• HQ 965006
• Jul 26, 2002

• Type : : Classification • HTSUS : 6302.32.1060; 6302.21.5050

CLA-2 RR:CR:TE 965006 mbg

Mr. Les Suzuki
Livingston International Consulting Group
1140 West Pender St., Suite 720
Vancouver BC
Canada V6E 4H5

RE: Classification, Status under the North American Free Trade Agreement and Country of Origin determination for Duvet Covers; General Note 12; Chapter Rule 1, GN12(t)/63, HTSUSA; 19 C.F.R. 12.130; 19 C.F.R. 102.21(c)(5); Last Country Where an Important Assembly or Manufacturing Process Occurred; Article 509

Dear Mr. Suzuki:

This is in response to your letter dated March 21, 2001, on behalf of your client, Daniadown Quilts, regarding the classification of two duvet covers under the Harmonized Tariff Schedule of the United States Annotated (“HTSUSA”) and the eligibility for duty free treatment under the North American Free Trade Agreement (“NAFTA”).

FACTS: You have submitted two manufacturing scenarios for our consideration. In the first scenario, the duvet cover is manufactured from fabric purchased from the U.S. and Israel. The “top” fabric is made from a 50 percent acrylic and 50 percent polyester jacquard woven fabric and the “other” side is made from a 100 percent cotton damask stripe woven fabric. A piping cord is sewn in the side and bottom seams. A zippered opening along one side allows the insertion of a duvet or comforter. The man-made fiber jacquard fabric is stated to be an originating product of the United States and the cotton damask stripe fabric was made in Israel. The fabrics are shipped to Canada where they are made into a duvet cover. You have also provided that the weight of the jacquard woven U.S. fabric is approximately 65 percent of the weight of the duvet cover’s fabric components and this fabric is also 65 percent of the duvet cover’s fabric costs.

In the second scenario, the duvet cover is manufactured from two plain woven cotton fabrics. The “top” fabric is printed while the “other” side is plain white. The printed fabric is stated to be U.S. originating and the plain white fabric is sourced in China. A piping cord is inserted in the seams on all four sides. A zippered opening along one side allows the insertion of a duvet or comforter. The two cotton fabrics are shipped to Canada where they are made into duvet covers.

ISSUES:

1) What is the proper classification of the subject duvet covers under the HTSUSA?

2) Whether the duvet covers are eligible for duty free treatment under the NAFTA?

3) What is the country of origin of the subject duvet covers? LAW AND ANALYSIS:

I. CLASSIFICATION

Classification under the HTSUSA is made in accordance with the General Rules of Interpretation (GRI). GRI 1 provides that the classification of goods shall be determined according to the terms of the headings of the tariff schedule and any relative Section or Chapter Notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRI may then be applied. Duvet covers are provided for pursuant to GRI 1 in heading 6302, HTSUSA, which provides for inter alia bed linen.

a. Scenario One There is no dispute that the subject duvet cover for scenario one is classified in heading 6302, HTSUSA. There is also no classification dispute concerning classification at the six digit level for bed linen which is not printed within subheading 6302.31 through 6302.39, HTSUSA, depending upon the textile composition of the fabric used in the manufacture of the duvet cover.

The subject duvet cover presented for scenario one is manufactured from both man-made fiber jacquard woven fabric and cotton damask striped fabric. The combination of these two different fabrics together create the completed duvet cover. Subheading 6302. 32, HTSUSA, provides for bed linen of man-made fibers and subheading 6302.31, HTSUSA, provides for bed linen of cotton. There is no eo nomine classification which provides for the subject duvet cover manufactured of different

fabrics. Accordingly, the subject merchandise cannot be properly classified based upon GRI 1 at the subheading level.

GRI 2(b) states that any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such materials or substance. However, the classification of goods consisting of more than one material or substance shall be according to the principles of GRI 3.

GRI 3 provides, in pertinent part:

When by application of Rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:

(a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.

(b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.

(c) When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.

(emphasis added).

