CBP Rules That CAFTA Eligibility Applies to Threads Made of Fibers From Non-CAFTA Countries

Garments assembled with thread manufactured in Honduras with fibers from countries outside the Dominican Republic-Central America Free Trade Agreement can still be eligible for CAFTA-DR benefits, CBP said in a recent ruling. The July 10 ruling, HQ H296285, was in response to a request from Coats Honduras about the eligibility of such clothes. The company uses fibers from the CAFTA-DR region but was considering making a change in sourcing, it said.

CBP said that to determine eligibility for the tariff preferences, it's necessary to determine if the yarns at issue "meet the definition of a 'wholly formed' yarn so as not to preclude otherwise DR-CAFTA eligible apparel from eligibility." Yarn is considered to be wholly formed in a CAFTA-DR country if the production, beginning with the extrusion of filaments or spinning of fibers into yarn, and finishing takes place in that country.

The company's spun yarn is spun from "nonoriginating fibers into a single yarn in Honduras," puts them in a twisting machine and inserts a "Z-twist" before finishing the thread for sale to garment producers, CBP said. "As the nonoriginating fibers are spun into yarns and are finished into thread in Honduras, the use of these fibers will not disqualify garments which are otherwise eligible for preferential tariff treatment under DR-CAFTA," CBP said. That's similarly true of the core spun yarns, in which "the filament core is extruded in the territories of the DR-CAFTA," the agency said. "As the core spun yarn has its core filament extruded in the DR-CAFTA and is spun together with nonoriginating fibers to form yarn in Honduras," garments made from that yarn are also eligible for the tariff preferences, CBP said.