Eligibility of a pants and belt set for duty-free treatment under the United States-Bahrain Free Trade Agreement; U.S. Note 13, Subchapter XIV, Chapter 99, Subheading 9914.99.20, HTSUS; Tariff Preference Level

HQ H204475 July 6, 2012 OT:RR:CTF:VS H204475 CMR CATEGORY: Classification TARIFF NO.: 9914.99.20 Ms. Kay Morrell JC Penney Purchasing Corporation 6501 Legacy Drive, MS 2316 Plano, TX 75024 RE: Eligibility of a pants and belt set for duty-free treatment under the United States-Bahrain Free Trade Agreement; U.S. Note 13, Subchapter XIV, Chapter 99, Subheading 9914.99.20, HTSUS; Tariff Preference Level Dear Ms. Morrell: This is in response to your letter of December 19, 2011, requesting a ruling on the eligibility of a pants and belt set for preferential tariff treatment under the United States – Bahrain Free Trade Agreement (BFTA). In New York Ruling Letter (NY) N197725, dated January 18, 2012, Customs and Border Protection (CBP) ruled on the classification and country of origin of the merchandise at issue. Your question regarding preferential tariff treatment under the BFTA was referred to this office. FACTS: You describe style PPK #8301 as “a women’s woven pant of 98% cotton 2% spandex with a coordinating plastic belt.” The woven fabric for the pants is made in China. The fabric is cut into components which are assembled into pants in Bahrain. A coordinating plastic belt is threaded through the belt loops of the pants prior to packaging and shipping. The pants set (pants and belt) will be shipped directly from Bahrain to the United States. The origin of the belt is currently Bahrain, but the belt may be made in China or another country other than Bahrain. You question whether the pants set would qualify for preferential tariff treatment under the tariff preference level (TPL) for certain apparel under the BFTA, specifically U.S. Note 13(c), Subchapter XIV, Chapter 99, and heading 9914.99.20 of the Harmonized Tariff Schedule of the United States (HTSUS). You provided the total Free on Board (FOB) value of the pants/belt set and the value of the belt. Based on the information you provided, the belt is less than 10% of the total value of the set. You raise General Note (GN) 30(e)(ii) in your ruling request, which refers to sets and de minimis values, and believe it is applicable to the importation of the subject pants and belt. You believe that as the belt is less than 10% of the total value of the set and the pants meet the requirements of heading 9914.99.20, HTSUS, the set qualifies for preferential tariff treatment under the BFTA TPL. ISSUE: Whether pants which are cut and sewn in Bahrain of third country fabric will qualify for preferential tariff treatment under the tariff preference level provided for in U.S. Note 13(c), Subchapter XIV, Chapter 99, and heading 9914.99.20 of the HTSUS when imported with a third country origin plastic belt. LAW AND ANALYSIS: On September 14, 2004, the United States and the Kingdom of Bahrain signed the United States – Bahrain Free Trade Agreement (BFTA). The provision of the BFTA were adopted by the United States with the enactment of the United States – Bahrain Free Trade Agreement Implementation Act (the “Act”), Public Law 109-169, 119 Stat. 3581 (19 U.S.C. § 3805 note), on January 11, 2006. On July 27, 2006, the President signed Proclamation 8039 (published in the Federal Register on August 1, 2006 (71 Fed. Reg. 43635)) which modified the HTSUS as set forth in Annexes I and II of Publication 3830 of the U.S. International Trade Commission to implement the Act. The modifications to the HTSUS included the addition of a new General Note 30, incorporating the relevant BFTA rules of origin as set forth in the Act, and the insertion throughout the HTSUS of the preferential duty rates applicable to individual products under the BFTA where the special program indicator “BH” appears in parenthesis in the “Special” rate of duty subcolumn. The modifications to the HTSUS also included a new Subchapter XIV to Chapter 99 to provide for temporary tariff rate quotas and applicable safeguards implemented by the BFTA. Paragraph 1 of Article 3.2 (Rules of Origin and Related Matters) of Chapter Three (Textiles and Apparel) of the United States – Bahrain Free Trade Agreement (BFTA) provides that except as provided in the Textiles and Apparel Chapter (including its Annexes), Chapter Four (Rules of Origin) applies to textile and apparel goods. With regard to “Preferential Tariff Treatment for Certain Non-Originating Textile and Apparel Goods,” paragraph 8 of Article 3.2 provides, in relevant part: Subject to paragraph 9, each Party shall accord preferential tariff treatment to the following goods, if they meet the applicable conditions for preferential tariff treatment under this Agreement other than the condition that they be originating goods: * * * (c) cotton or man-made fiber apparel goods provided for in Chapters 61 or 62 of the Harmonized System that are cut or knit to shape, or both, and sewn or otherwise assembled in the territory of a Party from fabric or yarn produced or obtained outside the territory of a Party; and Paragraph 9 sets forth the quantitative limitation and effective time period for the treatment provided for in paragraph 8. The purpose of paragraph 8 is to allow the use of non-originating fiber, yarns and fabrics in the production of certain goods for a set time period and to allow those goods to benefit from preferential tariff treatment under the BFTA up to a set quantitative limit. This preferential tariff treatment provision is set forth in Chapter 99, HTSUS. Paragraph 8 sets forth a condition for receipt of preferential tariff treatment for the enumerated goods provided for therein. The goods must “meet the applicable conditions