CLA-2- OT:RR:CTF:TCM H133215 NCD
Port Director, Port of NY/NWK
U.S. Customs and Border Protection
1100 Raymond Blvd., Suite 402
Newark, NJ 07102
RE: Application for Further Review of Protest No: 4601-10-101100; Carpet
Tiles
Dear Port Director:
This is in reference to the Application for Further Review ("AFR") of Protest No. 4601-10-10110, timely filed on July 2, 2010, by Shayne Law Group, P.C., on behalf of Brinton's USA. The AFR concerns the classification of carpet tiles under the Harmonized Tariff Schedule of the United States (HTSUS). In coming to our decision, we have taken into account arguments presented in a supplemental submission dated July 9, 2015.
FACTS:
The merchandise at issue consists of 0.91 x 0.91 meter square Axminster carpet tiles (see Figure 1 below). The carpet tiles are comprised of a pile surface of 80 percent wool and 20 percent nylon with a polyvinyl chloride (PVC) backing. Prior to importation, they are cut from master rolls of patterned Axminster carpeting along demarcating lines woven into the carpeting (see Figure 2 below).
The protest at issue involves a shipment of carpet tiles entered on October 28, 2008. The carpet tiles were entered under subheading 5702.41.20, HTSUS, as "Carpets and other textile floor coverings, woven, not tufted or flocked, whether or not made up, including "Kelem", "Schumacks", "Karamanie" and similar hand-woven rugs: Other, of pile construction, made up: Of wool or fine animal hair: Other" with a rate of duty of Free. Customs and Border Protection (CBP) issued a notice of intent to rate advance the entry on February 19, 2010. The merchandise was liquidated on March 12, 2010, under subheading 5702.31.20, HTSUS, which provides for "Carpets and other textile floor coverings, woven, not tufted or flocked, whether or not made up, including "Kelem", "Schumacks", "Karamanie" and similar hand-woven rugs: Other, of pile construction, not made up: Of wool or fine animal hair: Other" with a rate of duty of 4 percent ad valorem. Protestant timely filed a protest with an application for further review on July 2, 2010, claiming that the correct classification for the carpet tiles is subheading 5702.41.20, HTSUS.
ISSUE:
Whether the carpet tiles are classified in subheading 5702.31.20, HTSUS, as carpets that are “not made up” or in subheading 5702.41.20, HTSUS, as carpets that are “made up.”
LAW AND ANALYSIS:
Initially, we note that the matter is protestable under 19 U.S.C. §1514(a)(2) as a decision on classification. The protest was timely filed, within 180 days of liquidation for entries made on or after December 18, 2004. (Miscellaneous Trade and Technical Corrections Act of 2004, Pub.L. 108-429, §2103(2)(B)(ii), (iii) (codified as amended at 19 U.S.C. § 1514(c)(3) (2006)).
Further Review of Protest No. 4601-10-101100 is properly accorded to
Protestant pursuant to 19 C.F.R. § 174.24(b) because the decision against which the protest was filed is alleged to involve questions of law or fact which have not been ruled upon by the Commissioner of Customs or his designee or by the Customs courts.
Merchandise imported into the United States is classified under the HTSUS. Tariff classification is governed by the principles set forth in the General Rules of Interpretation (GRIs) and, in the absence of special language or context which requires otherwise, by the Additional U.S. Rules of Interpretation. The GRIs and the Additional U.S. Rules of Interpretation are part of the HTSUS and are to be considered statutory provisions of law for all purposes.
GRI 1 requires that classification be determined first according to the terms of the headings of the tariff schedule and any relative section or chapter notes and, unless otherwise required, according to the remaining GRIs taken in their appropriate order. GRI 6 requires that the classification of goods in the subheadings of headings shall be determined according to the terms of those subheadings, any related subheading notes and, mutatis mutandis, to GRIs 1 through 5.
In understanding the language of the HTSUS, the Explanatory Notes (ENs) of the Harmonized Commodity Description and Coding System, which constitute the official interpretation of the HTSUS at the international level, may be utilized. The ENs, although not dispositive or legally binding, provide a commentary on the scope of each heading, and are generally indicative of the proper interpretation of the HTSUS. See T.D. 89-80, 54 Fed. Reg. 35127 (August 23, 1989).
