CLA-2-58:OT:RR:NC:N3:352
Ms. Sandra Tovar
CST, Inc.
500 Lanier Avenue West, Suite 901
Fayetteville, GA 30214
RE: The tariff classification, country of origin and status under the Dominican Republic-Central America-United States Free Trade Agreement (DR-CAFTA) for fabrics woven in El Salvador and embroidered in Honduras
Dear Ms. Tovar:
In your letter dated April 17, 2015, on behalf of your client United Embroidery, S.A., Honduras, you requested a ruling on tariff classification, country of origin and status under the Dominican Republic-Central America-United States Free Trade Agreement (DR-CAFTA) for embroidered fabric from Honduras. Samples of Embroidery in the Strip and Embroidery Allover in various stages of production, as well as videos of the operations, were provided to this office.
FACTS:
The two subject items are described as Embroidery in the Strip (narrow or trim embroidery products) and Embroidery Allover (full-width embroidered fabrics).
According to the information, samples and videos provided, the manufacturing operations and facts are as follows:
United Embroidery has two base fabrics planned for use for embroidery.
Style 2505 White is a bleached, plain weave batiste fabric made of 65% polyester staple fiber yarn and 35% cotton staple yarn. The weight of the fabric is 94.8 grams per square meter. The polyester staple yarn is produced in Mexico. The cotton yarn is produced in the USA. The yarns are woven into fabric in El Salvador.
Style 1555 Greige is an unbleached, plain weave batiste fabric made of the same yarns and same factory as Style 2505. The fabric is approximately the same weight.
The embroidery thread is 100% polyester filament yarn made in the United States.
The production of embroidery involves two fundamental steps: stitching and cutting for narrow or trim embroidery products (Embroidery in the Strip) and stitching and tubing/rolling for full fabric width embroidery products (Embroidery Allover). Stitching is performed on Saurer Schiffli (shuttle) embroidery machines. These machines are loaded with a base fabric (Style 2505 or 1555) and 100% polyester embroidery yarn. The machine stitches the embroidery, an embellishment consisting of an embroidery design upon the base fabric.
The process is identical for both Embroidery in the Strip and Embroidery Allover. The pattern or design stitched may vary.
After the embroidery stitching is complete, the embroidered fabric is ready for cutting.
For embroidery in the strip, the cutting process involves thread-cutting and shearing of loose threads. The fabric is further finished by using straight cutting machines to scallop-cut and trim the embroidery into narrower strips. The size of the strips depends on the finished width requirement of each particular embroidery pattern.
After the cutting process, the embroidery is inspected, wound onto spool put ups, and packed for shipping. In the case of Allover Embroidery, the cutting process simply consists of thread-cutting/shearing to remove loose threads. The Allover Embroidery is inspected and tubed to allow packing and shipment in roll form.
ISSUES:
What are the tariff classification, country of origin and status under the Dominican Republic-Central America-United States Free Trade Agreement (DR-CAFTA) of the subject merchandise?
CLASSIFICATION:
The applicable subheading for Embroidery in the Strip and Embroidery Allover will be 5810.92.9080, Harmonized Tariff Schedule of the United States (HTSUS), which provides for embroidery in the piece, in strips or in motifs: other embroidery: of man-made fibers: other, other: other.
The duty rate for this provision is governed by Additional U.S. Note 3 to Chapter 58 which states that the rate of duty is “7.4 % ad valorem, but in the case of embroidery in the piece not less than the rate which would apply to such product if not embroidered.” Since the base fabric for this item would be classifiable in subheading 5513.11.00, HTSUS, which provides a rate of duty of 14.9 % ad valorem, the general rate of duty for this merchandise will be 14.9 % ad valorem.
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 http://www.usitc.gov/tata/hts/.
DR-CAFTA - LAW AND ANALYSIS:
General Note 29, HTSUS, sets forth the criteria for determining whether a good is originating under the DR-CAFTA. General Note 29(b), HTSUS, (19 U.S.C. § 1202) states, in pertinent part, that:
For the purposes of this note, subject to the provisions of subdivisions (c), (d), (m) and (n) thereof, a good imported into the customs territory of the United States is eligible for treatment as an originating good under the terms of this note if—
(i) the good is a good wholly obtained or produced entirely in the territory of one or more of the parties to the Agreement;
(ii) the good was produced entirely in the territory of one or more of the parties to the Agreement, and—
(A) each of the non-originating materials used in the production of the good undergoes an applicable change in tariff classification specified in subdivision (n) of this note; or
(B) the good otherwise satisfies any applicable regional value content or other requirements specified in subdivision (n) of this note;
and the good satisfies all other applicable requirements of this note; or
(iii) the good was produced entirely in the territory of one or more of the parties to the Agreement exclusively from originating materials.
