CLA-2 CO:R:C:F 953946 ALS
Mr. Ed Baker
A.N. Deringer, Inc.
30 West Service Road
Champlain, NY 12919
RE: Seed and Bulb Kits
Dear Mr. Baker:
This is in reference to your ruling request of April 1, 1993,
concerning "Easy-Gro Bulb Kits" and "Easy-Gro Dwarf Sunflower Kits"
assembled in Canada from components originating in Canada and other
countries.
FACTS:
The articles under consideration are kits composed of a 5 inch
terra cotta pot and saucer; a bag of growing mix containing peat
moss, vermiculite, perlite, calcitic lime, dolomite lime, nitrogen
phosphorous, potassium, trace elements and a wetting agent;
amaryllis, paperwhite narcissus, white calla lily bulbs or
sunflower seeds; straw fill and a fiberboard canister with a lid
and label. The bulbs and seeds are not in growth or flower. The
growing mix, straw fill and packaging are of Canadian origin. The
pot and saucer are from Germany. The amaryllis bulbs are from
Holland, the Narcissus bulbs are from Israel, and the Calla Lily
bulbs are from the U.S. The sunflower seeds are from Japan. The
non-Canadian components are assembled, in Canada, with products of
Canadian origin into kits. The value and origin of items common
to each kit are:
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5 inch terra cotta pot and saucer - Cdn $ .60 - Germany
Growing mix - .15 - Canada
Straw fill - .15 - Canada
Fiberboard Canister/Lid/ Labelling- 1.83 - Canada
Assembly Labor - .50 - Canada
The kits also contain one type of bulb or seed, as follows:
An Amaryllis bulb valued at Cdn $4.05 each,
Narcissus bulbs valued at Cdn $1.96 (4 in each kit @ Cdn
$.49 each),
A Calla Lily bulb valued at Cdn $1.35 each, or
A Dwarf Sunflower Seed at Cdn $.41
These prices are based on spring 1993 purchases by the Canadian
supplier of the kits and will be good for shipments to the United
States from September 1993 through March 1994.
ISSUE:
What is the classification of the subject kits and are they
eligible for preferential treatment under the U.S. - Canada Free-
Trade Agreement (CFTA)?
LAW AND ANALYSIS:
Classification of merchandise under the Harmonized Tariff
Schedule of the United States Annotated (HTSUSA) is governed by
the General Rules of Interpretation taken in order. GRI 1 provides
that the classification is determined first in accordance with the
terms of the headings and any relative section and chapter notes.
If GRI 1 fails to classify the goods and if the heading and legal
notes do not otherwise require, the remaining GRI's are applied
taken in order.
In considering the headings eligible for classification of
these goods, we noted that the components of the kits are
classifiable in 3 different headings of the HTSUSA. For purposes
of classification, the packaging and straw fill were not
considered. There is no specific heading that refers to all the
components of the kits. Since each of the headings refer to only
a part of the kit, we referred to GRI 3 which, pursuant to GRI 2,
provides that goods classifiable under 2 or more headings shall be
classified according to the provisions of GRI 3. Although GRI 3(a)
provides that the heading with the most specific description shall
be preferred to other headings, when 2 or more headings refer to
a part only of the materials or substances contained in - 3 -
mixed or composite goods, the headings are to be considered as
equally specific. We found that to be the case with this article
so it could not be classified under that GRI.
We next referred to GRI 3(b) which covers mixtures, composite
goods consisting of different materials or made up of different
components and goods put up in sets for retail sale which cannot
be classified by reference to GRI 3(a). In considering whether the
subject articles are sets for retail sale in accord with GRI 3(b),
we evaluated the articles against the specified requirements which
a product must meet to qualify for classification thereunder. The
articles must:
(a) consist of at least 2 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) be put up in a manner suitable for retail sale
directly to users without repacking.
We believe that the articles under consideration meet all
those requirements. The individual components of the kits are
clearly packaged to be sold at retail, they are composed of at
least 2 different articles classifiable in different headings, and
the contents of each kit are designed to permit an interested
person to grow a flower.
In considering which of the materials give the kits their
essential character we noted that the factor which determines
essential character will vary as between different kinds of goods.
