CLA-2 RR:CR:TE 963904 SS
Mr. Gilles Desjardins
Milgram
407, rue McGill, Suite 500
Montreal (Quebec), Canada, H2Y 2G7
RE: Classification, Status under the North American Free Trade Agreement and Country of Origin Determination for a Comforter Set; General Note 12; 19 CFR 102.21(d); Sets; 19 CFR 102.21 (c)(1); Wholly Obtained or Produced in a Single Country; 19 CFR 102.21(c)(4); Most Important Assembly or Manufacturing Process; 19 CFR 102.19(a); NAFTA Preference Override; CITA Directive Concerning Visa and Quota Reporting for Textiles and Textile Products Entered as Sets; Article 509
Dear Mr. Desjardins:
This letter is in reply to your letter dated March 1, 2000, concerning the classification, status under the North American Free Trade Agreement (NAFTA) and country of origin determination for a comforter set which will be imported into the United States.
FACTS:
The subject merchandise consists of a comforter, sheets, bed skirt and pillow shams. The sheets, bed skirt, pillow shams and the outer shell of the comforter are made from 65 percent polyester/35 percent cotton fabric woven in Pakistan. The quilted comforter is filled with a batting fabric made in Canada. The items will be packed together for retail sale as a comforter set. The manufacturing operations for the comforter set are as follows:
PAKISTAN
polyester/cotton fabric is woven,
comforter shells are made,
sheets, bed skirt and pillow shams are made.
CANADA
batting fabric is made,
the comforter shell is stuffed, sewn closed and quilted,
comforter, sheets, bed skirt and pillow shams are packed for retail sale and shipped to the US.
ISSUES:
How is the comforter set classified?
Is the comforter set eligible for preferential treatment under NAFTA?
What is the country of origin of the comforter set?
LAW AND ANALYSIS:
I. Classification
Classification of merchandise under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA) is in accordance with the General Rules of Interpretation (GRI), taken in order. GRI 1 provides that classification shall be determined according to the terms of the headings and any relative section or chapter notes.
The comforter is classifiable under heading 9404, HTSUSA. The sheets are classifiable under heading 6302, HTSUSA. The bed skirt is classifiable under heading 6303, HTSUSA. The pillow shams are classifiable under heading 6304, HTSUSA. Since classification of the submitted merchandise under a single heading cannot be determined by applying GRI 1, we must apply the other GRI.
GRI 3 provides for goods that are, prima facie, classifiable in two or more headings. GRI 3(b) provides that goods put up in sets for retail sale shall be classified as if they consisted of the material or component which gives them their essential character. According to the Harmonized Commodity Description and Coding System Explanatory Notes, the official interpretation of the Harmonized System at the international level, "goods put up in sets for retail sale" refers to goods which:
consist of at least two different articles which are, prima facie, classifiable in different headings;
consist of products or articles put up together to meet a particular need or carry out a specific activity; and
are put up in a manner suitable for sale directly to users without repacking.
The submitted set meets the qualifications of "goods put up in sets for retail sale." The components of the set consist of four different articles which are, prima facie, classifiable in different headings. They are put up together to carry out the specific activity of furnishing a bed and they are packaged for sale directly to users without repacking. Customs has previously held that the comforter is the component that gives a comforter set its essential character. See Headquarters Ruling Letter (HQ) 959813, dated April 10, 1998. Therefore, the comforter set is classifiable under heading 9404, HTSUSA.
The applicable subheading for the comforter set will be 9404.90.8522, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for: “[m]attress supports; articles of bedding and similar furnishing (for example, mattresses, quilts, eiderdowns, cushions, pouffes and pillows) fitted with springs or stuffed or internally fitted with any material or of cellular rubber or plastics, whether or not covered: Other: Other: Other: Quilts, eiderdowns, comforters and similar articles, With outer shell of man-made fibers.
II. Nafta Eligibility/Originating Status:
The comforter shell is stuffed, sewn closed and quilted in Canada. Additionally, the finished comforter is packaged with the sheets, bed skirt, and pillow shams in Canada. Thus, the subject comforter set undergoes 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 NAFTA into the HTSUSA. General 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 set forth in regulations issued by the Secretary of Treasury (without regard to whether the goods are marked), when such goods are imported into the customs territory of the United States 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, in accordance with section 201 of the North American Free Trade Agreement Implementation Act.
Accordingly, the comforter set at issue will be eligible for the “Special” “CA” rate of duty provided it is a NAFTA “originating” good under General Note 12(b), HTSUSA, and it qualifies to be marked as a good of Canada.