The 2015 HTSUS subheadings under consideration are as follows:
5702 Carpets and other textile floor coverings, woven, not tufted or flocked whether or not made up, including "Kelem", "Shumacks", "Karamanie" and similar hand-woven rugs:
Other, of pile construction, not made up:
5702.31 Of wool or fine animal hair:
5702.31.20 Other
5702.41 Of wool or fine animal hair:
5702.41.20 Other
As a preliminary matter, it is undisputed that the subject merchandise is properly classified under heading 5702, HTSUS. Whether the carpet tiles are properly classified in subheading 5702.41.20, HTSUS, rather than in subheading 5702.31.20, HTSUS, turns on whether they qualify as “made up.” See Headquarters Ruling Letter (HQ) 967601, dated March 22, 2006.
Section XI, Note 7 of the HTSUS states, in relevant part, as follows:
For the purposes of this section, the expression "made up" means:
Cut otherwise than into squares or rectangles;
Produced in the finished state, ready for use (or merely needing separation by cutting dividing threads) without sewing or other working (for example, certain dusters, towels, tablecloths, scarf squares, blankets);
Cut to size and with at least one heat-sealed edge with a visibly tapered or compressed border and the other edges treated as described in any other subparagraph of this note, but excluding fabrics the cut edges of which have been prevented from unraveling by hot cutting or by other simple means;
Hemmed or with rolled edges, or with a knotted fringe at any of the edges, but excluding fabrics the cut edges of which have been prevented from unravelling by whipping or other simple means;
Cut to size and having undergone a process of drawn thread work;
Assembled by sewing, gumming or otherwise (other than piece goods consisting of two or more lengths of identical material joined end to end and piece goods composed of two or more textiles assembled in layers, whether or not padded); or
Knitted or crocheted to shape, whether presented as separate items or in the form of a number of items in the length.
Protestant asserts that Note 7(b) applies to the subject merchandise because the merchandise is in a finished state. It is undisputed that the remaining definitions of “made up” under Note 7 do not apply to the subject merchandise.
EN(II)(2) to Section IX explicates Note 7(b) as follows:
Made up articles.
Under Note 7 to this Section, the expression "made up" in Chapters 56 to 63 means:
******
(2) Produced in the finished state, ready for use (or merely needing separation by cutting dividing threads) without sewing or other working. Goods of this kind include products knitted or crocheted directly to shape and certain dusters, towels, table cloths, scarf squares, blankets, etc., with threads along the warp left unwoven or the weft edges cut to form a fringe. Such articles may have been woven separately on the loom, but may also have been simply cut from lengths of fabric which have bands of unwoven threads (generally warp threads) at regular intervals. These lengths of fabric, from which ready-made articles of the types described above may be obtained by simply cutting the dividing threads, are also considered as "made up" articles.
However, rectangular (including square) articles simply cut out from larger pieces without other working and not incorporating fringes formed by cutting dividing threads are not regarded as "produced in the finished state" within the meaning of this Note. The fact that these articles may be presented folded or put up in packings (e.g., for retail sale) does not affect their classification.
Consistent with Note 7(b) and the EN thereto, CBP construes the term “produced in the finished state” as strictly limited to textiles that essentially come off the loom in their final forms and require only minor, if any, manipulation prior to use. See HQ H003043, dated May 16, 2007; HQ 967601, dated March 22, 2006; HQ 955458, dated June 8, 1994; HQ 089592, dated September 20, 1991; HQ 089058, dated July 25, 1991. Thus, while rugs qualify as textile floor coverings that are produced in the finished state, carpeting, which requires additional working subsequent to production and prior to use, does not. See HQ 967601; see also NY N236265, dated January 4, 2013; NY N230051, dated August 30, 2013; NY J82270, dated April 1, 2003; NY 816967, dated December 6, 1995; NY 881225, dated December 23, 1992; see New York Ruling Letter (NY) N251236, dated March 27, 2014; NY N125435, dated October 22, 2010; NY N032537, dated July 15, 2008; NY N018718, dated November 6, 2007; NY N007202, dated March 14, 2007; NY L85591, dated June 27, 2005; NY L84138, dated April 27, 2005; NY D86779, dated January 28, 1999; and NY A82480, dated May 1, 1996 for examples of various rugs classified under subheading 5702.41.20. In HQ 967601, we specifically held that carpet rolls were not produced in the finished state because they required cutting to account for the dimensions of their area of installation. We reached this conclusion based on our finding that the carpet rolls underwent considerable alteration between the time of production and the time of use as installed carpeting.
