CLA-2 RR:CR:TE 965986 jsj
Mr. Ralph Saunders
Senior Trade Advisor
Deringer Logistics Consulting Group
1 Lincoln Blvd.
Suite 225
Rouses Point, New York 12979
Re: Modification of NY I80828 (May 10, 2002); HQ 965739 (June 27, 2002); NAFTA Originating Goods; Self-Produced Material; Country of Origin; NAFTA Preference Override; CITA Quota/Visa Requirements.
Dear Mr. Saunders:
The purpose of this correspondence is to respond to your request of October 8, 2002. The correspondence in issue requested, on the behalf of your client, C. S. Brooks Canada, Inc. (C. S. Brooks), modification of HQ 965739 (June 27, 2002).
The request for modification you submitted specifically advocates that this office reconsider its position concerning the eligibility of the comforter to receive preferential treatment pursuant to the North American Free Trade Agreement (NAFTA). The submission suggests that the comforter may be deemed a NAFTA originating good through the applicability of the Appendix to Part 181, section 4 (8), of the NAFTA Rules of Origin Regulations applicable to “self-produced material” and further suggests the applicability of the NAFTA preference override of 19 C.F.R. 102.19. Customs and Border Protection (CBP), although not requested to do so, will apply the same analysis to the pillow sham, also determined in NY I80828 (May 10, 2002) to be a product of the country of Pakistan and ineligible for the NAFTA preferential rate of duty.
CBP, subsequent to reviewing the submission on the behalf of C. S. Brooks, concludes that the comforter and the pillow sham are entitled to the “Special” Column 1 “CA” NAFTA rate of duty. CBP does not believe that HQ 965739 should be modified or revoked, but will modify NY I80828.
This ruling is being issued subsequent to the following: (1) A review of your submission dated October 8, 2002; (2) A telephone conversation with Ms. Gloria Columbe of your office conducted with a member of my staff on December 3, 2002; and (3) A review of NY I80828 and HQ 965739.
Pursuant to section 625 (c), Tariff Act of 1930, as amended, 19 U.S.C. 1625 (c), notice of the proposed modification of NY I80828 was published on March 12, 2003, in the Customs Bulletin, Volume 37, Number 11. No comments were received.
FACTS
The article in issue, as identified by C. S. Brooks, is a “Bed in a Bag.” The “Bed in a Bag” bedding set consists of a twin sized comforter, bed skirt, pillow sham, pillowcase, flat sheet and fitted sheet.
The outer shell of the comforter, the pillow sham and the skirt portion of the bed skirt will be made of either a seventy (70) percent polyester and thirty (30) percent cotton woven, printed fabric or a fifty (50) percent polyester and fifty (50) percent cotton woven, printed fabric. The comforter is filled with a polyester batting fabric and quilted through all three layers. The back aspect of the pillow sham features an overlapping flap closure and the edges are finished with a flange or picture frame effect.
The bed skirt is designed to hang over the edge of a box spring on three sides. The skirt has an approximately thirteen (13) inch drop. The skirt aspect of the bed skirt will be made from either a seventy (70) percent polyester and thirty (30) percent cotton woven, printed fabric or a fifty (50) percent polyester and fifty (50) percent cotton woven, printed fabric. The platform aspect of the bed skirt will be made from spunbond nonwoven fabric.
The flat sheet, fitted sheet and pillowcase will be made from a fifty (50) percent polyester and fifty (50) percent cotton woven, printed fabric. The fitted sheet is elasticized along the sides. The flat sheet is hemmed at the top and bottom. The sides are selvage. The pillowcase is folded and sewn, leaving one end open.
The “Bed in a Bag” bedding set will be packaged for retail sale in a vinyl bag.
The manufacturing operations are:
Pakistan:
(1) The polyester and cotton fabric (70/30 or 50/50) is woven;
(2) The fabric may be bleached; and
(3) Rolls of greige or bleached fabric are exported from Pakistan to Canada.
