Facts
Haggar Apparel Co., the respondent, designs, manufactures, and markets apparel for men. The matter arose from a refund proceeding for duties imposed on men's trousers shipped by Haggar to the United States from an assembly plant it controlled in Mexico. The fabric had been cut in the United States and then shipped to Mexico, along with the thread, buttons, and zippers necessary to complete the garments. There the trousers were sewn and reshipped to the United States. If that had been the full extent of it, there would not have been a dispute, for if there were mere assembly without other steps, all agree the imported garments would have been eligible for the duty exemption Haggar claimed. [1]
The Government claimed that the trousers were permapressed in Mexico. This process involved baking, which the Customs Service claimed was a process in addition to assembly, and as such denied Haggar a duty exemption. Haggar claimed the baking was simply part of the assembly process, or, in the words of the controlling statute, an "operation incidental to the assembly process." [2] Haggar's claim was difficult because Customs had issued an administrative regulation that deemed all permapressing operations as an additional step in manufacture, not part of assembly. The regulation had been adopted in 1975 by the Commissioner of Customs upon approval by the Treasury Department, after notice-and-comment rulemaking.
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