For purposes of Note 7(b) coverage, the instant carpet tiles are essentially no different from the carpet rolls in HQ 967601, in that both products undergo considerable change in form following initial production. Like the merchandise in HQ 967601, the tiles originate from master rolls and are systematically cut into smaller pieces prior to their end uses as floor coverings. The only discernible differences between the two products are the timing and extent of the cutting; while the carpeting in HQ 967601 is cut after importation to installation specifications, the instant merchandise is cut into uniform tiles prior to entry. This shorter timetable and different stylistic approach for the cutting are not sufficient to render the carpet tiles finished within the meaning of Note 7(b) because some number of tiles will still need to be cut to size at installation and tacked or glued into place to create the designated pattern. Hence, the carpet tiles are not ready for use at time of production in the manner of area rugs classified in subheading 5702.41.20, as the latter come off the loom equipped for immediate use as floor coverings.
Moreover, although “dividing threads” is not defined in the Nomenclature, the EN to Note 7(b) specifically counsels that “rectangular (including square) articles simply cut out from larger pieces without further working and not incorporating fringes formed by cutting dividing threads” be excluded from Note 7(b) coverage. CBP has adopted this position in myriad rulings classifying textiles. See, e.g., HQ H003043 (ruling that mesh fabric cut to length from a larger master roll did not qualify for Note 7(b) coverage) and HQ 089058 (holding that that a cloth wipe cut in a square or rectangular shape from a larger piece was not produced in the finished state). In the present case, the carpet tiles are squares that are cut from a larger master roll along woven demarcations and, as a result, left without residual fringes. As such, they precisely fit the description of the articles deemed unfinished by the EN.
In both its protest and supplemental submission, Protestant presents numerous arguments in support of its contention that the subject carpet tiles are properly classified in subheading 5702.31.20, HTSUS. In the protest, for example, Protestant urges us to adopt a “modern” interpretation of “dividing threads” as including woven demarcations in the master carpet designed to guide cutting. However, demarcations incorporated into woven material are not comparable to the “bands of unwoven threads” with which the EN equates “dividing threads” (emphasis added). Moreover, the 2003 amendment to Note 7(c) to allow for heat-sealing in “made up” products, cited by Protestant as purported evidence of a broader expansion and modernization of Note 7, has no bearing on the proper interpretation of Note 7(b). Note 7(b) provides the sole definition within Note 7 of “products in the finished state,” whereas Note 7(c) deals with a completely alternative definition of “made up” involving a clearly unfinished product. Accordingly, the inclusion of a “complex” or “modern” procedure within the scope of Note 7(c) does not, in and of itself, reflect a broadening of products in the finished form for Note 7(b) purposes. We therefore decline to expand the scope of “dividing threads” as it appears in Note 7(b) to include woven material that does not contain dividing threads at all.
Protestant also contends in the protest that cutting along multiple dimensions, as in the present case, is anticipated by Note 7(b). Specifically, Protestant references HQ 555663, dated March 6, 1991, and HQ 557842, dated March 25, 1994, in stating that “Customs has long made a distinction between simple or incidental procedures such as cutting to size along one dimension and more complex procedures such as used in this case which involves cutting multiple dimensions.” However, the cases cited by Protestant involved an entirely different context, namely the classification of merchandise within heading 9802, which governs treatment of exported and returned goods. Our determinations in those cases that the cutting of the products at issue constituted “incidental operations” were mandated by 19 CFR 10.16(b)(6), which lists “cutting to length of…products exported in continuous length” as an acceptable assembly operation for purposes of classification in heading 9802. No such statute applies to heading 5702; rather, interpretation of 5702 is dictated solely by its own terms, Note 7, and any other section or chapter notes. Thus, our treatment of cutting techniques in HQ 555663 and HQ 557842 cannot simply be extrapolated to determinations of Note 7(b) coverage. Rather, treatment of cutting for Note 7(b) purposes is guided by the language of the note, the EN thereto, and the myriad CBP rulings construing the note. As discussed above, all of these sources support our classification position.
