CLA-2-94:OT:RR:NC:N4:433
Mary Kastner
PMK International LLC.
18900 8th Avenue S, Suite 900
Seatac, WA 98148
RE: The tariff classification, North American Free Trade Agreement (NAFTA), country of origin, marking, and trade remedy applicability of an upholstery kit from China, or Mexico, or Vietnam.
Dear Ms. Kastner:
In your letter dated December 19, 2018, on behalf of your client, Pacific Motion DBA Stanton, you requested a binding ruling for classification, country of origin, and marking. Product descriptions and samples were received.
Pacific Motion DBA Stanton, item the “Upholstery Kit,” is a manmade woven and knit textile fabric product consisting of several components that are cut, sewn, specifically formed and fitted with straight unfinished edges to the size and shape of sofas, ottomans, loveseats, and zippered seat and back cushion jackets that will later be stapled onto furniture frames. The “Upholstery Kit” is part of a manufacturing process to be performed that will result in a final article ready for retail sale. The kit does not include stuffing.
The Explanatory Notes (ENs) to the Harmonized Tariff Schedule of the United States (HTSUS) constitute the official interpretation of the tariff at the international level. The ENs to Chapter 94 of the HTSUS, “Parts,” state: “This Chapter only covers parts, whether or not in the rough, of goods of heading 9401 to 9403 and 9405, when identifiable by their shape or other specific features as parts designed solely or principally for an article of those headings. They are classified in this Chapter when not more specifically covered elsewhere.” The “Upholstery Kit” contains dedicated parts of incomplete and unassembled furniture, and are not more specifically provided for elsewhere in the tariff schedule and are to be classified in heading 9401, HTSUS. See Headquarters ruling H265042 dated July 18, 2016.
The “Upholstery Kit” is classified in subheading 9401.90.5021, which provides for “Seats (other than those of heading 9402), whether or not convertible into beds, and parts thereof: Parts: Other: Other: Other of textile material, cut to shape.” The rate of duty will be free.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on World Wide Web at https://hts.usitc.gov/current.
You outline two scenarios wherein the “Upholstery Kit” is manufactured. In scenario one, Chinese fabric will be shipped and imported into Vietnam. In Scenario two, the Chinese fabric will be shipped and imported into Mexico. In either of these countries, the fabric will then be cut, sewn, shaped, inclusion of zippers, welt corded, decked, buttoned, pleated, etc. and specifically formed and fitted to the size and shape of chairs, sofas, and ottomans. Once complete, the “Upholstery Kit” will be shipped and imported into the United States, unstuffed, and sold to U.S. manufacturers for final stuffing and assembly.
Country of Origin, Trade Remedy, Marking – Scenario 1 (Vietnam)
Pursuant to 19 CFR 134.1(b), “country of origin” means the country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the “country of origin.” Further, pursuant to 19 CFR 10.14(b) a substantial transformation occurs when, as a result of manufacturing processes, a new and different article emerges, having a distinctive name, character, or use.
You indicate that the material components for the “Upholstery Kit” are sourced in China. Based on the information provided, it appears that the material components will undergo a substantial transformation in Vietnam to become an “Upholstery Kit,” taking on a new name, character, and identity. As a result, the country of origin for the “Upholstery Kit,” is conferred in Vietnam.
As a product of Vietnam, the “Upholstery Kit” is not subject to Section 301 of the United States Trade Act of 1974.
Part 134, Customs Regulations (19 CFR 134), implements the country of origin marking requirements of 19 U.S.C. 1304. Unless excepted by law, every article of foreign origin imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or container) will permit, in such a manner as to indicate to the ultimate purchaser in the United States the English name of the country of origin of the article.
Marking of the “Upholstery Kit,” is to be in accordance with the above cited criteria.
Country of Origin and Marking – Scenario 2 (Mexico)
As stated above 19 CFR 134 implements the country of origin marking requirements and exceptions. However, for a good of a NAFTA country (Mexico, Canada), the NAFTA Marking Rules (set forth in 19 CFR 102) will determine the country of origin. Because the “Upholstery Kit” is manufactured in part in Mexico, a NAFTA country, the NAFTA origin marking rules govern scenario 2.
The “Upholstery Kit,” classified in 9401.90.5021, is not a textile or apparel product according to 19 CFR 102.21(a)(b)(5), therefore the country of origin of the “Upholstery Kit,” will be determined in accordance with 19 CFR 102.11. Section 102.11(a) sets forth the following hierarchy for determining country of origin.