With respect to the “originating” requirement, 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-
they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or
they have been transformed in the territory of Canada, Mexico and/or the United States so that—
except as provided in subsection (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,
* * *
Since the comforter set is not wholly obtained or produced entirely in Canada, it will only qualify as an originating good of Canada if the comforter set has been transformed in Canada such that the non-originating materials undergo the applicable change in tariff classification.
The first question presented in this case is whether or not all of the items in the set must meet the terms of General Note 12(b), or, if only the item which imparts the essential character to the set (i.e., the comforter) must meet the terms of General Note 12(b). Customs has consistently held that all the items in the set must meet the terms of General Note 12(b). See HQ 956970, dated December 12, 1994; HQ 559421, dated September 16, 1996; HQ 560081, dated March 13, 1997; HQ 560577, dated August 4, 1997; HQ 560456, dated September 26, 1997; HQ 560992, dated July 6, 1998; and HQ 561326, dated April 26, 1999. Customs decision is consistent with the NAFTA which explicitly requires that each of the non-originating materials used in the production of the good undergo the applicable change in tariff classification.
Therefore, we must ascertain whether the non-originating materials (comforter shell, sheets, bed skirt and pillow shams) are transformed in Canada pursuant to General Note 12(b)(ii)(A). To qualify under this provision, the non-originating materials must undergo the change in tariff classification set forth in General Note12(t), HTSUSA. The comforter set is classifiable in subheading 9404.90.8522, HTSUSA. The NAFTA rule of origin for subheading 9404.90, HTSUSA, states that:
A change to subheading 9404.90 from any other chapter, except from heading 5007, 5111 through 5113, 5208 through 5212, 5309 through 5311, 5407 through 5408 or 5512 through 5516.
The non-originating comforter shell is classified under heading 6307, HTSUSA, when it leaves Pakistan. As headings 6302, 6303, 6304 and 6307, HTSUSA, are not excepted by subdivision (t), the non-originating materials undergo the requisite change in tariff classification.
The fact that the sheets, bed skirt and pillow shams were merely packaged together in the set in Canada does not disqualify the set from being considered an originating good. This issue has been addressed in HQ 561326, dated April 26, 1999. In comparing the NAFTA to the United States-Canada Free-Trade Agreement and 19 CFR 102.17, Customs explained that there is no language in General Note 12, HTSUSA, which would disqualify a good from obtaining originating status by virtue of merely having undergone simple packaging or combining operations. Thus, non-originating items may undergo the requisite tariff shift under General Note 12(t), HTSUSA, when packaged in Canada with NAFTA originating items.
The comforter set qualifies as an originating good. Accordingly, the comforter set will be entitled to the special “CA” rate of duty if the comforter set qualifies to be marked as a good of Canada and provided that all other NAFTA requirements are met.
III. Country of Origin/NAFTA Marking Rules
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.
Additionally, Section 102.21(d) addresses the treatment of sets for country of origin purposes. Section 102.21(d) provides the following:
Where a good classifiable in the HTSUS as a set includes one or more components that are textile or apparel products and a single country of origin for all of the components of the set cannot be determined under paragraph (c) of this section, the country of origin of each component of the set that is a textile or apparel product shall be determined separately under paragraph (c) of this section.
Thus, although the classification and NAFTA originating status of the comforter set is based on the comforter, per the terms of Section 102.21(d), the country of origin of each item in the set must be determined separately if there is not a single country of origin for the entire set.
Paragraph (c)(1) states that “[t]he 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.” The sheets, bed skirt and pillow shams were wholly obtained or produced in Pakistan. Thus, the country of origin for the sheets, bed skirt and pillow shams initially appears to be Pakistan. Since the subject comforter was not wholly obtained or produced in a single country, territory or insular possession, paragraph (c)(1) of Section 102.21 is inapplicable to the comforter.
Paragraph (c)(2) states that “[w]here 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 “[t]he 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:”
HTSUS Tariff shift and/or other requirements
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.
The subject comforter is made from a shell fabric and a batting fabric. Since the fabrics comprising the comforter are formed in more than one country, 102.21(c)(2) is inapplicable to the comforter.
Section 102.21(c)(3) states that, “[w]here 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 comforter is not knit and subheading 9404.90, HTSUSA, is excepted from provision (ii), Section 102.21(c)(3) is inapplicable.
Section 102.21 (c)(4) states, “[w]here 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 fabric making process of the comforter’s outer shell in Pakistan constitutes the most important manufacturing process. Therefore, the country of origin of the subject comforter initially appears to be Pakistan.