The Harmonized Commodity Description and Coding System, Explanatory Notes (EN), represent the official interpretation of the Harmonized System at the international level (for the 4 digit headings and the 6 digit subheadings) and facilitate classification under the HTSUSA by offering guidance in understanding the scope of the headings and GRI. The EN, although not dispositive or legally binding, provide a commentary on the scope of each heading of the HTSUS, and are generally indicative of the proper interpretation of these headings. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).

Explanatory Note VIII to GRI 3(b), page 4, states:

The factor which determines essential character will vary as between different kinds of goods. It may, for example, be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of a constituent material in relation to the use of the goods. Application of the remaining GRI to the subject duvet cover requires the determination of which fabric imparts the essential character of the duvet cover for classification at the six digit level. You have provided that the jacquard woven fabric imparts 65 percent of the weight of the duvet cover’s fabric components. In addition you have provided that the jacquard woven fabric is 65 percent of the duvet cover’s fabric costs. It is Customs opinion that the man-made fiber jacquard woven fabric imparts the essential character to the duvet cover. Subsequently, at the eight digit level of classification within the Harmonized System, we must look at whether the subject merchandise contains piping. The piping used on the subject merchandise is a light colored twisted cording and therefore, classification is proper in subheading 6302.32.10, HTSUSA. Therefore, based upon GRI 3(b), the subject duvet cover would be properly classified in subheading 6302.32.1060, HTSUSA, which provides for other bed linen of man-made fibers containing piping.

b. Scenario Two

There is no dispute that the subject duvet cover for scenario two is also classified in heading 6302, HTSUSA. However, for classification at the six digit level for cotton bed linen, we must choose between “printed” in subheading 6302.21, HTSUSA, and “not printed” in subheading 6302.31, HTSUSA.

The sample submitted for scenario two consists of two woven cotton fabrics assembled for a duvet cover. One of the fabrics is a plain white woven cotton fabric and the other fabric is a printed cotton fabric. To determine the classification at the subheading level, we must again look to GRI 3(b) and determine which fabric imparts the essential character of the duvet cover. It is the opinion of Customs that the printed side of the duvet would impart the essential character because the purchaser would typically have this side visible for usage and therefore, classification is proper is subheading 6302.21, HTSUSA. Next, we must examine the piping for the sample presented in scenario two for a determination of the classification at the eight digit level. The piping on the duvet cover leads us to classification in subheading 6302.21.5050, HTSUSA.

II. NAFTA ELIGIBILITY

The duvet covers for scenario one and scenario two undergo processing operations in the United States and Canada and therefore may be eligible for the

NAFTA preferential duty free status if they are considered ”originating goods” and qualify to be marked as a good of Canada.

To be eligible for the duty preference provided under the NAFTA, goods must be “originating goods” within the rules of origin in General Note 12(b), HTSUSA. General 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 [.]

As both duvet covers contain fabrics that were made outside of the NAFTA territories, they are not considered “wholly obtained or produced” as required by General Note 12(b)(i), HTSUSA. However, if the non-originating materials (i.e., the fabrics from Israel and China) undergo a change in tariff classification described in subdivision (t) to GN 12, the duvet covers would be eligible for the preferential rate.

The NAFTA rule of origin for heading 6302, HTSUSA, requires:

A change to heading 6301 through 6302 from any other chapter, except from headings 5106 through 5113, 5204 through 5212, 5307 through 5308 or 5310 through 5311, chapter 54 through 55, or heading 5801 through 5802 or 6001 through 6006, provided that the good is both cut (or knit to shape) and sewn or otherwise assembled in the territory of one or more of the NAFTA parties.

However, Chapter Rule 1, GN 12(t)63, HTSUSA, states:

Chapter rule 1: For purposes of determining the origin of a good of this chapter, the rule applicable to that good shall only apply to the component that determines the tariff classification of the good and such component must satisfy the tariff change requirements set out in the rule for that good.

(emphasis added.)

In the subject duvet covers, the foreign fabrics do not meet the tariff shift rule, however, we are able to disregard the foreign fabrics since the chapter rule directs that only the component which determines the tariff classification must meet the terms of the tariff shift rule to be eligible for NAFTA preferential treatment. Furthermore, both scenarios have cutting and assembly occurring in Canada and therefore satisfy the remaining requirements of the rule which requires the good be both cut and sewn in the territory of one or more NAFTA parties.