Canada:
The polyester batting fabric is made (this item may also be made in the United States);
The nonwoven fabric for the platform section of the bed skirt is formed;
The fifty (50) percent polyester and fifty (50) percent cotton fabric for the flat sheet, fitted sheet and pillowcase is woven;
The seventy (70) percent polyester and thirty (30) percent cotton fabric and the fifty (50) percent polyester and fifty (50) percent cotton fabrics are bleached, if needed, printed and finished;
The fabrics are cut, sewn, stuffed and quilted to form the set components; and
The comforter, bed skirt, pillow sham, pillowcase, fitted sheet and flat sheet are packed for retail sale.
ISSUE
Does the “Bed in a Bag” bedding set qualify to receive the “Special” Column 1 “CA” rate of duty pursuant to General Note 12 (a)(i) of the Harmonized Tariff Schedule of the United States Annotated as goods that originate in the territory of a NAFTA Party and that qualify to be marked as goods of Canada?
LAW AND ANALYSIS
Customs and Border Protection in NY I80828 addressed the classification, eligibility for preferential treatment pursuant to the North American Free Trade Agreement and country of origin of the “Bed in a Bag” bedding set. New York Ruling Letter I80828, as it addresses the classification analysis of all the articles of the bedding set and the country of origin analysis of the fitted sheet, the flat sheet and the pillowcase, is authoritative and will not be modified or revoked with regard to these issues.
CBP, in HQ 965739, modified NY I80828 as it addressed the country of origin of the bed skirt. Headquarters Ruling Letter 965739, as it addresses the country of origin of the bed skirt, is authoritative and will not be modified or revoked in this ruling letter.
NAFTA Originating Goods
This ruling letter will initially address whether the comforter and the pillow sham qualify as “goods originating in the territory of a NAFTA party” pursuant to HTSUSA General Note 12 (b) and whether the comforter and the pillow sham may be marked as goods of Canada pursuant to 19 C.F.R. 102.19, the NAFTA preference override. The resolution of these issues in conjunction with the determinations of NY I80828 and HQ 965739 will establish whether the entire “Bed in a Bag” bedding set is eligible to receive the “Special” column 1 “CA” rate of duty.
General Note 12 (a)(i) of the HTSUSA addressing the North American Free Trade Agreement provides that “[g]oods that originate in the territory of a NAFTA party…and that qualify to be marked as goods of Canada” and that are “entered under a subheading for which a rate of duty appears in the ‘Special’ subcolumn followed by the symbol ‘CA’ in parentheses” are eligible for the “CA” rate of duty. General Note 12 (b) provides, in part, that goods imported into the customs territory of the United States will be eligible for NAFTA tariff treatment as “goods originating in the territory of a NAFTA party” only if:
they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States:
or
(ii) they have been transformed in the territory of Canada, Mexico and/or the United States so that--
except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein, or
the goods satisfy the applicable requirements of subdivisions (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note.
Since neither the comforter nor the pillow sham were wholly obtained or produced in Canada, Mexico or the United States, the issue becomes whether they have been transformed in the territory of one of the NAFTA Parties as provided in GN 12 (b)(ii).
The comforter and pillow sham will be considered as having been “transformed” in the territory of a NAFTA Party if each non-originating material, in this instance the fabric, undergoes a change in tariff classification as described in subdivision (t). Subdivision (t) of GN 12, applicable to the comforter and pillow sham classified as a set in subheading 9404.90.8522, HTSUSA, provides, in pertinent part:
A change to subheading 9404.90 from any other chapter, except from headings 5007, 5111 through 5113, 5208 through 5212, 5309 through 5311, 5407 through 5408 or 5512 through 5516. See GN 12 (t)/94.7.
The fabric used in the manufacture of the comforter and the pillow sham, of either polyester/cotton blend, is classifiable at the time of entry into Canada in heading 5513, HTSUS. Fabric classifiable in heading 5513, HTSUS, is excepted from the tariff shift requirement of GN 12 (t)/94.7. The comforter and pillow sham, therefore, do not initially meet the transformation requirement of GN 12 (b).
