CLA-2-64:RR:NC:TP:347 H82030
Mr. Harvey Arias
Romica USA, Inc.
8730 NW 36th Avenue
Miami, FL 33147
RE: The tariff classification and status under the North American Free Trade Agreement (NAFTA) and CBI II for unformed uppers.
Dear Mr. Arias:
In your letter dated January 5, 2001, you requested a tariff classification ruling for snow boots involving several possible countries of origin. This letter replaces NY G85607 issued to you on January 30, 2001 with an incorrect tariff number.
You state that until now your normal procedures have been to import man-made fabric snow boot uppers from China under quota category 669 and Harmonized Code 6406.10.9040. You stitch the uppers to PVC bottoms in Miami, and then sell the completed boots in the U.S. market. In the year 2001, you plan to change your model to any one of the scenarios listed below. For each scenario, you ask for answers to the following questions:
Duties and/or quota payable by the importer of raw material or shoe components in Mexico or the Dominican Republic.
Under which set of rules can the raw material or shoe components be converted to a NAFTA-qualified product when the raw material or cut shoe components are changed to stitched shoe uppers in Mexico or the Dominican Republic?
What duty or quota, if any, would be payable by us, the U.S. importer, for the NAFTA-qualified product?
What duty or quota would our Canadian customers be liable for when the completed NAFTA-qualified product is imported into Canada from the U.S.?
What duty or quota would our European customers be liable for when the completed NAFTA-qualified product is imported into Europe from the U.S.?
We can provide you with importing information on items you plan to import to the United States only, therefore, we cannot answer your questions for #1, #4, and #5, above.
These are your possible scenarios as you describe them:
Model A:
Man-made fabric snow pack raw material from Taiwan and China is cut into shoe upper components in China and shipped to an independent factory in Mexico.
The shoe upper components are assembled (stitched) into shoe uppers in Mexico.
The completed shoe uppers are shipped to Miami.
Model A-1:
As Model A except that you would own the factory in Mexico.
Model A-2:
As Model A except that the raw material from Taiwan and China would be cut in Mexico.
Model B:
As Model A except the components are assembled into uppers in the Dominican Republic.
Man-made fabric snow pack raw material from Taiwan and China is cut into shoe upper components in China and shipped to the Dominican Republic.
The shoe upper components are assembled (stitched) into shoe uppers in an independent factory in Dominican Republic.
The completed shoe uppers are shipped to Miami.
Model B-1:
As Model B except that the raw material from Taiwan and China is cut in the Dominican Republic.
Model C:
As Model A except that shoe upper raw material is made in the U.S.A. and sent to an independent factory in Mexico for cutting and stitching into shoe uppers.
Man-made fabric snow pack raw material from the U.S.A. is shipped to an independent factory in Mexico. We assume for purposes of this ruling that all materials will be originating under the NAFTA origin rules.
The shoe upper raw material is cut into components, and assembled (stitched) into shoe uppers in an independent factory in Mexico.
The completed shoe uppers are shipped to Miami.
Model C-1:
As Model C except you would own the factory in Mexico.
Model D:
As Model C except that shoe upper raw material is made in the U.S.A. and sent to the Dominican Republic for cutting and stitching into shoe uppers.
Man-made fabric snow pack raw material from the U.S.A. is shipped to a third party factory in Dominican Republic for cutting and stitching into shoe uppers.
The shoe upper raw material is cut into components, and assembled (stitched) into shoe uppers in the third party factory in Dominican Republic.
The completed shoe uppers are shipped to Miami.
In your letter, you also state that for all the proposed models, once the uppers are imported into the U.S., they will be stitched to PVC outsoles in Miami to form complete shoes.
You have enclosed the following samples:
A packet of cut shoe upper components
An assembled (stitched) shoe upper.
A completed boot.
From the samples you have provided, we have determined that the assembled (stitched) boot uppers for all model scenarios, before they are made into completed boots, are “unformed uppers” for purposes of chapter 64, Harmonized Tariff Schedule of the United States (HTSUS).
NAFTA-related models:
For models A, A-1 and A-2, raw materials from Taiwan and China will become footwear uppers of subheading 6406.10 (this includes formed and unformed uppers) when they are either cut and assembled into uppers in Mexico (model A-2), or assembled into uppers in Mexico (model A and A-1). If they undergo the change in tariff classification required by General Note 12(t) 64, Harmonized Tariff Schedule of the United States (HTSUS) - used when one or more materials involved in the production of the goods are “non-originating” - they will be eligible for NAFTA from Mexico. Subheading (t) of General Note 12 for chapter 64 states that in order to qualify for NAFTA there must be “a change to subheading 6406.10 from any other subheading, except 6401 through 6405, provided there is a regional value content of not less than 55% under the net cost method.” The change to 6406.10 takes place in Mexico when upper parts are made into uppers of this subheading. Provided that the Regional Value Content is not less than 55% under the net cost method, the uppers of this scenario would qualify for NAFTA duty preference upon importation into the U.S. In this regard the applicable tariff provision for the unformed uppers of models A, A-1 and A-2 would be 6406.10.9040. The special rate of duty from Mexico would be free. The applicable textile category is 669.