For scenario one, Customs determined that the jacquard woven fabric manufactured in the U.S. imparted the essential character pursuant to GRI 3(b). Thus the component that determined the tariff classification of the duvet cover was the jacquard woven fabric. Since the jacquard woven fabric is stated to be an originating material it does not have to meet the terms of the tariff shift rule. Although the piping is considered when classifying the duvet cover at the 8-digit level, it is not a component that determines that tariff classification at the international level and does not have to meet the terms of the NAFTA tariff shift rule. Therefore, the duvet cover for scenario one would be eligible for NAFTA preferential treatment.

For scenario two, Customs determined that the duvet cover was properly classified as printed bed linen since the printed fabric imparted the essential character pursuant to GRI 3(b). Thus the component that determined the tariff classification of the duvet cover was the printed cotton fabric. Since the printed cotton fabric is stated to be an originating material it does not have to meet the terms of the tariff shift rule. Additionally, the piping is not subject to the tariff shift rule. Therefore, the duvet cover for scenario one would be eligible for NAFTA preferential treatment.

III. COUNTRY OF ORIGIN

On December 8, 1994, the President signed into law the Uruguay Round Agreements Act. Section 334 of that Act (codified at 19 U.S.C. 3592) provides new rules of origin for textiles and apparel entered, or withdrawn from warehouse, for consumption, on and after July 1, 1996. On September 5, 1995, Customs published Section 102.21, Customs Regulations, in the Federal Register, implementing Section 334 (60 FR 46188). Thus, effective July 1, 1996, the country of origin of a textile or

apparel product shall be determined by sequential application of the general rules set forth in paragraphs (c)(1) through (5) of Section 102.21. A. EXCEPTION FOR TEXTILE GOODS PROCESSED IN ISRAEL

Section 102.21(a) specifically states that the rules in Section 102.21 shall not apply "for purposes of determining whether goods originate in Israel or are the growth, product, or manufacture of Israel." The basis for the Israeli exception is Section 334(b)(5) of the Uruguay Round Agreements Act. Section 334(b)(5) provides that: This section shall not affect, for purposes of the customs laws and administration of quantitative restrictions, the status of goods that, under rulings and administrative practices in effect immediately before the enactment of this Act, would have originated in, or been the growth, product, or manufacture of, a country that is a party to an agreement with the United States establishing a free trade area, which entered into force before January 1, 1987. For such purposes, such rulings and administrative practices that were applied, immediately before the enactment of this Act, to determine the origin of textile and apparel products covered by such agreement shall continue to apply after the enactment of this Act, and on and after the effective date described in subsection (c), unless such rulings and practices are modified by the mutual consent of the parties to the agreement.

Israel is the only country which qualifies under the terms of Section 334(b)(5). As the Section 334 rules of origin for textiles and apparel products do not apply to Israel, we refer to the 19 CFR 12.130 rules of origin, the rules of origin applicable to textiles and textile products before the enactment of Section 334. Section 334(b)(5) makes clear that if country of origin was conferred in Israel under Section 12.130, Israel will now be accorded the same treatment. This interpretation of Section 334(b)(5) was confirmed in a Notice of a general statement of policy, Treasury Decision 96-58, appearing in the Federal Register, Vol. 61, No. 148, dated July 31, 1996. Accordingly, applying Section 12.130(b), the standard of substantial transformation governs the country of origin determination where textiles and textile products are processed in more than one country. The country of origin of textile products is deemed to be that foreign territory or country where the article last underwent a substantial transformation. Substantial transformation is said to occur when the article has been transformed into a new and different article of commerce by means of substantial manufacturing or processing.

Section 12.130(d) sets forth criteria for determining whether a substantial transformation of a textile product has taken place. This regulation states that these

criteria are not exhaustive; one or any combination of criteria may be determinative, and additional factors may be considered. Section 12.130(d)(1) states that a new and different article of commerce will usually result from a manufacturing or processing operation if there is a change in: (i) Commercial designation or identity, (ii) Fundamental character or (iii) Commercial use.

