CLA-2 RR:TC:TE 959834 jb

Angel L. Cooper
A.N. Deringer, Inc.
173 W. Service Road
Champlain, NY 12919

RE: Revocation of HQ 959592; country of origin determination for comforters and a pillow; Section 102.21(c)(4); most important manufacturing process; NAFTA; Section 102.19; NAFTA preference override

Dear Ms. Cooper:

In Headquarters Ruling Letter (HQ) 959592, dated October 1, 1996, this office issued to you a country of origin determination, on behalf of your client, Marimac Manufacturing, for certain comforters and a pillow which will be imported into the United States. We have reviewed that ruling and determined that it is in error.

FACTS:

The subject merchandise consists of a comforter made of a woven blend of 50 percent polyester and 50 percent cotton fabric, a comforter made of 100 percent woven cotton fabric, and a pillow measuring approximately 20 inches by 30 inches or 20 inches by 25-1/2 inches, made of a woven blend of 50 percent polyester and 50 percent cotton fabric. You state that the comforters do not contain any embroidery, lace, braid, edging, trimming, piping or applique work. The manufacturing operations are as follows:

PAKISTAN

- fabric is woven and printed; - fabric is cut; - comforter shells and pillow shell is assembled by sewing on three sides.

UNITED STATES

- 100 percent polyester fabric filling is formed.

CANADA

- the comforter shells and pillow shell are stuffed with the polyester filling; - the comforter shells and pillow shell are sewn on the fourth side to form the completed comforters and pillow; - the comforters and pillow are quilted.

ISSUE:

1. Whether the subject merchandise is eligible for duty free treatment under the North American Free Trade Agreement (NAFTA)?

2. What is the country of origin of the subject merchandise?

LAW AND ANALYSIS:

NAFTA Eligibility

In HQ 959592 it was determined that the subject merchandise did not qualify as a good of Canada because the good had not been transformed in Canada, that is, the non-originating material from Pakistan did not undergo the applicable change in tariff classification. This determination was based on the fact that the non-originating material consisted of the fabric woven in Pakistan. Upon review of that ruling we realize that this analysis is incorrect. The proper analysis for the non-originating material is based on the change in tariff classification undergone by non-originating material which is comprised of the comforter and pillow shells from Pakistan, not the woven fabric. The proper analysis is thus set forth below.

The subject comforters and pillow shell undergo processing operations in Canada which is a country provided for under the North American Free Trade Agreement (NAFTA). General Note 12, HTSUSA, incorporates Article 401 of the North American Free Trade Agreement (NAFTA) into the HTSUSA. Note 12(a) provides, in pertinent part:

* * *

(i) Goods that originate in the territory of a NAFTA party under subdivision (b) of this note and that qualify to be marked as goods of Canada under the terms of the marking rules... and are entered under a subheading for which a rate of duty appears in the "Special" subcolumn followed by the symbol "CA" in parentheses, are eligible for such duty rate... . [Emphasis added]

Accordingly, the comforters and pillow at issue will be eligible for the "Special" "CA" rate of duty provided they are NAFTA "originating" goods under General Note 12(b), HTSUSA, and they qualify to be marked as goods of Canada. Note 12(b) provides in pertinent part,

For the purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as "goods originating in the territory of a NAFTA party" only if--

(i) they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or

(ii) they have been transformed in the territory of Canada, Mexico and/or the United States so that--

(A) except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein, or

(B) the goods otherwise satisfy the applicable requirements of subdivisions (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note; or

(iii) they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials; or

* * * Accordingly, the subject merchandise qualifies as a good of Canada only if the good has been transformed in Canada such that the non-originating materials (comforter shells and pillow shell woven, cut and sewn in Pakistan) undergo the applicable change in tariff.

The subject comforters are classified in subheading 9404.90, Harmonized Tariff Schedule of the United States (HTSUS), which provides for, among other things, articles of bedding and similar furnishings. The pillows, which we note are adequate in size to provide support, are similarly classified in subheading 9404.90, HTSUS. For merchandise classifiable in this heading subdivision (t), chapter 94, states that:

A change to subheading 9404.90 from any other chapter, except from headings 5007, 5111 through 5113, 5208 through 5212, 5309 through 5311, 5407 through 5408 or 5512 through 5516.

In both the case of the comforters and the pillow, when the non-originating materials from Pakistan enter Canada they are classifiable in heading 6307, HTSUS. As heading 6307, HTSUS, is not excepted by subdivision (t), the merchandise undergoes the requisite change in tariff. As such, the merchandise qualifies for the NAFTA preference.

Country of origin

On September 5, 1995, Customs published in the Federal Register (60 FR 46188) T.D. 95-69 which set forth final amendments to the Customs Regulations to implement the provisions of section 334 (b) of the Uruguay Round Agreements Act ("the Act"), Public Law 103-465, 108 Stat. 4809, codified at 19 U.S.C. 3592, regarding the country of origin of textile and apparel products. These final regulations apply to goods entered, or withdrawn from warehouse, for consumption on or after July 1, 1996. The regulatory provisions in T.D. 95-69 that implement the basic origin principles of section 334(b) of the Act are contained in a new 102.21 of the Customs Regulations (19 CFR 102.21).

