Haggar Apparel Co. v. US, 93-06-00343. Slip Op. 96-110.

• Decision Date: 12 July 1996
• Docket Number: No. 93-06-00343. Slip Op. 96-110.,93-06-00343. Slip Op. 96-110.
• Citation: 938 F. Supp. 868
• Parties: HAGGAR APPAREL COMPANY, Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

938 F. Supp. 868

HAGGAR APPAREL COMPANY, Plaintiff, v. UNITED STATES, Defendant.

No. 93-06-00343. Slip Op. 96-110.

United States Court of International Trade.

July 12, 1996.

Sandler, Travis, & Rosenberg, Miami, FL (Gilbert Lee Sandler, Edward M. Joffe and Arthur K. Purcell), for plaintiff.

Frank W. Hunger, Assistant Attorney General, Washington, DC, Joseph I. Liebman, Attorney in Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, United States Department of Justice, New York City (Saul Davis), Washington, DC, for defendant.

OPINION AND JUDGMENT ORDER

DiCARLO, Chief Judge:

Plaintiff, Haggar Apparel Company challenges the denial of protests filed pursuant to section 515 of the Tariff Act of 1930, 19 U.S.C. § 1515 (1988). Haggar contends the United States Customs Service erroneously denied a duty allowance for fabric components manufactured in the United States and shipped to Mexico for assembly into men's pants. Jurisdiction is proper under 28 U.S.C. § 1581(a) (1988). The court finds the merchandise in question is entitled to a duty allowance.

BACKGROUND

The imported merchandise consists of men's pants assembled in Mexico from components manufactured in the United States. (Stip. Facts ¶¶ 9, 43.) Haggar markets these pants under the "Presstige" name. The most important performance characteristics of Presstige pants are crease retention and seam and surface flatness; the pants are "wash and wear" garments. (Tr. at 11-12, 40; Stip. Facts ¶¶ 18-19.)

Haggar achieves its performance requirements by using a "pre-cured," "post-cured," or pure synthetic fabric. (Stip. Facts ¶ 18.) Curing involves the application of heat to fabric treated with resin. Under the pre-cured method, resin and heat are both applied at the textile mill; Haggar purchases the fabric, cuts it to shape, assembles the components, and presses the completed garment. (Stip. Facts ¶ 20; Tr. at 12.) Under the post-cured approach, Haggar purchases resin-treated fabric from the mill, cuts, assembles, and presses the garment, and bakes it in a curing oven. Id. Both the pre-cured and post-cured methods use fabric of a cotton-synthetic blend, which is typically sixty percent cotton and forty percent polyester. (Stip. Facts ¶ 9; Tr. at 12.) Presstige pants made from a pure synthetic fabric require pressing, but do not require resin treatment or baking. (Tr. at 43.)

All methods for producing Presstige pants involve the same assembly and pressing process. Id. at 13. The only difference occurs after pressing. Id. In the post-cured method, the pants are loaded on an oven conveyer, baked, and unloaded from the conveyer. Improper pressing of the garment prior to the baking process will result in the product being sold as a "second," as proper pressing is essential to crease retention and surface flatness. (Stip. Facts ¶ 41.) In addition, a crease defect cannot be reversed after oven-baking. Id.

The garments at issue are Model 245 Presstige pants imported by Haggar in 1988 and 1989. (Stip. Facts ¶ 36; Haggar's Customs Protest at 3-4.) These pants were made from fabric style 2010, which is a post-cured fabric comprised of sixty percent combed cotton and forty percent fortrel polyester. (Stip. Facts ¶ 39.) The fabric and other components, such as buttons, thread, zippers, and trim items, were manufactured in the United States. Id. ¶¶ 47-50. Haggar cut the resin-treated fabric to shape, and exported the fabric and remaining components to Mexico, where they were assembled into pants by Haggar's wholly owned subsidiary, Haggarmex. Id. ¶¶ 9, 43-52. Following assembly, pressing, and baking, Haggar attached hangtags and tickets to the pants and packaged and shipped them to the United States. (Id. ¶ 52; Tr. at 153-154.)

Upon importation, Haggar sought a duty allowance for pre-1989 entries under item 807.00 of the Tariff Schedule of the United States hereinafter "TSUS", and for the remaining entries under subheading 9802.00.80 of the Harmonized Tariff Schedule of the United States hereinafter "HTSUS". Item 807.00, Subpart B, Part I, Schedule 8, TSUS (1987); Subheading 9802.00.80, Chapter 98, Section XXII, HTSUS (1987) (implemented into law on Jan. 1, 1989, pursuant to 19 U.S.C. § 3004 (1988)). Customs denied a duty allowance for the post-cured, cut-to-shape fabric components, but granted the duty allowance for all other components produced in the United States. For the post-cured fabric Customs assessed duties at the rate of 16.5 percent ad valorem under TSUS item 381.62.40, and 17.7 percent ad valorem under HTSUS subheading 6203.42.40. (Stip. Facts ¶ 11.)

