CLA-2 CO:R:C:S 557870 WAS

Mr. David King
7308 Haverford
Dallas, TX 75214

RE: Eligibility of certain lace table coverings for duty-free treatment under subheading 9802.00.90; country of origin marking; NAFTA; section 102.14; advanced in value; improved in condition

Dear Mr. King:

This is in response to your letter dated March 30, 1994, concerning the eligibility of certain polyester lace table coverings for duty-free treatment under subheading 9802.00.90, Harmonized Tariff Schedule of the United States (HTSUS). You have provided samples of the merchandise for our review. We have referred the classification issue that you have raised to our Textiles Classification Branch for a separate response.

FACTS:

You state that the merchandise consists of 100 percent polyester lace table coverings, such as runners, placemats and tablecloths, which are knit on a mayer double-jacquard machine. You state that these table coverings are knit in the U.S. from polyester of U.S.-origin which has been extruded in the U.S. These articles also undergo a dyeing and finishing operation in the U.S. The final product will be sold directly at retail by catalogue and/or sold wholesale.

You state that the polyester material will be sent to Mexico in the form of panels on a continuous roll. In Mexico, the material will be ripped and/or trimmed by hand into what you describe as separate units, which will subsequently be returned to the U.S. You note that for one of the samples (sample "B") which was submitted with your ruling request, the final products are easily identifiable in their finished form.

ISSUES:

(1) Whether the subject polyester lace table coverings are eligible for duty-free treatment under subheading 9802.00.90, HTSUS, when returned to the U.S.

(2) Whether the returned coverings are subject to country of origin marking requirements.

LAW AND ANALYSIS:

I. Eligibility for duty-free treatment of lace table coverings under subheading 9802.00.90, HTSUS.

One of the special provisions contained in Annex 300-B of the North American Free Trade Agreement ("NAFTA") is Appendix 2.4, which provides for the elimination of customs duties on textile and apparel goods that are assembled in Mexico from fabrics wholly formed and cut in the U.S. To implement this provision, a new tariff item was created in subheading 9802.00.90, HTSUS.

Subheading 9802.00.90, HTSUS, provides as follows:

Textile and apparel goods, assembled in Mexico in whole of fabrics wholly formed and cut in 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; provided that goods classifiable in Chapters 61, 62, or 63 may have been subject to bleaching, garment dyeing, stone-washing, acid-washing or perma-pressing after assembly as provided for herein.

In the instant case, you state that you plan on shipping polyester material in the form of panels on a continuous roll to Mexico where the panels will be ripped and/or trimmed by hand into separate units, which are then imported into Mexico. The process of ripping and/or trimming which you describe as taking place in Mexico does not constitute a proper assembly operation. The fabric is not being joined or assembled to itself or to another component. Therefore, we are of the opinion that the merchandise will not qualify for duty-free treatment under subheading 9802.00.90, HTSUS.

II. Country of Origin Marking Requirements

The marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. Part 134, Customs Regulations (19 CFR Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.

The country of origin marking requirements for a "good of a NAFTA country" are also determined in accordance with Annex 311 of the North American Free Trade Agreement ("NAFTA"), as implemented by section 207 of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057) (December 8, 1993) and the interim amendments to the Customs Regulations published as T.D. 94-4 (59 Fed. Reg. 109, January 3, 1994) with corrections (59 Fed. Reg. 5082, February 3, 1994) and T.D. 94-1 (59 Fed. Reg. 69460, December 30, 1993). These interim amendments took effect on January 1, 1994, to coincide with the effective date of the NAFTA. The Marking Rules used for determining whether a good is a good of a NAFTA country are contained in T.D. 94-4 (adding a new Part 102, Customs Regulations). The marking requirements for these goods are set forth in T.D. 94-1 (interim amendments to various provisions of Part 134, Customs Regulations).

Section 134.45(a)(2) of the interim regulations, provides that "a good of a NAFTA country may be marked with the name of the country of origin in English, French, or Spanish. Section 134.1(g) of the interim regulations, defines a "good of a NAFTA country" as an article for which the country of origin is Canada, Mexico or the United States as determined under the NAFTA Marking Rules.

In this case, you state that the lace panels knit in the U.S. from yarn extruded in the U.S. are exported to Mexico, a NAFTA country, where they are processed prior to being reimported into the U.S.