The factors to be applied in determining whether or not a manufacturing operation is substantial are set forth in Section 12.130(d)(2). The following will be considered:

(i) The physical change in the material or article; (ii) The time involved in the manufacturing or processing; (iii) The complexity of the manufacturing or processing; (iv) The level or degree of skill and/or technology required in the manufacturing or processing operations; (v) The value added to the article or material;

The fabric used to make the duvet cover in scenario one was woven and printed in Israel. The fabric was shipped to Canada where it was cut and assembled with other fabrics into the subject duvet cover.

Section 12.130(e)(1) describes manufacturing operations from which an article will usually be considered a product of the country in which those operations occurred:

(iv) Cutting of fabric into parts and the assembly of those parts into the completed article;

In the case of the instant merchandise, the substantial transformation occurs in Canada at the time of the cutting of the fabric and the assembly of those parts into the subject duvet cover. Accordingly, as Israel does not confer origin pursuant to Section 12.130, we then apply the rules in Section 102.21 to determine the country of origin.

B. SECTION 102.21 RULES OF ORIGIN FOR TEXTILE AND APPAREL PRODUCTS Paragraph (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 duvet covers are not wholly obtained or produced in a single country, territory or insular possession, paragraph (c)(1) of Section 102.21 is inapplicable.

Paragraph (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 of the foreign materials 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:" Paragraph (e) in pertinent part 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": For heading 6302, HTSUSA, the following tariff shift rule is applicable: 6301-6306 The country of origin of a good classifiable under heading 6301 through 6306 is the country, territory, or insular possession in which the fabric comprising the good was formed by a fabric-making process. The subject duvet covers consist of more than one fabric that are each formed in different countries. Accordingly, as the fabrics comprising the duvet covers are formed in more than one country, Section 102.21(c)(2) is inapplicable.

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 duvet covers are not knit and heading 6302, HTSUSA, is excepted from provision (ii), Section 102.21 (c)(3) is inapplicable.

Section 102.21 (c)(4) states, "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". The fabrics for the outer shell of the subject duvet covers are sourced in more than one country. As no one fabric is more important than the other, a single country of origin determination for the duvet covers cannot be made based on Section 102.21(c)(4).

Paragraph (c)(5) states that "Where the country of origin of a textile or apparel product cannot be determined under paragraph (c)(1), (2), (3) or (4) of this section, the

country of origin of the good is the last country, territory or insular possession in which an important assembly or manufacturing process occurred". Accordingly, in the case of the duvet covers, the country of origin is conferred by the last country in which an important assembly or manufacturing process occurred and therefore, the country of origin is Canada.  HOLDING:

The subject duvet cover manufactured of 50 percent acrylic and 50 percent polyester jacquard woven fabric and 100 percent cotton damask stripe fabric with piping cord is classified in subheading 6302.32.1060, HTSUSA, which provides for “Bed linen, table linen, toilet linen and kitchen linen: Other bed linen: Of man-made fibers: Containing any embroidery, lace, braid, edging, trimming, piping or applique work, Other: Other.”

The subject duvet cover manufactured of plain woven cotton fabric and printed cotton fabric is classified in subheading 6302.21.5050, HTSUSA, which provides for “Bed linen, table linen, toilet linen and kitchen linen: Other bed linen, printed: Of cotton: Containing any embroidery, lace, braid, edging, trimming, piping or applique work: Not napped, Other.”

The country of origin of the duvet covers is Canada. The duvet covers are entitled to the NAFTA “CA” duty rate of Free upon compliance with all applicable laws, regulations, and agreements.

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 181.100(a)(2). This section states that a ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect.

This ruling is being issued under the provisions of Part 181 of the Customs Regulations (19 C.F.R. 181). Should it be subsequently determined that the information furnished is not complete and does not comply with 19 CFR 181.100(a)(2), 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.
Sincerely,

Myles Harmon, Acting Director
Commercial Rulings Division