DISCUSSION

Customs is entitled to a presumption of correctness as to its factual determinations. See 28 U.S.C. § 2639(a)(1) (1988) (presumption); see also Goodman Mfg., L.P. v. United States, 69 F.3d 505, 508 (Fed.Cir.1995) (limiting presumption to factual determinations). Plaintiff bears the burden of proving that Customs' determination is incorrect. 28 U.S.C. § 2639(a)(1).

Item 807.00(c) of the TSUS affords domestic goods exported for purposes of assembly a partial duty allowance upon re-entry into the United States. To qualify under item 807.00(c), fabricated components of the United States assembled abroad must not be advanced in value abroad outside of assembly and operations incidental to the assembly process. Item 807.00(c), TSUS. Item 807.00 provides:

807.00 Articles assembled abroad in whole or in part of fabricated components, the product of the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape, or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process such as cleaning, lubricating, and painting.

Item 807.00, TSUS. Pursuant to item 807.00, Customs assesses a duty upon eligible merchandise based "upon the full value of the imported article, less the cost or value of such products of the United States." Id. The HTSUS provides an identical exemption under Subheading 9802.00.80.

The parties do not challenge that the imported merchandise was advanced in value or improved in condition abroad. Further, they agree that the articles were exported in condition ready for assembly without further fabrication and that the articles have not lost their physical identity. (Stip. Facts ¶¶ 44-45.) Therefore in determining whether the components qualify for an item 807.00 trade allowance, the dispositive issue is whether ovenbaking is an operation incidental to assembly. To answer this question, the court turns to the Federal Circuit's decision in United States v. Mast Industries, Inc., 668 F.2d 501 (C.C.P.A.1981).

I. The Mast Factors

To determine whether button-holing and pocket-slitting operations were incidental to assembly of women's pants, the court in United States v. Mast examined the following factors:

(1) Whether the cost of the operation relative to the cost of the affected component and the time required by the operation relative to the time required for assembly of the whole article were such that the operation may be considered "minor."

(2) Whether the operations in question were necessary to the assembly process. ...

(3) Whether the operations were so related to assembly that they were logically performed during assembly.

Mast, 668 F.2d at 506. The Mast court also indicated a fourth consideration: "whether economic or other practical considerations dictate that the operations be performed concurrently with assembly." Id. at n. 7. These factors are not exhaustive, and all factors may not be relevant in each case. General Motors Corp. v. United States, 976 F.2d 716, 719-20 (Fed.Cir.1992). Nonetheless, the most basic question — whether such operations are of a minor nature incidental to the assembly process — remains the focus of the court's inquiry.

(A) Cost Comparisons

The first prong of the Mast comparisons examines whether the challenged operation constitutes a significant proportion of the total assembly process. To make this determination, the court must first define the scope of the challenged operation, because in making the cost determination, the court must weigh the expense and time costs of the challenged operation against the cost of assembly. According to plaintiff, the court should compare only ovenbaking against total assembly costs. (Haggar's Post Trial Br. at 1-2.)

Defendant argues the court must compare all non-assembly costs against only pure assembly expenses. (Def.'s Post Trial Br. at 2-3.) To accomplish this task, defendant first contends that operations included on the assembly side of the Mast comparisons are solely those operations which encompass the joinder of two solids. Id. at 16 & n. 10. Defendant argues that, at a minimum, the court must exclude all non-joinder operations, including minor chopping and trimming operations, from the assembly side of the Mast comparisons. Id. at 16-17.

Second, defendant contends the court must combine all non-joinder operations which were excluded from the assembly side of the Mast comparisons for comparison against pure assembly costs in order to ascertain whether the challenged operations were more than minor improvements, and therefore, not incidental to assembly. Id. According to defendant, failing to combine all non-joinder costs for comparison against pure assembly costs would result in a piece-meal analysis that would undermine "item 807.00 by allowing major and significant operations to be broken down to a point where each step could be called minor." Id. at 17 (quoting General Motors, 976 F.2d at 720). Defendant contends this court in Surgikos, Inc. v. United States, 12 Ct. Int'l Trade 242, 245, 1988 WL 24664 (1988) similarly combined all non-assembly operations for comparison against pure assembly operations in determining whether the...