June 12, 2009 CBP Bulletin Notice on New Interpretation on Elastomeric Yarns and DR-CAFTA Eligibility of Hosiery, Etc.

Proposed modification of ruling; proposed revocation of treatment. CBP is proposing to modify one ruling on the DR-CAFTA eligibility of certain hosiery made of non-originating elastomeric yarn. Additionally, CBP proposes that this notice covers any rulings on this merchandise that may exist but have not been specifically identified. CBP is also proposing to revoke any treatment it has previously accorded to substantially identical merchandise.

CBP states that any party who has received an interpretive ruling or decision on the merchandise that is subject to the proposed modification and revocation, or any party involved with a substantially identical transaction, should advise CBP by July 12, 2009, the date that written comments on the proposed ruling are due. Furthermore, CBP states that an importer's failure to advise CBP of such rulings, decisions, or substantially identical transactions may raise issues of reasonable care on the part of the importer or its agent for importations subsequent to the effective date of the final decision on this notice.

Hosiery made of non-DR-CAFTA yarn. The products are described as pantyhose, Just My Size^TM style 93315-E3J and Hanesbrands Silk Reflections style 717. Style 93315-E3J panty is composed of 92% nylon and 8% spandex. The legs are composed of 88% nylon and 12% spandex. Style 717 panty is composed of 82% nylon and 18% spandex. The legs are composed 85% nylon and 15% spandex. Three samples of yarn were also submitted. Style C3M 8707C consists of a spandex core with a polyester yarn wrapped around the core. Style C3M S136M consists of a spandex core with a texturized nylon yarn wrapped around the core. Style C3M S152M consists of a spandex core with a nylon yarn wrapped around the core. All three are gimped yarns.

The yarns will be produced in non-DR-CAFTA countries and then shipped to Guatemala. In Guatemala, the hosiery will be knit to shape from the non- DR-CAFTA yarns. The hosiery will then be shipped directly to the U.S.

CBP is proposing to issue HQ H045716 in order to modify NY N028235 and determine that the hosiery is not eligible for duty-free treatment under the DR-CAFTA. The classification of the hosiery in NY N028235 remains unchanged.

CBP is proposing this change based on the implementing legislation for the DR-CAFTA, Pub. L. 109-53, 119 Stat. 462, Section 203(f)(3) (19 USC 4033(f)(3)), and four 1956 - 1992 court cases.¹

CBP states that 19 USC 4033(f)(3) provides in relevant part:

(3) TEXTILE OR APPAREL GOODS.-

(A) GENERAL.-Except as provided in subparagraph (B), a textile or apparel good that is not an originating good because certain fibers or yarns used in the production of the component of the good that determines the tariff classification of the good do not undergo an applicable change in tariff classification, set out in Annex 4.1 of the Agreement, shall be considered to be an originating good if-

(i) the total weight of all such fibers or yarns in that component is not more than 10 percent of the total weight of that component; or

(ii) the yarns are those described in section 204(b)(3)(B)(vi)(IV) of the Andean Trade Preference Act (19 U.S.C. 3203(b)(3) (B)(vi)(IV))(as in effect on the date of the enactment of this Act).

(B) CERTAIN TEXTILE OR APPAREL GOODS.-A textile or apparel good containing elastomeric yarns in the component of the good that determines the tariff classification of the good shall be considered to be an originating good only if such yarns are wholly formed in the territory of a CAFTA-DR country.

CBP states it is clear from the implementing legislation above that elastomeric yarn contained in the component that determines the classification of a textile or apparel good must be ''wholly formed'' in the territory of a DR-CAFTA party.

However, when Pub. L. 109-53 was implemented in HTS General Note 29, the requirement set forth in 19 USC 4033(f)(3)(B) regarding elastomeric yarns was grouped in a paragraph which also set forth the de minimis rule (i.e., GN 29(d)(i)).

Nevertheless, CBP argues that the requirement that elastomeric yarn must be wholly formed in the territory of a DR-CAFTA party is a separate and distinct requirement which is applicable irrespective of whether the textile or apparel good contains a fiber or yarn subject to the de minimis rule.

CBP states that this provision in GN 29(d) applies regardless of whether the tariff shift rule is met. Consequently, the non-originating elastomeric yarn disqualifies the hosiery from eligibility for duty-free treatment under the DR-CAFTA.

¹CBP cites several prior court cases in which the language of the statute itself was ruled to be determinative. In Rico Import Co. v. United States, Slip Op. 92-146, dated August 27, 1992, the court stated that "it is well settled that tariff acts must be construed to carry out the intent of the legislature." See Nippon Kogaku (USA), Inc. v. United States, 69 CCPA 89, 92, 673 F.2d 380, 382 (1982)(citing Sandoz Chem. Works, Inc. v. United States, 43 CCPA 152, 156, C.A.D. 623 (1956)). The first place to look to establish the intent of Congress is the language of the statute itself. Consumer Prod. Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980).

June 12, 2009 CBP Bulletin (Vol. 43, No. 24) available athttp://www.cbp.gov/xp/cgov/trade/legal/bulletins_decisions/bulletins_2009/

BP Note

1. USC 4033 (f) is titled: "De minimis amounts of nonoriginating materials."

(See future issue of ITT for additional information on this proposed ruling modification.)