSUS) Dear Ms. Cheung: Customs and Border Protection (CBP) issued New York Ruling Letter (NY) N013984, dated July 17, 2007, and NY N019427, dated November 29, 2007, to you in response to your requests for rulings on the classification and eligibility for preferential tariff treatment of certain garments produced, in part, in a Qualifying Industrial Zone (QIZ). We have had occasion to review the decisions in NY N013984 and NY N019427 and have determined that they each contain an error with regard to the decision on the eligibility of goods produced under scenario A (concerning the sash and textile belt only) in each ruling. Accordingly, NY N013984 and NY N019427 are modified as set forth below. Pursuant to section 625(c), Tariff Act of 1930 (19 U.S. C. 1625(c)), as amended by section 623 of Title VI (Customs Modernization) of the North American Free Trade Agreement Implementation Act, Pub. L. 103–182, 107 Stat. 2057, 2186 (1993), notice of the proposed modification of NY K80820 was published in the Customs Bulletin, Volume 45, Number 22, on May 25, 2011. Two comments were received during the notice and comment period. One comment supported CBP’s action and sought a clarification in this decision of certain facts, while the other comment sought a broader modification. FACTS: As set forth in NY N013984 state in relevant part: The submitted [boys’] shorts, style 1000, are constructed from 100 percent cotton yarn dyed fabric. The shorts have five belt loops, a front fly zipper, a button at the waistband that closes in the left-over-right direction, side entry pockets below the waist, two set-in rear welt pockets with button closures, expandable pant leg cargo pockets and hemmed leg openings. The shorts will be imported [into the U.S.] with a textile web belt. . . . The textile web belt . . [has a] metal D ring closures. . . . You have indicated that the garments will be produced in Egypt in an approved “Qualifying Industrial Zone.” The manufacturing operations for the shorts are done in accordance with one of the following scenarios, A, B and C: Under scenarios A, B and C, the shorts were made from imported rolls of fabric by cutting and sewing in a QIZ in Egypt. The issue was the duty free treatment of the shorts with an accompanying belt. The scenarios were described in NY N013984, with regard to the textile web belt as follows: SCENARIO A Belt wholly formed in China, imported into Egypt QIZ to be assembled with shorts for import into the U.S. * * * We note that in scenarios B and C, the belts (texile or polyurethane) were manufactured in Egypt. NY N013984 misstated the belt production in Egypt which in fact consisted of the belt material being cut to both length and width prior to assembly of the belt in Egypt. The shorts and belt combinations in scenarios B and C were determined to be eligible for preferential treatment under General Note 3(a)(v) of the HTSUS as products of the Qualifying Industrial Zone. The facts provided in NY N019427, state in relevant part: Style 3000 is a pair of women’s pants constructed from 98 percent cotton and 2 percent spandex woven twill fabric. The pants have a flat waistband with five belt loops, a front zipper with a button and a hook and bar closure that fastens right over left and a woven textile sash belt threaded through the belt loops. The pants also feature two front pockets, two back pockets with a button closure and hemmed leg openings with a side slit. Four manufacturing scenarios were presented in NY N019427. In all four scenarios the pants were cut and sewn in a QIZ in Egypt from foreign fabric. We are only concerned herein with scenario A described below: SCENARIO A: The sash belt is formed in China and shipped to the QIZ factory in Egypt. The sash belt is threaded through the pant belt loops. The pants and sash belt will be exported directly to the United States. * * * In NY N013984 and NY N019427, CBP classified the woven shorts with textile web belt (NY N013984) and the woven pants with sash belt (NY N019427) as composite goods with the garments imparting the essential character to the goods and thus determining the classification of the composite goods. ISSUE: Are the composite goods consisting of woven shorts with textile web belt (NY N013984) and woven pants with sash belt (NY N019427) which were the subject of NY N013984 and NY N019427, respectively, eligible for preferential treatment under GN 3(a)(v), HTSUS, as products of a QIZ? LAW AND ANALYSIS: Under GN 3(a)(v), HTSUS, articles which are the product of the West Bank, the Gaza Strip or a QIZ and which are imported directly to the United States from the West Bank, the Gaza Strip, a QIZ or Israel qualify for duty-free treatment, provided the sum of (1) the cost or value of materials produced in the West Bank, the Gaza Strip, QIZ, or Israel, plus (2) the direct costs of processing operations performed in the West Bank, the Gaza Strip, QIZ or Israel, is not less than 35% of the appraised value of such articles when imported into the U.S. An article is considered to be a "product of" the West Bank, the Gaza Strip, or a QIZ if it is either wholly the growth, product or manufacture of one of those areas or a new or different article of