Part 102 of the interim regulations, sets forth the "NAFTA Marking Rules" for purposes of determining whether a good is a good of a NAFTA country for marking purposes. Section 102.11 of the interim regulations, sets forth the required hierarchy for determining country of origin for marking purposes. Section 102.11(a) of the interim regulations states that "[t]he country of origin of a good is the country in which:

(1) The good is wholly obtained or produced; (2) The good is produced exclusively from domestic materials; or (3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other requirements of these rules are satisfied."

Pursuant to section 102.11(a)(3) of the interim rules, the country of origin of a good is the country in which each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20. Section 102.20 of the interim rules, sets forth the specific tariff classification changes and/or other operations, which are specifically required in order for country of origin to be determined on the basis of operations performed on the foreign materials contained in a good. In the instant case, as the polyester lace material is classified in heading 6302, HTSUS, the change in tariff classification must be made in accordance with section 102.20(k), Section XI: Chapters 50 through 63, 6302 of the interim regulations, which states in part that:

a change to heading 6302 from any other heading, except from heading 5007, 5111 through 5113, 5208 through 5212, 5309 through 5311, 5407 through 5408, 5512 through 5516, 5602 through 5603, 5801 through 5804, 5806, 5809 through 5810, 5901, 5903, 5906 through 5907, and 6001 through 6002.

Therefore, each foreign material incorporated in the lace material must come from a heading outside of heading 6302. In the instant case, assuming that the polyester in its raw form is imported into the U.S., prior to being extruded in the U.S., the plastic material is classified in Chapter 39, HTSUS. Thus, a change to heading 6302 from a Chapter 39 provision constitutes an acceptable tariff shift under the interim marking rules. Therefore, the country of origin of the lace which is produced in the U.S. from imported polyester material in its raw form is the U.S.

Section 102.14 of the interim regulations, provides in pertinent part that no good, last advanced in value or improved in condition outside the United States has United States origin. If under any other provisions of Part 102 such a good is determined to be a good of the United States, that determination will be disregarded and the country or origin of the good will be the last foreign country in which the goods was advanced in value or improved in condition.

"Advanced in value" is defined in section 102.1(a) of the interim regulations as "an increase in the value of goods as a result of production with respect to that good, other than by means of those "minor processing" operations described in paragraphs (m)(5), (m)(6), and (m)(7) of this section." "Improved in Condition" is defined in section 102.1(i) as "the enhancement of the physical condition of a good as a result of production with respect to that good, other than by means of those "minor processing" operations described in paragraphs (m)(5), (m)(6) and (m)(7) of this section." (Minor processing operations described in paragraphs (m)(5), (m)(6) and (m)(7) include unloading, reloading or any other operation necessary to maintain the good in good condition; putting up in measured doses, packing, repacking, packaging, repackaging; testing, marking, sorting or grading).

In the instant case, we find that the U.S.-origin knit fabric which is shipped to Mexico in the form of panels on a continuous roll are advanced in value or improved in condition as a result of the cutting and/or trimming operations which take place in Mexico. Accordingly, pursuant to section 102.14 of the interim regulations, the country of origin of the imported lace table coverings (runners, placemats and tablecloths) is Mexico, the last foreign country in which the good was advanced in value or improved in condition. Therefore, for purposes of the country of origin marking requirements of 19 U.S.C. 1304, the imported goods must be marked to indicate that the country of origin of the lace table coverings is Mexico. Section 134.43(e) of the interim regulations, provides in part that "where the country of origin of an article is determined in accordance with section 102.14, part 102 of this Chapter, such article, at the choice of the importer, exporter or producer of the good may be marked, as appropriate, in a manner such as the following:

(1) Assembled in (name of foreign country) from U.S. components;

(2) Further processed in (name of country of origin) from U.S. materials;

(3) Product of (name of foreign country) made from U.S. components; or

(4) Product of (name of foreign country).

This ruling is being issued under the provisions of Part 183 of the Customs Regulations (19 CFR Part 183).

HOLDING:

Based on the information provided, as the fabric does not undergo a proper assembly operation in Mexico, the merchandise will not be eligible for duty-free treatment under subheading 9802.00.90, HTSUS. Furthermore, we find that the processing in Mexico advances in value and improves in condition the U.S.-origin fabric. Accordingly, pursuant to section 102.13 of the interim regulations, the country of origin of the imported table coverings is Mexico, the last foreign country in which the good was advanced in value or improved in condition.

Sincerely,

John Durant, Director
Commercial Rulings Division