CLA-2 CO:R:C:M 089467 JMH
Mr. David Coutts
BodyPro Inc.
Box 475
2384 Yonge Street
Toronto, Ontario M4P 2G9
CANADA
RE: Modification of Headquarters Ruling 086895, dated August 17,
1989, and modification of Headquarter Ruling 084935, dated
August 23, 1990; pocket gym; United States-Canada Free Trade
Agreement ("CFTA"); General Note 3(c)(vii); set; composite
good; essential character; GRI 3(a); GRI 3(b)
Dear Mr. Coutts:
It has been brought to the attention of this office that
Headquarters Ruling 086895 ("HQ 086895"), dated August 17, 1990,
is in error regarding to the application of the United States-
Canada Free Trade Agreement ("CFTA"). Below please find the
modified position of this office.
FACTS:
This office issued Headquarters Ruling 084935 ("HQ 084935"),
dated August 23, 1989, which concerned the tariff classification
and marking requirements applicable to the BodyPro "Pocket Gym".
The Pocket Gym, as imported, includes the following:
two injection molded plastic handles made in Canada;
two aluminum extension tubes extruded and machined in
Canada;
one 2' x 3' folded instruction poster printed in
Canada;
one 8 1/2" x 14" sports specific/product sheet printed
in Canada;
one 8 1/2" x 5 1/2" exercise sheet printed in Canada;
one 9 1/4" long x 4" wide x 3 1/2" high nylon bag made
in Korea; and
one 10" twist tie made in Canada.
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HQ 084935 determined that the Pocket Gym is a set under the
meaning of General Rule of Interpretation ("GRI") 3(a),
Harmonized Tariff Schedule of the United States Annotated
("HTSUSA"). The essential character of the set was found to be
imparted, in accordance with GRI 3(b), by the exercise equipment.
Thus, the Pocket Gym was classified under the provision for the
exercise equipment in subheading 9506.91.00, HTSUSA, as "Articles
and equipment for gymnastics, athletics, other sports (including
table-tennis) or outdoor games, not specified or included
elsewhere in this chapter...Other...Gymnasium or other exercise
articles and equipment; parts and accessories thereof..." This
ruling concluded that the Pocket Gym is an "originating good"
under General Note 3(c)(vii), HTSUSA, and therefore, eligible for
the tariff preferences under the CFTA. HQ 084935 also
determined that the nylon bag was subject to textile visa and
quota requirements.
HQ 084935 was modified in HQ 086895. The Pocket Gym was
determined to be a composite good and not a set under GRI 3(a).
The two headings which describe the Pocket Gym are heading 9506
(the heading for exercise equipment), heading 4202 (the heading
for the nylon bag), and heading 4901 (the heading for the
instruction posters and sheets). The essential character of the
composite good under GRI 3(b) was found to be imparted by the
exercise equipment, as in HQ 084935. Therefore, the
classification of the Pocket Gym remained in subheading
9506.91.00. HQ 086895 did not analyze the CFTA status of the
Pocket Gym, nor did it analyze the textile visa and quota
requirements.
The classification of the Pocket Gym in subheading
9506.91.00 is not at issue in this ruling.
ISSUE:
Whether the BodyPro Pocket Gym is an "originating good in
Canada" under General Note 3(c)(vii), and thus, eligible for
tariff preferences under the CFTA.
LAW AND ANALYSIS:
To be eligible for tariff preferences under the CFTA, goods
must be "originating goods" within the rule of origin in General
Note 3(c)(vii)(B), HTSUSA. There are two primary means in
General Note 3(c)(vii)(B) by which articles imported into the
United States may be "goods originating in the territory of
Canada." The first method is if the goods are "wholly obtained
or produced in the territory of Canada and/or the United States."
General Note 3(c)(vii)(B)(1). The second method is if the goods
are "transformed in the territory of Canada and/or the United
States." General Note 3(c)(vii)(B)(2).
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A product which is "wholly obtained or produced in the
territory of Canada and/or United States" is one which is grown,
mined, harvested, born and raised in Canada and/or the United
States, or otherwise intimately connected to the two countries
and their land, air and sea territories as defined in General
Note 3(c)(vii)(L), HTSUSA. The Pocket Gym includes articles from
a third country. The Pocket Gym is not "wholly obtained or
produced" in Canada under General Note 3(c)(vii)(B)(1).
The second method to become an originating good for CFTA
purposes is for an article made of foreign materials to be
transformed in Canada and/or the United States in accordance with
General Note 3(c)(vii)(B)(2). A transformation is evident when a
change in tariff classification occurs that is authorized by
General Note 3(c)(vii)(R), HTSUSA.
In the present situation the Pocket Gym has been determined
to be a composite good, a good made of different components with
differing classifications. The Pocket Gym consists of articles
classified in headings 9506, 4202, and 4901. As a composite
good, the Pocket Gym is classified under the heading of the
article which imparts the Pocket Gym's essential character. The
articles which by themselves are classified in headings 4202 and
4901 are now classified under heading 9506. A classification
change does occur for these articles. However, this is not the
type of classification change to which the CFTA refers.
General Note 3(c)(vii)(C)(1), HTSUSA, states:
(C) Goods shall not be considered to originate in the
territory of Canada pursuant to subdivision
(c)(vii)(B)(2) merely by virtue of having
undergone--
(1) simple packaging or, except as expressly
provided by the rules of subdivision
(c)(vii)(R) of this note, combining
operations...
The House Committee on Ways and Means report on the CFTA
stated:
Goods containing materials from third countries will
qualify for preferential treatment only if the
materials undergo a sufficient degree of processing or
assembly in one or both Parties to result in physically
and commercially significant changes in the product
that change its tariff classification under the
Harmonized System. H. Rep. 816, Part 1, 100th cong.,
2d Sess. 15 (1988) (emphasis added).
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The House Ways and Means Committee focused on the change in
classification which occurs to third country materials after the
third county materials undergo some processing or assembly.
Third country articles that change their classification simply
because they are entered with other articles have not undergone
any processing or assembly. The change in classification which
occurs to such third country articles occurs merely because of
the packaging or combining of the articles. The articles
themselves have not been transformed in any way.
In the instant case, the third country nylon bag does not
undergo any manufacturing or assembly. The foreign article is
not changed in any way. It is merely repackaged into the
composite good . It is the opinion of this office that the
change in classification this article undergoes is a change
brought about by simple packaging. Thus, this classification
change is not allowed under the CFTA. The Pocket Gym is not
entitled to the tariff preferences under the CFTA.
HOLDING:
HQ 086895 and HQ 084935 are hereby modified. The Pocket Gym
is correctly classified in subheading 9506.91.00, as "Articles
and equipment for gymnastics, athletics, other sports (including
table-tennis) or outdoor games, not specified or included
elsewhere n this chapter...Other...Gymnasium or other exercise
articles and equipment; parts and accessories thereof..."
However, the Pocket Gym is not an originating good for
purposes of the CFTA, and thus, the Pocket Gym is not entitled to
tariff preferences under the CFTA. The articles in the composite
good change their classifications to the classification of the
article which imparts the composite good's essential character.
However, this change in classification occurs through the
packaging of the composite good. This type of classification
change does not transform the third country good as required by
General Note 3(c)(vii)(B)(2). General Note 3(c)(vii)(C) states
that a change in classification which results from simple
packaging does not create goods which originate in Canada for
CFTA purposes. The BodyPro Pocket Gym is not entitled to the
tariff preferences under CFTA.
Sincerely,
John Durant, Director
Commercial Rulings Division