The importer, in this instance, may seek recourse to the Appendix to Part 181 of the NAFTA Rules of Origin Regulations, particularly section 4 (8) applicable to “self-produced material.” Section 4 (8) provides, in pertinent part:
For purposes of determining whether non-originating materials undergo an applicable change in tariff classification, a self-produced material may, at the choice of the producer of a good into which the self-produced material is incorporated, be considered as an originating material or non-originating material, as the case may be, used in the production of that good. (Emphasis added) 19 C.F.R. Part 181 Appendix section 4 (8).
“[S]elf-produced material,” as defined in section 2 (1), is “a material that is produced by the producer of a good and used in the production of that good.” 19 C.F.R. Part 181 Appendix section 2 (1).
C. S. Brooks, as the producer of the “Bed in a Bag” bedding set (the “good”), has the option, pursuant to Part 181 Appendix section 4 (8), of identifying the comforter shell, a transitional article in the production of the comforter, and the pillow sham (the “self-produced materials”) as non-originating materials. The non-originating materials, through the election of this option, would be the comforter shell classifiable in heading 6307, HTSUS, and the pillow sham classifiable in heading 6304, HTSUS. Headings 6307 and 6304, HTSUS, are not excepted from the tariff shift rule of GN 12 (t)/94.7. The comforter shell and the pillow sham under this analysis meet the transformation requirement of GN 12 (b)(ii). See generally HQ 562498 (Nov. 13, 2002); HQ 965696 (Sept. 18, 2002); and HQ 965309 (Sept. 18, 2002).
The “Bed in a Bag” bedding set, pursuant to the analysis set forth above and in NY I80828, meets the initial requirement of GN 12 (a)(i) to qualify for the column 1 Special “CA” rate of duty. Each of the components of the set are goods that “originate” in the territory of a NAFTA Party.
Country of Origin
The second element of General Note 12 (a)(i) is that the goods “qualify to be marked as goods of Canada.” CBP in NY I80828 determined that the flat sheet, the fitted sheet and the pillowcase qualified to be marked as goods of Canada. CBP, in HQ 965739, reached the same determination for the bed skirt. This ruling letter will reconsider the country of origin of the comforter and the pillow sham.
The Uruguay Round Agreements Act, particularly section 334, codified at 19 U.S.C. 3592, sets forth the rules of origin for textile and apparel products. Regulations implementing section 334 are in set forth in Part 102 of Title 19 of the Code of Federal Regulations.
Section 102.21 of Customs regulations establishes, with specifically delineated exceptions, that “this section shall control the determination of the country of origin of imported textile and apparel products for purposes of the Customs laws.” 19 C.F.R. 102.21. Textile and apparel products that are encompassed within the scope of section 102.21 are any goods classifiable in Chapters 50 through 63 of the HTSUSA, as well as goods classifiable under other specifically enunciated subheadings, including subheadings 9404.90.80-95, HTSUS. See 19 C.F.R. 102.21 (b)(5).
The “Bed in a Bag” comforter and pillow sham are classifiable in subheading 9404.90.8522, HTSUSA, and heading 6304, HTSUS, respectively. They are, therefore, textile and apparel products subject to the rules of origin in 19 C.F.R. 102.21. See 19 C.F.R. 102.21 (b)(5).
Although the “Bed in a Bag” bedding set is classified as a “set” pursuant to General Rule of Interpretation 3 (b) and further classified in subheading 9404.90.8522, HTSUSA, based on the essential character provided by the comforter, 19 C.F.R. 102.21 (d) addressing the treatment of sets mandates that the origin of each item in the set be determined separately. Section 102.21 (d) specifically provides that where one or more components of a set are textile or apparel products and section 102.21 (c) does not provide for a single country of origin, “each component of the set that is a textile or apparel product shall be determined separately under paragraph (c).” 19 C.F.R. 102.21 (d). The country of origin of the comforter and the pillow sham will, therefore, be determined separately.