Protestant further contends in the protest that discussions regarding textile squares in the Customs Co-Operation Council (CCC) constitutes evidence of the Council’s intent to leave some textile squares within the scope of Note 7(b). Even assuming arguendo that these comments are indicative of the CCC’s intent, they do not actually advance Protestant’s position. It is clear that the CCC intended to extend Note 7(b) coverage to some textile squares, as it specifically carved out an allowance for such textiles when cut along dividing threads. Yet, nowhere in these referenced comments does the CCC suggest that Note 7(b) should also cover textiles created through multi-dimensional cutting or through cutting along dividing lines woven into a master roll. We cannot infer from the Council’s mere mention of possible distinctions among square textiles that it tended to shoehorn square carpet tiles like the instant ones into Note 7(b). Again, the EN to Note 7(b) explicitly counsels against such a conclusion.
In the supplemental submission, Protestant reiterates its previous contention that the demarcations woven into the subject carpet tiles constitute dividing threads for purposes of Note 7(b), and further argues that the EN to Note 7(b) should not guide our decision because it impermissibly narrows the scope of “made up” for purposes of Note 7(b). With regard to the first of these arguments, Protestant fails to cite any CBP ruling or court case that supports its contention that woven lines are coextensive with “dividing threads.” Instead, Protestant refers to several cases involving products that were either left uncut or were cut in entirely different manners than are the instant carpet tiles following importation. With regard to the second argument, Protestant misconstrues the EN to Note 7(b) as it relates to the term “made up” for purposes of Note 7. Contrary to Protestant’s contentions, the EN does not address, let alone modify, the general scope of “made up.” Rather, it applies narrowly to one of the several definitions of this term, i.e., the definition of “made up” as “produced in the finished state” as set forth in Note 7(b). As discussed above, Note 7(b) requires that separation of any articles be accomplished by the cutting of “dividing threads,” but it does not define, provide examples of, or otherwise establish the scope of “dividing threads.” Therefore, insofar as it states that the cutting of “dividing threads” should leave incorporating fringes on the edges of the article, the EN merely explains, rather than alters, the scope of “dividing threads” for purposes of Note 7(b). Because the EN is not inconsistent with Note 7 or any other provision of the HTSUS, it guides our interpretation of Note 7 and other relevant HTSUS provisions. See Alcan Food Packaging (Shelbyville) v. United States, 771 F.3d 1364, 1367 (Fed. Cir. 2014) (“We have said that such explanatory notes, though not enacted by Congress, ‘are ‘generally indicative’ of the proper interpretation of a tariff provision,’ and we have ‘credited the unambiguous text of relevant explanatory notes absent persuasive reasons to disregard it.’”).
Lastly, we note that in its protest, Protestant describes the carpet tiles as “imported already cut and in their final manufactured form” and “ready to use.” Note 7(b) defines “made up” as “produced in the finished state” (emphasis added). Therefore, it is immaterial whether the cutting and other preparation of the tiles has occurred prior to importation.
In light of the foregoing, we find that the carpet tiles were properly classified in subheading 5702.31.20, HTSUS, in the provision for "Carpets and other textile floor coverings, woven, not tufted or flocked, whether or not made up, including "Kelem", "Shumacks", "Karamanie" and similar hand-woven rugs: Other, of pile construction, not made up: Of wool or fine animal hair: Other."
HOLDING:
The carpet tiles are classified in subheading, 5702.31.20, HTSUS, as "Carpets and other textile floor coverings, woven, not tufted or flocked, whether or not made up, including "Kelem", "Shumacks", "Karamanie" and similar handwoven rugs: Other, of pile construction, not made up: Of wool or fine animal hair: Other." The applicable general column one duty rate is 4% ad valorem. You are instructed to DENY the protest.
In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-0SA, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the Protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision.
Sixty days from the date of the decision, the Office International Trade, Regulations and Rulings, will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division