As the good contains non-originating materials, it would have to undergo an applicable change in tariff classification in order to meet the requirements of General Note 29(b)(ii)(A).
For goods classified in heading 5810, General Note 29(n), Chapter 58 rule 3 requires:
A change to heading 5806.31 through 5811.00 from any other chapter except from headings 5111 through 5113, 5204 through 5212 or 5212, or chapters 54 through 55.
Per the DR-CAFTA product specific rule above, the cotton yarn classified in Chapter 52, and polyester staple yarn and fabric classified in Chapter 55, are required to be of DR-CAFTA origin in order for goods classified in heading 5810 to be originating goods. Since the polyester staple yarn, classified in Chapter 55, is produced in Mexico, and does not undergo the tariff shift required by the tariff specific rule for heading 5810, the goods in heading 5810 described above do not qualify for preferential treatment under the DR-CAFTA, as they do not meet the requirements of HTSUS General Note 29(b)(ii)(A). The goods will therefore not be entitled to a free rate of duty under the DR-CAFTA.
COUNTRY OF ORIGIN - LAW AND ANALYSIS:
Section 334 of the Uruguay Round Agreements Act (codified at 19 U.S.C. 3592), enacted on December 8, 1994, provided rules of origin for textiles and apparel entered, or withdrawn from warehouse for consumption, on and after July 1, 1996. Section 102.21, Customs Regulations (19 C.F.R. 102.21), published September 5, 1995 in the Federal Register, implements Section 334 (60 FR 46188). Section 334 of the URAA was amended by section 405 of the Trade and Development Act of 2000, enacted on May 18, 2000, and accordingly, section 102.21 was amended (68 Fed. Reg. 8711). Thus, the country of origin of a textile or apparel product shall be determined by the sequential application of the general rules set forth in paragraphs (c)(1) through (5) of Section 102.21.
Paragraph (c)(1) states, “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 subject merchandise is 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, “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
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:
HTSUS 5810.91 – 5810.99 - Tariff shift and/or other requirements:
(1) For embroidered fabric, the country or origin is the country, territory, or insular possession in which the fabric was produced by a fabric-making process;
Section 102.21(b)(2) of the Customs Regulations defines the meaning of a “fabric-making” process for the purposes of the determination of the country of origin of imported textile and apparel products for purposes of Customs laws and the administration of quantitative restrictions. This section states:
(2) Fabric-making process. A fabric-making process is any manufacturing operation that begins with polymers, fibers, filaments (including strips), yarns, twine, cordage, rope, or fabric strips and results in a textile fabric.
In the case before us for consideration, the only country where a fabric-making process occurs is El Salvador, where the base fabric is woven. Since the base fabric is formed by a fabric-making process in a single country, that is, El Salvador, as per the terms of the tariff shift requirement and/or other requirements specified in paragraph (e), the country of origin is conferred in El Salvador.
HOLDING:
The applicable subheading for Embroidery in the Strip and Embroidery Allover will be 5810.92.9080, Harmonized Tariff Schedule of the United States (HTSUS), which provides for embroidery in the piece, in strips or in motifs: other embroidery: of man-made fibers: other, other: other. The general rate of duty is 14.9 % ad valorem.
The country of origin of these products is El Salvador for marking purposes.
This merchandise does not qualify for preferential treatment under the DR-CAFTA because the requirements for originating status have not been met.
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 177.9(b)(1). 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 177 of the Customs Regulations (19 C.F.R. 177). Should it be subsequently determined that the information furnished is not complete and does not comply with 19 CFR 177.9(b)(1), 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 originating status or 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 in accordance with 19 CFR 177.2.
Should you wish to request an administrative review of this ruling, submit a copy of this ruling and all relevant facts and arguments within 30 days of the date of this letter, to the Director, Commercial Rulings Division, Headquarters, U.S. Customs and Border Protection, Regulations & Rulings, 799 9th Street N.W. - 7th floor, Washington, DC 20229-1177.
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, contact National Import Specialist Maribeth Dunajski at [email protected].
Sincerely,
Gwenn Klein Kirschner
Director
National Commodity Specialist Division