commerce that has been grown, produced or manufactured in one of those areas. With regard to the eligibility of the subject boys’ shorts with textile belt and the subject women’s pants with textile sash, we apply the rules of origin set forth in 19 CFR § 102.21 to determine whether these goods qualify as a product of a QIZ under GN 3(a)(v). The composite goods at issue are classified in headings 6203 (boys’ shorts) and 6204 (women’s pants) and are produced from processing occurring in more than one country. As such, under § 102.21(c)(2), we look to the rule set forth for goods of headings 6203 and 6204 set forth in section (e) of § 102.21. The applicable rule requires that if the good consists of two or more component parts that it undergo a change to an assembled good of the heading (6203 or 6204) from unassembled components provided the change is the result of the good being wholly assembled in a single country, territory or possession. “Wholly assembled” is defined in § 102.21(b)(6) as meaning: that all components, of which there must be at least two, preexisted in essentially the same condition as found in the finished good and were combined to form the finished good in a single country, territory or insular possession. Minor attachments and minor embellishments (for example, appliqués, beads, spangles, embroidery, buttons) not appreciably affecting the identity of the good, and minor subassemblies (for example, collars, cuffs, plackets, pockets), will not affect the status of a good as “wholly assembled” in a single country, territory, or insular possession. Based on the information provided, the boys’ shorts and the women’s pants are “wholly assembled” in a QIZ and therefore they are “products of” the QIZ. In HQ 960033, dated January 30, 1997, the origin of a composite good consisting of a vest and belt was determined by the origin of the vest as it imparted the essential character of the good. (“Since the instant vest and belt are considered a composite good and the vest imparts the essential character of the composite good, the country of origin of the vest will determine the origin for the composite good and the country of origin of the belt will not be determined separately.”) See also, HQ 959342, dated July 18, 1996, wherein the origin of a dress and self-fabric belt was based on the origin of the dress as it imparted the essential character to the composite good. In HQ 563246, dated July 7, 2005, a composite good consisting of a pair of shorts and a matching belt was determined to be a product of Jordan for purposes of the JFTA. The shorts determined the classification of the composite good and thus, the origin of the shorts which were cut and sewn in Jordan, determined the origin of the composite good. Accordingly, with regard to the Chinese-origin textile belt, as the good at issue is classifiable as a composite good, the origin of the garment determines the origin of the composite good and thus whether the composite good is considered a “product of” the QIZ.  We note that the reason cited for denying preferential treatment to the composite good in NY K80820 was Treasury Decision (T.D.) 91-7. This was an error. T.D. 91-7 set forth the position of the Customs Service with regard to the tariff treatment and country of origin marking of sets, mixtures and composite goods prior to the enactment of section 334 of the Uruguay Round Agreements Act which is codified at 19 U.S.C. § 3592, the statutory basis for 19 CFR § 102.21. In HQ 559983, dated August 22, 1996, the Customs Service (now CBP) considered the marking of a dress and belt composite good. The composite good had been the subject of HQ 959342, dated July 18, 1996, which applied § 102.21 to determine the origin of the dress and belt to be the country in which the dress components were fully assembled, country B. In the ruling, we stated: Since 19 CFR 102.21 implements section 334 of the Uruguay Round Agreements Act which applies ‘for purposes of the customs laws,’ and 19 U.S.C. 1304 is a Customs law, the country of origin of the dress and self-fabric belt for marking purposes is Country B. Therefore, only a single country of origin marking on the dress will be needed for the dress and belt composite good. We noted in HQ 559983 that the decision reached therein was consistent with the “common sense” approach of T.D. 91-7 and that the analysis presented in that T.D. need not be used. HOLDING: Under scenario A in NY N013984 and under scenario A in NY N019427, the country of origin of the composite good consisting of woven boys’ shorts with textile web belt or woven women’s pants with textile sash belt, respectively, is the QIZ, i.e., where the shorts or pants are wholly assembled. As such, the composite goods are “products of” the QIZ in which the shorts or pants are wholly assembled. Provided that the 35 percent value added requirement is met, the composite goods would qualify for preferential treatment under GN 3(a)(v). NY N013984 and NY N019427 are hereby modified. In accordance with 19 U.S.C. § 1625(c), this ruling will become effective 60 days after its publication in the Customs Bulletin. Sincerely, Myles B. Harmon, Director Commercial and Trade Facilitation Division