OT:RR:CTF:FTM H313168 JER
Ms. Jesica Cortez and Mr. Renato Lopez Avila
Lerdo
Ciudad de México
San Simón Tolnahuac, N/A 06920 Mexico
RE: USMCA Eligibility; Narrow Elastic Fabric
Dear Ms. Cortez,
This is in response to your correspondence, dated August 5, 2020, in which you requested a binding ruling, on behalf of Intimark S. De. R.L. DE C.V., (“Intimark”), concerning the application of Note 2 to Chapter 61, under the United States-Mexico-Canada Agreement (“USMCA”), as implemented in General Note (“GN”) 11, HTSUS. Your request was forwarded to this office from the National Commodity Specialist Division for response. Our ruling is set forth below.
FACTS:
Intimark manufactures certain apparel products in Mexico, classified under Chapter 61, HTSUS. These products contain narrow elastic fabric, referred to as “elastic bands,” which are either woven or knitted. The narrow elastic fabric is used to form elastic bands, which are ultimately used to form waistbands for the apparel products in question. Intimark obtains the narrow elastic fabrics from Stretchline de Mexcio s de R.L. C.V. (“Stretchline”), a production company based in Mexico.
According to Intimark, Strechline produces the elastic bands at their facility in Mexico from the yarn of various origin. Specifically, in producing the narrow elastic fabric, Stretchline obtains yarn from the producers in the following countries: China, Italy, Spain, Vietnam, India, and the United States. As indicated by Intimark in its ruling request, the production process in Mexico occurs in four stages as follows: (1) management of the yarn, which includes winding the yarn onto bobbins, tangled or linking two yarns as follows: yarn making (wherein the yarn is prepared into a skein of yarn for their dyeing); twisting (rolling nylon or polyester over spandex using a single or double yarn) and hatching (the twisted material is winded on bobbins with different number of endings); (2) knitting or weaving of narrow elastic fabric (in this phase the different kinds of yarns are linked in different forms to knit elastic tapes), three different methods are used: knitting, jacquard, and weaving; (3) dyeing the elastic bands (utilizing two techniques: dyeing exhaustion (for dark colors) and continuous dyeing (for light colors); and, (4) packaging, which includes winding the elastic bands onto reels, layering and corrugating the elastic bands into boxes and lapping or creasing the elastic bands in boxes. Once the yarn has been processed into narrow elastic fabric (elastic bands), Strechline delivers the narrow elastic fabric to Intimark where the finished elastic bands are incorporated into the various apparel products as waistbands.
Intimark provided a video demonstrating how the elastic fabric is formed into waistbands and sewn into other fabric to form the apparel products. The requestor also provided multiple “Manufacturer’s Affidavit of Origin of Fabric” documents and multiple “Certificate of Origin” documents from Stretchline, indicating the origin of the yarn used to produce the narrow elastic fabric in Mexico.
ISSUE:
Whether the narrow elastic fabric in question is considered originating for purposes of Note 2 to Chapter 61, GN 11, HTSUS.
LAW AND ANALYSIS:
The United States-Mexico-Canada Agreement (“USMCA”) was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. § 4511(a)). GN 11 of the HTSUS implements the USMCA. GN 11(b) sets forth the criteria for determining whether a good is an originating good for purposes of the USMCA. GN 11(b) states:
For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country, as defined in subdivision (l) of this note, is eligible for the preferential tariff treatment provided for in the applicable subheading and quantitative limitations set forth in the tariff schedule as a “good originating in the territory of a USMCA country” only if—
the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries;
the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials;
the good is a good produced entirely in the territory of one or more USMCA countries using nonoriginating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o)); or
(iv) except for a good provided for in any of chapters 61 through 63—
…
According to Intimark, the imported apparel products are classified in headings 6107, HTSUS, 6104, HTSUS and 6108, HTSUS. The subject narrow elastic fabric, which is incorporated into the imported apparel products, is classified under heading 6002, HTSUS, if knitted and under subheading 5806.20, HTSUS, if woven.
Chapter Rule 2 to Chapter 61, HTSUS, under GN 11 states as follows:
Effective on January 1, 2022, and notwithstanding chapter rule 1 of this chapter, a good of this chapter containing fabrics of subheading 5806.20 or heading 6002 is originating only if such fabrics are both formed from yarn and finished in the territory of one or more of the USMCA countries.