General Rule (1) states, “The good is wholly obtained or produced.”
As the subject merchandise is not wholly obtained or produced in a single country, Rule (1) of Section 102.11(a)(1) is inapplicable.
General Rule (2) states, “The good is produced exclusively from domestic materials; or.”
As the subject merchandise is not produced exclusively from domestic materials, Rule (2) of Section 102.11(a)(2) is inapplicable.
General Rule (3) states, “Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other requirements of these rules are satisfied.
Section 102.20 “Specific Rule by Tariff Classification” states that: For 9401.90 - A change to subheading 9401.90 from any other heading, except from subheading 9403.90.
As the rolls of fabric from China are classifiable in Section XI (textile and textile articles), which are outside of Chapter 94, the “Upholstery Kit” will undergo the applicable change in tariff classification as specified in 102.11(a)(3), thereby qualifying the good for country of origin Mexico.
The “Upholstery Kit,” classified in 9401.90.5021, is not a textile or apparel product according to 19 CFR 102.21(a)(b)(5), therefore the country of origin of the “Upholstery Kit,”
Trade Program – NAFTA
General Note (GN) 12(b), HTSUS, sets forth the criteria for determining whether a good is originating under the NAFTA. In this case, to be an "originating good" the material components of the “Upholstery Kit” must be transformed in the territory of Mexico pursuant to GN12(b)(ii)(A), HTSUS, which states:
Except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such good undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein.
Chapter 94, Note 2: A change to subheading 9401.90 from any other heading.
As the material components (fabric rolls) from China are classified outside of heading 9401, when imported into Mexico the material components are cut, sewn, shaped, inclusion of zippers, welt corded, decked, buttoned, pleated etc. and specifically formed and fitted to the size and shape of chairs, sofas and ottomans thereby satisfying the tariff shift. As such, the completed “Upholstery Kit” is eligible for NAFTA preferential duty treatment.
Trade Remedy
The issue before us, therefore, is whether the substantial transformation analysis undertaken in Headquarters Ruling Letter (HRL) 082183 remain applicable to the facts of this case and whether the Chinese fabric in Mexico must be NAFTA originating pursuant to General Note 12(b), for purposes of subheading 9903.
Effective July 6, 2018, the Office of the United States Trade Representative (USTR) imposed an additional tariff on certain products of China classified in the subheadings enumerated in Section XXII, Chapter 99, Subchapter III U.S. Note 20(b), HTSUS. The USTR imposed additional tariffs, effective August 23, 2018, on products classified under the subheadings enumerated in Section XXII, Chapter 99, Subchapter III U.S. Note 20(d), HTSUS. Subsequently, the USTR imposed further tariffs, effective September 24, 2018, on products classified under the subheadings enumerated in Section XXII, Chapter 99, Subchapter III U.S. Note 20(f) and U.S. Note 20(g), HTSUS. For additional information, please see the relevant Federal Register notices dated June 20, 2018 (83 F.R. 28710), August 16, 2018 (83 F.R. 40823), and September 21, 2018 (83 F.R. 47974). Products of China that are provided for in subheading 9903.88.01, 9903.88.02, 9903.88.03, or 9903.88.04 and classified in one of the subheadings enumerated in U.S. Note 20(b), U.S. Note 20(d), U.S. Note 20(f) or U.S. Note 20(g) to subchapter III shall continue to be subject to antidumping, countervailing, or other duties, fees and charges that apply to such products, as well as to those imposed by the aforementioned Chapter 99 subheadings.
As subheading 9903.88.03, HTSUS, is written, this office is of the opinion that the country of origin determination for duty purposes, in this case, is premised on a traditional substantial transformation analysis. The manufacturing in Mexico results in a finished product that has a distinctive name, character, and use because the Chinese fabric undergo tracing of patterns onto the fabric, cutting, sewing inclusion of zippers, welt cording, decking, buttoning, pleating etc. and are specifically formed and fitted to the size and shape of chairs, sofas and ottomans. Accordingly, the country of origin of the “Upholstery kit” for purposes of subheading 9903.88.03, HTSUS, is conferred in Mexico. Therefore, as a product of Mexico, the “Upholstery Kit” is not subject to Section 301 of the United States Trade Act of 1974.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, please contact National Import Specialist Dharmendra Lilia at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division