The final rule for the rules for determining country of origin of a good for purposes of Annex 311 of the NAFTA was published by Customs on June 6, 1996, in the Federal Register (61 FR 28932). Therein it was stated, in pertinent part:

New 102.21 was modeled on the approach taken in the interim Part 102 texts as published in T.D. 94-4 and thus incorporates a general statement of applicability (paragraph (a)), various definitions (paragraph (b)), general origin rules (paragraphs (c) and (d)), and specific tariff shift and/or other requirements (paragraph (e)) that apply under the second general rule. Of particular note for purposes of the present document is the definition of "textile or apparel product" in 102.21(b)(5) which delineates the class of goods covered by the 102.21 rules. That definition identifies those goods with reference to classification in the HTSUS and refers to Chapters 50 through 63 (that is, all of Section XI) of the HTSUS as well as to specific headings and 6-, 8- or 10-digit subheadings of the HTSUS that fall outside Section XI. Thus, if a good is classifiable in an HTSUS provision listed in 102.21(b)(5), precedence must be given to the 102.21 rules over any other regulatory provision with regard to that good, including any origin rules contained elsewhere in part 102.

Accordingly, as the subject merchandise is classified in subheading 9404.90, HTSUS, textile articles identified by 102.21(b)(5), the 102.21 rules take precedence over any other rules of origin to determine the appropriate country of origin.

Section 102.21(c)(1) states that, "The country of origin of a textile or apparel product is the single country, territory, or insular possession in which the good was wholly obtained or produced". As the subject merchandise is neither wholly obtained or produced in a single country, section 102.21(c)(1) is not applicable.

Section 102.21(c)(2) states that, "Where the country of origin of a textile or apparel product cannot be determined under paragraph (c)(1) of this section, the country of origin of the good is the single country, territory, or insular possession in which each foreign material incorporated in that good underwent an applicable change in tariff classification, and/or met any other requirement, specified for the good in paragraph (e) of this section."

Section 102.21(e) states that, "The following rules shall apply for purposes of determining the country of origin of a textile or apparel product under paragraph (c)(2) of this section":

9404.90 The country of origin of a good classifiable under subheading 9404.90 is the country, territory, or insular possession in which the fabric comprising the good was formed by a fabric-making process.

In the case of the subject merchandise as the fabric is formed in both Pakistan and the United States, the terms of section 102.21(e) are not applicable.

Section 102.21(c)(3) states that, "Where the country of origin of a textile or apparel product cannot be determined under paragraph (c)(1) or (2) of this section":

(i) If the good was knit to shape, the country of origin of the good is the single country, territory, or insular possession in which the good was knit; or

(ii) Except for goods of heading 5609, 5807, 5811, 6213, 6214, 6301 through 6306, and 6308, and subheadings 6209.20.5040, 6307.10, 6307.90, and 9404.90, if the good was not knit to shape and the good was wholly assembled in a single country, territory, or insular possession, the country of origin of the good is the country, territory, or insular possession in which the good was wholly assembled.

As the subject merchandise is not knit and provision (ii) excepts heading 9404.90, HTSUS, section 102.21(c)(3) is also not applicable.

Section 102.21(c)(4) states that, "Where the country of origin of a textile or apparel product cannot be determined under paragraph (c) (1), (2) or (3) of this section, the country of origin of the good is the single country, territory, or insular possession in which the most important assembly or manufacturing process occurred. In the case of the subject merchandise the most important manufacturing process occurs at the time of the fabric-making process of the outer shells of the comforters and pillow, which actually forms the merchandise. Moreover, basing the country of origin determination on the fabric-making process carries out the clear intent of Section 334 as expressed in Section 334(b)(2) and Part 102.21(c)(3)(ii). Accordingly, the fabric making process in Pakistan, where the fabric for the outer shells of the comforters and pillow shell is formed, constitutes the most important manufacturing process. Accordingly, the country of origin for this merchandise is Pakistan. However, as stated in section 102.19(a):

Except in the case of goods covered by paragraph (b) of this section, if a good which is originating within the meaning of 181.1(q) of this chapter is not determined under 102.11(a) or (b) or 102.21 to be a good of a single NAFTA country, the country of origin of such good is the last NAFTA country in which that good underwent production other than minor processing, provided that a Certificate of Origin (see 181.11 of this chapter) has been completed and signed for the good.

As this merchandise qualifies as a NAFTA originating good, applying the terms of section 102.19(a), the country of origin of the subject comforters and pillow is Canada.

HOLDING: Accordingly, as set forth in the analysis herein, HQ 959592 is revoked. The proper country of origin for the subject comforters and pillow is Canada for duty, quota and marking purposes.

The subject merchandise is eligible for the NAFTA preference.

The holding set forth above applies only to the specific factual situation and merchandise identified in the ruling request. This position is clearly set forth in section 19 CFR 177.9(b)(1). This section states that a ruling letter is issued on the assumption that all of the information furnished in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect.

Should it be subsequently determined that the information furnished is not complete and does not comply with 19 CFR 177.9(b)(1), the ruling will be subject to modification or revocation. In the event there is a change in the facts previously furnished, this may affect the determination of country of origin. Accordingly, if there is any change in the facts submitted to Customs, it is recommended that a new ruling request be submitted in accordance with 19 CFR 177.2.

Sincerely,

John Durant, Director
Tariff Classification Appeals
Division