Therefore, upon entry into force of the USMCA on July 1, 2020, narrow elastic fabric of subheading 5806.20 or heading 6002 (in this case, used in apparel products of Chapter 61) may be sourced from anywhere. However, effective January 1, 2022, apparel containing narrow elastic fabrics of subheading 5806.20 or heading 6002 will be considered originating only if such fabrics are both formed from yarn and finished in the territory of one or more of the USMCA countries. The apparel article must also satisfy the tariff shift requirement(s) that apply to the good.
At issue is whether the narrow elastic fabric, whether knitted (6002) or woven (5806.20) is considered “formed from yarn and finished” in the territory of Mexico for purposes of Note 2 to Chapter 61, GN 11, HTSUS. In that regard, Schedule I(1)(a) of the Uniform Regulations Regarding the Interpretation, Application, and Administration of Chapter 4 (Rules of Origin) and Related Provisions in Chapter 6 (Textile and Apparel Goods) of the USMCA provides as follows:
(a) for the purpose of Chapter 61, Note 2 or Chapter 62, Note 3 of Annex 4–B, a fabric of subheading 5806.20 or heading 60.02 is considered formed from yarn and finished, or formed and finished from yarn, in the territory of one or more Parties if all production processes and finishing operations, starting with the weaving, knitting, needling, tufting, or other process, and ending with the fabric ready for cutting or assembly without further processing, took place in the territories of one or more of the USMCA countries, even if non-originating yarn is used in the production of the fabric of subheading 5806.20 or heading 60.02[.]
See 19 C.F.R. Part 182, Appendix A, Schedule I (PSRO Annex). Inasmuch as the terms “formed from yarn and finished” or “formed and finished from yarn” are defined by the USMCA, the regulations require that fabric subject to Note 2 to Chapter 61, GN 11, HTSUS, conform to that definition.
Intimark provided Affidavits of Origin signed by the manufacturer of the narrow elastic fabric, Stretchline, which attest to fact that the country of origin of the yarn used to produce the elastic fabric included: China, Taiwan, United States, Italy, Spain, Vietnam, and India. The Stretchline Affidavits of Origin further affirmed that the yarn from those countries was processed and produced into narrow elastic fabric at their facility in Mexico.
According to the information provided, the processing of the yarn into narrow elastic fabric occurs in four stages of production. These four stages of production are all performed by Strechline in Mexico. The first stage includes winding the yarn onto bobbins. Next, the yarn is tangled or linked by linking two strands of thread or yarn and twisting them together. Stage two consists of knitting or weaving the yarn (depending on whether the fabric is intended to be woven or knitted) into a solid piece of fabric (knitted or woven). In the case of woven fabric, the yarn is woven with a rigid yarn (or tape) by way of weft and weave production. In the case of the knitted fabric, the knitting technique produces a flat fabric. Also, during stage two there is a process referred to as Jacquard, which is similar to the weft and weave production in the first method, however, this method includes the attachment of a brand or logo. Stage three is where the fabric is dyed into a specified color. The fourth and final stage is referred to as the packaging stage, which involves the packaging of the finished elastic fabric bands in preparation for final production at the Intimark’s facility. The completed narrow elastic fabric bands are creased, layered and corrugated and then placed into boxes for delivery to Intimark. Finally, the finished narrow elastic fabrics are received by Intimark where they are cut to shape and assembled to the material used to form the finished apparel products – as waist bands.
Based on the manufacturing process of the narrow elastic fabric as performed at the Stretchline facility, and the information provided, the subject narrow elastic fabric meets the definition of the term “formed from yarn and finished.” In particular, the narrow elastic fabric is formed when it is knitted or woven from strands of yarn to form the elastic fabric. The fabric is then “finished” when it is dyed, packaged, cut to shape and assembled to ultimately form the waist bands. All of these stages of production occur in Mexico. Accordingly, the stages of production at the Stretchline facility and the assembly process performed at the Intimark facility results in narrow elastic bands that has been formed from yarn and finished in Mexico in a manner consistent with the terms set forth in 19 C.F.R. Part 182, Appendix A, Schedule I (PSRO Annex).
HOLDING:
Based on the information provided, the narrow elastic fabric meets the criteria set forth in Chapter Note 2 to Chapter 61, under the GN 11, HTSUS.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Yuliya A. Gulis, Chief
Food, Textiles and Marking Branch