It may, for example, be determined by the nature of the material
or component, its bulk, quantity, weight or value, or by the role
of a constituent material in relation to the use of the goods. We
believe that the bulbs or seeds form the essential character of the
kits because without them the kits would serve no purpose.
We next considered the eligibility of the kits for
preferential treatment under the CFTA. General Note 3(c)(vii) of
the HTSUSA provides the rules which determine what products
imported into the United States from Canada are entitled to special
duty treatment under the CFTA. Eligible goods must be goods
"originating" in Canada, as stated in General Note 3(c)(vii)(A),
HTSUSA.
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Pursuant to General Note 3(c)(vii)(B), HTSUSA, goods imported
into the Customs territory of the United States are eligible for
treatment as "goods originating in the territory of Canada" only
if--
(1) they are goods wholly obtained or produced in the
territory of Canada and/or the United States,
(2) they have been transformed in the territory of Canada
and/or the United States, so as to be subject--
(I) to a change in tariff classification as described
in the rules of subdivision (c)(vii)(R) of this
note, or
(II) to such other requirements subdivision (c)(vii)(R)
of this note may provide when no change in tariff
classification occurs, and they meet the
other conditions set out in
subdivisions(c)(vii)(F),(G),
(H),)(I),(J) and (R) of this note.
Since the nature of goods imported into Canada and assembled
with various Canadian products to form the subject kits is not
altered in any way and the classification of such individual
components is not changed, subdivision (c)(vii)(B)(2)(I) is not
applicable hereto. We, however, believe that paragraph (II) of the
subdivision may apply. After concluding that most of the
references in paragraph (II) were inapplicable, we considered the
applicability of subdivision 3(c)(vii)(H). That provision
provides:
(H) Notwithstanding subdivision (c)(vii)(G), goods
described in that paragraph shall be considered to have
been transformed in the territory of Canada and be treated
as goods originating in the territory of Canada if--
(1) the value of materials originating in the
territory of Canada and/or the United States that
are used or consumed in the production of the
goods plus the direct cost of assembling the goods in
the territory of Canada and/or the United States
constitute not less than 50 percent of the value of the
goods when exported to the territory of the
United States, and
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(2) the goods have not subsequent to assembly
undergone processing or further assembly in a
third country....
In order to determine whether the subject kits meet the
requirements of subdivision 3(c)(vii)(H), we considered the
information provided by the requester as to the origin and value
of each component of the kits. In regard to the bulb kits we
concluded:
1. The Amaryllis bulb kit is not eligible for CFTA treatment
since 63.9 percent of the value relates to components whose
origin is other than Canada or the U.S.
2. The White Calla Lily bulb kit is eligible for
CFTA treatment since 87.4 percent of its value
relates to components whose origin is either Canada or the U.S.
3. The Paperwhite Narcissus bulb kit is eligible for CFTA
treatment. Based on figures which will be steady until
March 1994, the Canadian component of the kit (there is no U.S.
component) forms 50.67 percent of the value. (Fluctuation of
the value of any of the components of the kit, will make it
necessary to reevaluate the conclusion as to CFTA eligibility).
4. The Sunflower seed kit is eligible for CFTA treatment
since 72.3 percent of its value relates to components whose
origin is either Canada or U.S.
HOLDING:
Kits composed of a terra cotta pot and saucer, a bag of
growing mix, straw fill, and a fiberboard canister and which
contain an amaryllis or calla lily bulb, not in growth or flower,
are classifiable in subheading 0601.10.9080, HTSUSA. They are
subject to a general rate of duty of 5.5 percent ad valorem. Such
kits containing a narcissus bulb, not in growth or flower, are
classifiable in subheading 0601.10.6000, HTSUSA, and are subject
to a general rate of duty of $2.10 per 1000. Such kits containing
sunflower seeds are classifiable in subheading 1206.00.0040,
HTSUSA, and are subject to a free general rate of duty.
- 6 -
The above kits, which are the product of Canada, may be
eligible, in accordance with General Note 3(c)(vii)(B), HTSUSA,
for a reduced rate of duty upon compliance with the provisions of
the United States - Canada Free-Trade Agreement and section 10.301
et seq., Customs Regulations (19 CFR 10.301 et seq.).
Sincerely,
John Durant, Director
Commercial Rulings Division