for preferential tariff treatment under this Agreement other than the condition that they be originating goods.” The most obvious example of “applicable conditions” that applies to goods subject to paragraph 8 is the requirement that goods be imported directly from the territory of one Party into the territory of the other Party as set forth in Article 4.1 of the BFTA. This requirement appears in GN 30(b), HTSUS. Hence, your inquiry is specific to the eligibility of the pants and belt set for preferential tariff treatment under the temporary tariff rate quota (also referred to as tariff preference level (TPL)) provided for in U.S. Note 13(c), Subchapter XIV, Chapter 99, and heading 9914.99.20 of the HTSUS. Heading 9914.00.20, HTSUS, provides for: Imports from Bahrain, in an aggregate quantity not to exceed an annual total quantity of 65 million SME, of goods described in U.S. note 13 to this subchapter U.S. Note 13, Subchapter XIV, Chapter 99, states in relevant part: The “Free” rate of duty for heading 9914.99.20 in the “Special” subcolumn of rates of duty column 1 followed by the symbol “(BH)” shall apply to imports from Bahrain, in an aggregate quantity for the period from August 1, 2006 through December 31, 2006, inclusive, not to exceed a total quantity of 27,083,333 million square meters equivalent (SME), and in an aggregate quantity for each calendar year from 2007 through 2015, inclusive, not to exceed a total quantity of 65 million SME, of: * * * (c) cotton or man-made fiber apparel goods provided for in chapters 61 or 62 of the tariff schedule that are cut or knit to shape, or both, and sewn or otherwise assembled in the territory of Bahrain from fabric or yarn produced or obtained outside the territory of Bahrain or the United States; and * * * Unless otherwise provided, this note and heading 9914.99.20 are effective as to imports from Bahrain entered through the close of December 31, 2015. At the close of such date, this note and heading 9914.99.20 shall be deleted from the tariff schedule and shall cease to apply to any goods entered after that date. In this case, the pants meet the requirements of Note 13(c) quoted above. The fabric is produced outside the territory of Bahrain or the United States and is cut and assembled into the garment in the territory of Bahrain. The question is whether the third country plastic belt, which is classified with the pants at the time of entry pursuant to General Rule of Interpretation (GRI) 3(b), will preclude the pants from eligibility under heading 9914.99.20, HTSUS. See NY N197725 wherein the pants and belt set were classified as a set in subheading 6204.62.4021, HTSUS, which provides for, among other things, women’s woven cotton trousers. Classification was based on the pants providing the essential character to the set. With regard to textile or apparel goods classified as sets pursuant to GRI 3(b), the BFTA provides in paragraph 7 of Article 3.2 (which is implemented in GN 30(e)(ii), HTSUS): Notwithstanding the specific rules of origin set out in Annex 3-A, textile or apparel goods classified under General Rule of Interpretation 3 of the Harmonized System as goods put up in sets for retail sale shall not be regarded as originating goods unless each of the goods in the set is an originating good or the total value of the non-originating goods in the set does not exceed 10 percent of the value of the set determined for purposes of assessing customs duties. You believe that this rule which is applicable to textile or apparel GRI 3(b) sets for purposes of determining their originating status is equally applicable to such sets under the TPL provision. The question then is whether GN 30(e)(ii) is an “applicable condition[ ] for preferential tariff treatment under this Agreement” that applies to goods subject to the TPL set forth in U.S. Note 13, Subchapter XIV, Chapter 99. GN 30(e)(ii), HTSUS, is a rule for determining the originating status of a good. If a good fails to meet the requirements of the rule, then it is a non-originating good for purposes of the BFTA. The goods within the scope of heading 9914.99.20, HTSUS, are non-originating goods. Therefore, we find the terms of GN 30(e)(ii) are not applicable to goods of heading 9914.99.20, HTSUS, and the quantitative limits set forth in U.S. Note 13, Subchapter XIV, Chapter 99. In Headquarters Ruling Letter (HQ) 959813, dated April 10, 1998, Customs dealt with the eligibility of a comforter set in which the comforter, which determined the classification of the set, met the terms of the applicable TPL provision under the North American Free Trade Agreement (NAFTA), but the remaining items in the set did not. We stated therein “that as the comforter determines the classification of the set, the set receives the preferential duty rate.” See also New York Ruling Letter I80828, dated May 10, 2002. Similarly, the pants determine the classification of the pants and belt set, and the pants meet the terms of U.S. Note 13, Subchapter XIV, Chapter 99, the pants and belt set are eligible for the preferential treatment provided for in heading 9914.99.20, HTSUS, without consideration of the value of the belt in relation to the value of the set. HOLDING: The pants and belt set qualifies for preferential tariff treatment under subheading 9914.99.20, HTSUSA. This ruling is issued pursuant to the provisions of Part 177, CBP Regulations (19 CFR Part 177). If the specific factual situation as described above should change, particularly with respect to the valuation information on which this decision is based, this ruling may not be valid. 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 officer handling the transaction. Sincerely Monika R. Brenner, Chief Valuation and Special Programs Branch