CLA-2 CO:R:C:T 955371 CC
Gary Brunell
A.N. Deringer, Inc.
173 W. Service Road
Champlain, NY 12919
RE: A cap with a net used for protection from mosquitos and
other insects; NAFTA
Dear Mr. Brunell:
This letter is in response to your inquiry, on behalf of
Produits Horizon Enr., requesting the country of origin marking of
and eligibility for preferential treatment for a cap from Canada.
You originally requested a U.S.-Canada Free Trade Act
eligibility determination for the merchandise. In your facsimile
of February 4, 1994, you changed this request to an eligibility
determination under the North American Free Trade Agreement
(NAFTA).
FACTS:
The merchandise at issue, designated by you as a "Bug Cap,"
is a cap which offers protection from mosquitos and other insects.
The cap has a pouch with a snap closure at the front panel over the
visor. This pouch contains a net, which can be placed over the
wearer's face and attached around the shoulders. The back panels
of the cap are made of nylon mesh; the front panel, visor, and
pouch are made of 100 percent cotton or a combination of 55 percent
cotton and 45 percent polyester.
The net is made of 100 percent nylon.
According to your submissions, the cap is made in China. It
is shipped to Canada where the pouch and netting are added, along
with various minor items such as the label, sewing thread, etc.
After completion of the caps, they will be imported into the United
States.
ISSUE:
Whether the caps at issue qualify for duty preference under
the NAFTA?
LAW AND ANALYSIS:
The NAFTA eliminates tariffs on most goods originating in
Canada, Mexico, and the United States over a maximum transition
period of fifteen years. Generally, tariffs only will be
eliminated on goods that "originate," as defined in Article 401 of
the NAFTA. Article 401 defines "originating" in four ways: (a)
goods wholly obtained or produced in the NAFTA region; (b) goods
produced in the NAFTA region wholly from originating materials; (c)
goods meeting the Annex 401 origin rule; and (d) unassembled goods
and goods classified with their parts which do not meet the Annex
401 rule of origin but contain 60 percent regional value content
using the transaction method (50 percent using the net cost
method).
The cap is made in China and is shipped to Canada for further
assembly to create the finished merchandise. Obviously, it is not
originating through methods (a) or (b), above. Article 401(b) of
the NAFTA indicates that goods may "originate" in Canada, Mexico,
or the United States, even if they contain non-originating
materials, if the materials satisfy the rule of origin specified
in Annex 401 of the NAFTA. The Annex 401 rules of origin are based
on a change in tariff classification under the Harmonized Tariff
Schedule (HTS), a regional value-content requirement, or both.
The finished merchandise is classifiable in Heading 6505 of
the Harmonized Tariff Schedule of the United States Annotated
(HTSUSA), which provides for hats and other headgear. Annex 401
states that for goods classifiable in headings 6503 to 6507 to be
considered originating, they must undergo a change to those
headings from any heading outside that group. At the time of
importation into Canada, the merchandise is a cap, classifiable in
Heading 6505, HTSUSA. This merchandise, therefore, does not
undergo the required tariff shift to be considered an originating
good. Consequently, duty preference under the NAFTA is denied.
You have also requested a country of origin marking
determination. Part 102 of the Customs Regulations (19 CFR Part
102), published in the Federal Register on January 3, 1994 (59 FR
110) establishes marking rules to determine when a good should be
marked as a good of a NAFTA country: the United States, Canada, or
Mexico.
Section 102.11 of the Customs Regulations sets out general
rules of origin. Section 102.11(a) states that the country of
origin of a good is the country in which: (1) the good is wholly
obtained or produced; (2) the good is produced exclusively from
domestic materials; or (3) the good undergoes an applicable change
in tariff classification set out in Section 102.20 of the Customs
Regulations.
Clearly methods (a)1 and (a)2 are not met in Canada for the
subject merchandise. The finished merchandise is classifiable in
Heading 6505. Section 102.20 states that for goods classifiable
in headings 6503 to 6506 to be considered goods of a NAFTA party
for country of origin purposes, they must undergo a change to those
headings: from any other heading outside that group, except
headings 6501 through 6502; or from heading 6501 by means of a
blocking process; or from heading 6502, provided that the change
is the result of at least three processing steps (e.g. dyeing,
blocking, trimming, or adding a sweatband). At the time of
importation into Canada, the merchandise is a cap, classifiable in
Heading 6505, HTSUSA. This merchandise, therefore, does not
undergo the required tariff shift under Section 102.20 to be
considered a good of Canada for country of origin marking purposes.
Section 102.11(b)(1) of the Customs Regulations states that
where the country of origin cannot be determined under paragraph
(a), the country of origin of the good is the country of origin of
the single material that imparts the essential character of the
good. Material is defined in Section 102.1(l) of the Customs
Regulations as "a good that is incorporated into another good as
a result of production with respect to that other good, and
includes parts, ingredients, subassemblies, and components." The
cap as it enters Canada is a component that will be further
processed, with a pouch and a net added, to produce the finished
article. Therefore, at this stage the cap is considered a
material. The cap, which is made in China, is the material that
imparts the essential character to this merchandise; the pouch,
net, and other minor components clearly would not impart the
essential character. Consequently, the country of origin of the
subject merchandise for marking purposes is not a NAFTA party in
accordance with Part 102 of the Customs Regulations.
Country of origin for marking purposes will therefore be
determined in accordance with Section 12.130 of the Customs
Regulations (19 CFR 12.130). That determination is the subject of
a separate letter, HQ 956008.
HOLDING:
The merchandise at issue is not eligible for duty preference
under the NAFTA. The article does not qualify for marking under
19 CFR Part 102 as a good of a NAFTA country.
This ruling letter is being issued pursuant to Section 181,
Subpart I, of the Customs Regulations, 19 CFR 181.
A copy of this ruling letter should be attached to the entry
documents filed at the time this merchandise is imported. If the
documents have been filed without a copy, this ruling should be
brought to the attention of the Customs officer handling the
transaction.
Sincerely,
John Durant, Director
Commercial Rulings Division