The country of origin of textile and apparel products is determined by the sequential application of paragraphs (c)(1) through (c)(5) of section 102.21. Paragraph (c)(1) provides that “[t]he country of origin of a textile or apparel product is the single country, territory or insular possession in which the good was wholly obtained or produced.” Since the fabric is formed in Pakistan and cut, sewn, stuffed and quilted in Canada, the origin of the comforter and pillow sham cannot be determined by reference to paragraph (c)(1).
Paragraph (c)(2) of section 102.21 provides that where the country of origin cannot be determined according to paragraph (c)(1), resort should next be to paragraph (c)(2). The country of origin, according to paragraph (c)(2), is “the single country, territory or insular possession in which each foreign material incorporated in that good underwent an applicable change in tariff classification, and/or met any other requirement, specified for the good in paragraph (e)” of section 102.21. Paragraph (e)(1), as applicable to the instant determinations, establishes tariff shift rules that provide:
The Comforter:
HTSUS Tariff Shift and/or Other Requirement
Except for goods of subheading 9404.90 provided for in paragraph (e)(2) of this section, the country of origin of a good classifiable under subheading 9404.90 is the country, territory, or insular possession in which the fabric comprising the good was formed by a fabric-making process.
The Pillow Sham:
HTSUS Tariff Shift and/or Other Requirement
Except for goods of heading 6302 through 6304 provided for in paragraph (e)(2) of this section, the country of origin of a good classifiable under heading 6301 through 6306 is the country, territory, or insular possession in which the fabric comprising the good was formed by a fabric-making process.
The applicable change in tariff classification for both subheading 9404.90, HTSUS, and heading 6304, HTSUS, provides that the country of origin is the country in which the fabric was formed, indicating that the country of origin of both the comforter and the pillow sham is Pakistan.
The origin determination for these goods does not, however, conclude with paragraphs (c)(2) and (e)(1) because, as addressed previously, the comforter, pillow sham and all of the other components of the “Bed in a Bag” bedding set qualify as “originating” in Canada resulting in the applicability of 19 C.F.R. 102.19, commonly referred to as the NAFTA preference override. See 19 C.F.R. 181.1 (q). The NAFTA preference override provides, in pertinent part:
(a) Except in the case of goods covered by paragraph (b) of this section, 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. 19 C.F.R. 102.19.
The comforter and the pillow sham meet the requirements of the NAFTA preference override of section 102.19. The articles are both NAFTA “originating” goods as set forth by the requirements of 19 C.F.R. 181.1 (q), have not been determined to be a good of a single NAFTA country under 19 C.F.R. 102.21 (the textile and apparel rules of origin) and have undergone production other than minor processing in a NAFTA country. See 19 C.F.R. 102.17 (addressing “non-qualifying operations”). In this instance, the fabric for the comforter has been cut, sewn, stuffed and quilted into the finished comforter and the fabric for the pillow sham has been cut and sewn into the finished pillow sham in Canada. The finished comforter and pillow sham are then packed in Canada for retail sale with the pillowcase, fitted sheet, flat sheet and the bed skirt. See generally HQ 562498; HQ 965696; and HQ 965309.
CBP, relying on the NAFTA preference override, concludes that the comforter and pillow sham undergo more than minor processing in Canada, the last NAFTA country in which the articles undergo any processing. The country of origin of the comforter and pillow sham is, therefore, Canada, the last NAFTA country in which the articles underwent more than minor processing.
Set
The “Bed in a Bag,” consisting of the comforter, pillow sham, bed skirt, pillowcase, flat sheet and fitted sheet, are classified in accordance with NY I80828 as “goods put up in sets for retail sale” pursuant to GRI 3(b). The comforter is the component of the set that provides the essential character. See generally HQ 562498; HQ 965696; and HQ 965309.
Quota / Visa Requirements
The comforter and pillow sham, although part of a set for classification purposes, are treated for quota and visa purposes as if they are imported separately. Section 204 of the Agricultural Act of 1956, 7 U.S.C. 1854, as amended, authorizes the President to limit importation into the United States of any textile or textile product. The President, in Executive Order 11651, 37 Fed. Reg. 4699 (Mar. 4, 1972), delegated the authority to supervise and implement all textile agreements and arrangements negotiated pursuant to Section 204 to the Committee for the Implementation of Textile Agreements (CITA).