However, Section 102.19(a) provides for a NAFTA override and states as follows:
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.
Thus, the next question presented in this case is whether or not the NAFTA override entitles all the items in the set to be marked “CA”. Since we have previously determined that the items in the set are “originating” for purposes of the NAFTA preference rule applicable to the set, it is Customs belief that Section 102.19(a) operates as an override for all the items in the set and all the items are entitled to be marked “CA”. Although packing is considered a non-qualifying operation under Section 102.17, the assembly of the comforter in Canada meets the requirement that the good underwent production other than minor processing. Customs has previously stated that as long as one item in the set undergoes production other than minor processing, the remaining items in the set will receive the benefit of the NAFTA override. See HQ 559421, dated September 16, 1996; HQ 560577, dated August 4, 1997; HQ 560456, dated September 26, 1997; and HQ 560992, dated July 6, 1998. Thus, each item in the set qualifies to be marked “CA”.
As each item in the comforter set has been found to be originating and qualifies to be marked “CA”, the comforter set is entitled to the special “CA” duty rate, provided that all other requirements of the NAFTA are met.
Under the analysis set forth above, the sheets, bed skirt and pillow shams, wholly produced in Pakistan and merely packaged with the comforter in Canada, would not be subject to quota and visa requirements. However, the Committee for the Implementation of Textile Agreements (CITA) has directed Customs to apply applicable quota and visa requirements to textiles and textile products which are classified as components of a set. See 54 Fed. Reg. 35223 (August 24, 1989) clarifying 53 Fed. Reg. 52765 (December 29, 1988). CITA recently reconfirmed the previous directive concerning the applicability of visa requirements and quota reporting of textiles and textile products entered as parts of sets under GRI 3 of the HTSUSA. See 67 Fed. Reg. 12977 (March 20, 2002). The directive states in pertinent part:
…all applicable visa and quota requirements will apply for textiles and their products which are classified as parts of a set. The rule applies to all items which, if imported separately, would have required a visa and the reporting of quota.
Customs recognizes that Section 204 of the Agricultural Act of 1956, codified at 7 U.S.C. §1854, as amended, authorizes the President to limit the importation into the United States of any textiles or textile products and that the authority to supervise and implement all textiles agreements and arrangements negotiated pursuant to 7 U.S.C. §1854 has been delegated to CITA. See Executive Order 11651, 37 Fed. Reg. 4699 (March 4, 1972).
If the comforter had been imported separately it would have qualified as an originating good and to be marked “CA” by operation of the NAFTA override of Section 102.19(a). Thus, the country of origin for the comforter is Canada for duty, marking and quota/visa purposes. However, if the sheets, bed skirt and pillow shams had been imported separately they would not have qualified as originating goods and would not receive the benefit of the NAFTA override. Thus, the country of origin of the sheets, bed skirt and pillow shams for duty and marking purposes is Canada but the country of origin for quota/visa purposes is Pakistan.
HOLDING:
The subject comforter set is classified, based on the comforter, in subheading 9404.90.8522, HTSUSA, which provides for comforters with an outer shell of man-made fibers.
By virtue of each item in the set meeting the applicable tariff shift rule, the comforter set is originating for NAFTA purposes.
By virtue of the NAFTA override, each item in the set must be marked country of origin Canada in order to receive preferential treatment under the NAFTA as claimed.
All of the items in the set are entitled to the NAFTA “CA” special duty rate. However, since Pakistan is the country of origin for the sheets, bed skirt and pillow shams for quota and visa purposes, they are subject to quota and visa requirements. The applicable textile category code is 666.
The designated textile and apparel category may be subdivided into parts. If so, visa and quota requirements applicable to the subject merchandise may be affected. Since part categories are the result of international bilateral agreements which are subject to frequent renegotiations and changes, to obtain the most current information available, we suggest that you check, close to the time of shipment, the Status Report on Current Import Quotas (Restraint Levels), an internal issuance of the U.S. Customs Service, which is available for inspection at your local Customs office. The Status Report on Current Import Quota (Restraint Levels) is also available on the Customs Electronic Bulletin Board (CEBB) which can be found on the U.S. Customs Service Website at www.customs.treas.gov.
Due to the changeable nature of the statistical annotation (the ninth and tenth digits of the classification) and the restraint (quota/visa) categories applicable to textile merchandise, you should contact your local Customs office prior to importation of this merchandise to determine the current status of any import restraints or requirements.
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,
John Durant, Director
Commercial Rulings Division