CLA-2 CO:R:C:M 089468 JMH
Mr. A Sochaczevski
AMAV Industries Ltd.
2345 Lapierre St.
Lasalle, Quebec HBN 1B7
CANADA
RE: Modification of Headquarters Ruling 084895 ("HQ 084895"),
dated October 12, 1989; plaster molding and painting kit;
United States-Canada Free Trade Agreement ("CFTA"); General
Note 3(c)(vii); GRI 3(a); GRI 3(b); sets; essential
character
Dear Mr. Sochaczevski:
It has been brought to the attention of this office that
Headquarters Ruling 084895 ("HQ 084895), dated October 13, 1989,
is in error concerning the application of the United States-
Canada Free Trade Agreement ("CFTA"). Below is the correct
position.
FACTS:
The articles in question are kits which are imported from
Canada for use by children to produce plaster novelties. The
kits include a clear plastic mold with 12 distinctively shaped
cavities; plaster to be mixed with water, kneaded, and then
poured into the mold cavities; a set of mixed paints and an
artist brush for coloring the novelties after the plaster dries,
and various small items for decorating some of the painted
novelties.
The boxes in which the kits are packaged display a picture
of the finished products, and recommends ages "8 years and up."
HQ 084895 assumed that this indicated that the articles are
designed to be principally used by children. The boxes also
state that the paintbrush, magnetic strip, paints and the plastic
tube are from the United States, the metal pieces are from Hong
Kong, and the plastic mold, plaster, thermometer and remaining
components are from Canada.
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HQ 084895 determined that the kits were classified under
subheading 9503.70.80, Harmonized Tariff Schedule of the United
States ("HTSUSA"), as "Other toys...Other toys, put up in sets or
outfits, and parts and accessories thereof...Other..." We affirm
this classification.
ISSUE:
Whether the novelty kits imported from Canada are
"originating goods in Canada" for purposes of the CFTA, and
therefore, eligible for the CFTA tariff preferences.
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).
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 novelty kits include articles
from third countries. The kits are 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.
The articles in the novelty kits do change classifications.
This change occurs in accordance with GRI 3, HTSUSA. GRI 3(a)
requires that when an article is described by two or more
headings then the most specific heading is preferred. The
novelty kits are described by the relevant headings for each of
the articles within the kit. However, GRI 3(a) also states that
if the applicable headings refer to only a part of the items in a
set put up for retail sale, then the headings are considered to
be equally specific. To determine what is a "set put up for
retail sale" the Explanatory Notes must again be utilized. The
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Explanatory Note for Rule 3(b) provides a three part test for
"goods put up in sets for retail sale." Explanatory Note
3(b)(X), Vol. 1, HCDCS, p. 4. This note states the following:
"For the purposes of this Rule, the term 'goods put up
in sets for retail sale' shall be taken to mean goods
which:
(a) consist of at least two different articles which
are prima facie, classifiable in different
headings.
(b) consist of products or articles put up together to
meet a particular need or carry out a specific
activity; and
(c) are put up in a manner suitable for sale directly
to users without repacking (e.g., in boxes or
cases or on boards)." (emphasis added)
In the present situation, the novelty kits consists of five
different articles, each having different classifications. The
articles are put up together for the particular activity of
creating plaster novelty items and they are packaged for sale to
the end user. Thus, the kit is a set. The mold and its use as
an article for the amusement for children imparts the essential
character of the set. Therefore, all of the articles are
classified under the provision which describes the children's
mold. The articles which by themselves are classified in other
subheadings are now classified in subheading 9503.70.80. 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
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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).
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. The
articles in a set do not change their classification because of
processing or assembly. The change in classification which
articles in a set undergo occurs merely because of the packaging
or combining of the articles. The articles themselves have not
been transformed in any way. The only transformation which has
occurred is the packaging of the articles and how the articles
are marketed to the consumer.
In the instant case, the third country metal pieces do not
undergo any manufacturing or assembly. The foreign articles are
not changed in any way. They are merely repackaged into a kit.
It is the opinion of this office that the change in
classification these articles undergo is a change brought about
by simple packaging. Thus, this classification change is not
allowed under the CFTA. The novelty kits for children are not
entitled to the tariff preferences under the CFTA.
HOLDING:
HQ 084895 is hereby modified. The novelty kits are
appropriately classified as sets in accordance with GRI 3(b).
The kits' essential character is imparted by the mold designed to
amuse children. Therefore, the proper classification for the
novelty kits is subheading 9503.70.80, HTSUSA, as "Other
toys...Other toys, put up in sets or outfits, and parts and
accessories thereof...Other..."
The children's novelty kits are not originating goods for
purposes of the CFTA, and thus, the novelty kits are not
entitled to tariff preferences under the CFTA. The articles in
the sets change their classifications to the classification of
the article which imparts the sets' essential character.
However, this change in classification occurs through the
packaging of the set. This type of classification change does
not transform the third country goods as required by General Note
3(c)(vii)(B)(2). General Note 3(c)(vii)(C) states that a change
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in classification which results from simple packaging does not
create goods which originate in Canada for CFTA purposes. The
novelty kits are not entitled to the tariff preferences under
CFTA.
Sincerely,
John Durant, Director
Commercial Rulings Division