CITA requires, as originally set forth in 53 Fed. Reg. 52765 (Dec. 29, 1988), clarified in 54 Fed. Reg. (Aug. 24, 1989) and reconfirmed in 67 Fed. Reg. 12977 (Mar. 20, 2002) that:
all applicable visa and quota requirements will apply for textiles and their products which are classified as parts of a set. The rule applies to all items which, if imported separately, would require a visa and the reporting of quota.
The comforter, if imported separately, is a NAFTA “originating” good and qualifies to be marked as country of origin Canada. The pillow sham, if imported separately, would not, however, qualify as a NAFTA “originating” good. The comforter is, therefore, a good of Canada for quota / visa purposes and the pillow sham is a good of Pakistan for quota / visa purposes. See generally HQ 965696; and HQ 965309.
The comforter would qualify as a NAFTA originating good because when the Pakistani fabric, classifiable in heading 5513, HTSUS, is made in Canada into the comforter shell, a transitional article in the production of the comforter is produced. The transition article, the comforter shell classifiable in heading 6307, HTSUS and deemed non-originating as permitted by the NAFTA rules of origin “self-produced material” rule, thereafter makes the tariff shift to subheading 9404.90, HTSUS. See 19 C.F.R. Part 181 Appendix section 4 (8); and GN 12 (t)/94.7.
This situation does not occur with the pillow sham. The pillow sham is not made into a transitional article from which an applicable tariff shift occurs prior to it being made into the final article. The pillow sham does not meet the definition of “self-produced material” when it is imported separately from the “Bed in a Bag” set. The pillow sham meets the definition of “self-produced material” in the instant case because when it is imported as a part of the “Bed in the Bag” set, it is the set that is the good. If the pillow sham was imported separately, there is no self-produced material, only the non-originating material, the fabric, and the final good, the pillow sham.
HOLDING
New York Ruling Letter I80828 (May 10, 2002) is, hereby, modified.
The “Bed in a Bag,” consisting of the comforter, pillow sham, bed skirt, pillowcase, flat sheet and fitted sheet, classified as a set in subheading 9404.90.8522, Harmonized Tariff Schedule of the United States Annotated, is entitled to the “Special” Column 1 “CA” NAFTA rate of duty.
The Special Column 1 “CA” NAFTA Rate of Duty is FREE.
There are no quota reporting or visa requirements for goods of Canada. The applicable textile quota category, if the comforter classified in subheading 9404.90.8522, HTSUSA, was not a good of Canada, would be category: 666.
The applicable textile quota category for the pillow sham, which if imported separately would be classifiable in subheading 6304.93.0000, HTSUSA, is category: 666. The pillow sham, for quota reporting and visa requirements, is a product of Pakistan.
This ruling letter, in accordance with 19 U.S.C. 1625 (c), will become effective sixty (60) days after its publication in the Customs Bulletin.
There are no applicable quota/visa requirements for products of World Trade Organization (WTO) member-countries as textile quota category 666 has been partially integrated for the relevant subheading. The textile category number above applies to merchandise produced in countries that are not members of the WTO.
The designated textile and apparel category may be subdivided into parts. If subdivided, any quota and visa requirements applicable to the subject merchandise may be affected. Since part categories are the result of international bilateral agreements which are subject to frequent negotiations and changes, to obtain the most current information available, we suggest your client check, close to the time of shipment, the Status Report On Current Import Quotas (Restraint Levels) an internal issuance of Customs and Border Protection which is updated weekly and is available for inspection at your local CBP office. The Status Report On Current Import Quotas (Restraint Levels) is also available on the Customs and Border Protection Web site at www.cbp.gov.
Due to the changeable nature of the statistical annotation (the ninth and tenth digits of the classification) and the restraint (quota/visa) categories, your client should contact your local CBP office prior to importation of this merchandise to determine the current status of any import restraints or requirements.
Sincerely,
Myles B. Harmon, Director
Commercial Rulings Division