For models A, A-1 and A-2, if we determine that the uppers are eligible for NAFTA using the rules discussed in the previous paragraph, we would then determine the country of origin for the finished shoes using the NAFTA rules of origin described in 19 CFR 102.11(a)(3). 19 CFR 102.11 (a)(3) states that the country of origin of a good is the country in which “each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in 102.20…” The country of origin rules set out in CFR 102.20 for chapter 64 states that in order to determine origin for a good “a change to 6401 through 6405 from any other heading outside that group, except from formed uppers” must be met. As stated, footwear uppers created in Mexico are imported into the U.S. where the soles are attached to them. Since the uppers imported into the U.S. from Mexico are “unformed uppers” for purposes of chapter 64, HTS, then the country of origin of the finished shoes will be the U.S.
For models C and C-1, raw materials from the U.S. are shipped to Mexico where they will be cut and stitched into unformed uppers of subheading 6406.10, HTS. They will then be imported into the U.S. to be stitched to PVC outsoles to form the finished footwear. The shoes for this scenario, being made entirely in the territory of the United States and Mexico using 100% U.S. raw materials, will satisfy the requirements of HTSUSA General Note 12(b)(iii) which states that “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 produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials…” In this regard, the merchandise will be entitled to a special rate of duty under the NAFTA upon compliance with all applicable laws, regulations, and agreements. The applicable tariff provision for the unformed uppers of models C and C-1 would be 6406.10.9040, HTS. The special rate of duty from Mexico would be free. The applicable textile category is 669.
In determining the country of origin for the finished footwear of models C and C-1, we used the NAFTA rules of origin described in 19 CFR 102.19 (a) which states that “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.” To decide what processes would be considered “minor processing,” we looked at two cases involving the country of origin of footwear. In Uniroyal Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983), the United States Court of International Trade concluded that a substantially complete Indonesian upper was not substantially transformed when it was attached to an outsole in the U.S. since the attachment was a minor manufacturing or combining process which left the identity of the upper intact. By contrast, in Headquarters Ruling Letter (HRL) 735338 dated January 28, 1994, Customs considered the country of origin marking of athletic footwear. Italian leather was cut and stitched into an upper in the Czech Republic, and the upper was subsequently shipped to Italy where it was placed on a last and the midsole and outsole was mounted. It was determined that the Italian-made materials were substantially transformed in the Czech Republic when they were cut and stitched into an open and unlasted footwear upper. However, since the completely open and unlasted upper imported into Italy did not have the very essence of a completed shoe, the upper was substantially transformed as a result of the processing performed in Italy, and, therefore was considered to be a product of Italy. In models C and C-1, U.S. raw materials are shipped to Mexico where they will be cut and stitched into uppers of subheading 6406.10. The unformed uppers are then imported into the U.S. to be stitched to PVC outsoles. In this regard, since “unformed” uppers are imported into the U.S., the country of origin will be the U.S.
CBI II models:
In model B raw materials from Taiwan and China are cut into parts of footwear uppers in China and shipped to Dominican Republic where they are assembled into unformed uppers of subheading 6406.10. The uppers are then imported into the U.S. where they are attached to outsoles. In model B-1 raw material from Taiwan and China is shipped to Dominican Republic where it is cut and assembled into unformed uppers of subheading 6406.10 and then imported into the U.S. where the uppers are attached to outsoles. In order to qualify for U.S. Note 2(b) Subchapter II of Chapter 98, HTSUS, (or CBI II) duty-free treatment, an eligible article must be assembled or processed in a beneficiary country entirely of components or ingredients that are a “product of “ the U.S. Since all materials shipped to Dominican Republic will not be “products of” the U.S., the uppers will not be entitled to duty-free treatment under U.S. note 2(b). In this regard, HTS 9802.00.50 or 9802.00.80 does not apply in this scenario. In addition, an allowance for any U.S. materials (U.S. Goods Returned) is not allowed since the processes that take place in China and Dominican Republic are more than “assembly procedures” under HTS 9802.00.80, nor are they considered “repairs or alterations” under HTS 9802.00.50. Since the uppers imported into the U.S. from Dominican Republic are “unformed” for purposes of chapter 64, HTS, the country of origin of the finished footwear will be the U.S. The applicable tariff provision for the unformed uppers of models B and B-1 would be 6406.10.9040. The general rate of duty will be 5.8% ad valorem. The applicable textile category is 669.
For scenario D, 100% U.S. raw materials are shipped to Dominican Republic where they are cut and stitched into footwear uppers. The uppers are then imported into the U.S. where the outsoles are injected onto them to create finished footwear. Provided that all the components used to make the uppers in Dominican Republic are of U.S. origin and all other requirements for U.S. Note 2(b), Subchapter II of Chapter 98, HTSUS (or CBI II) are met, footwear of this scenario would be eligible for duty-free treatment. Since “processing” and “assembly” procedures take place in Dominican Republic to make the footwear uppers, classification at 9802.00.5010, HTS, free of duty, would apply. Items classified at 9802.00.5010 do not need to have any country of origin marking when imported into the U.S. Regarding country of origin marking for the finished footwear, since the uppers imported into the U.S. from Dominican Republic are considered “unformed” for purposes of chapter 64, HTS, then the country of origin of the finished footwear will be the U.S.
Regarding references to “Made in U.S.A.” used on the footwear, questions should be directed to the Federal Trade Commission (FTC), Division of Enforcement, 6th and Pennsylvania Avenue, NW, Washington, DC, 20508. Although the country of origin of the finished footwear will be the USA under the Customs statutes, the FTC has the primary responsibility under statutes which require the identification of certain foreign components if a “Made in USA” claim is made.
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, contact National Import Specialist Richard Foley at 212-637-7089.
Sincerely,
Robert B. Swierupski
Director,
National Commodity
Specialist Division