OT:RR:CTF:VS H149357 BGK
Mr. Daniel J. Gluck
Simon Gluck Kane LLP
1700 Broadway, 31st Floor
New York, New York 10019
Re: NAFTA, Country of Origin, Subheading 9801.00.10, HTSUS, Bed-in-a-Bag
Dear Mr. Gluck:
This is in response to your letter, dated February 17, 2011, requesting a ruling on behalf of your client, pursuant to Subpart A of 19 C.F.R. Part 177. This ruling concerns the country of origin and tariff treatment for certain bed-in-a-bag sets.
FACTS:
Bed-in-a-bag sets are exported to Mexico or Canada for labeling. A label indicating the company name and describing the contents will be attached to the outside of the retail packaging. You have stated that they will be exported under NAFTA.
The processing of the bed-in-a-bag sets begins in China, India, or Pakistan. Greige fabric is made either in China, India, or Pakistan and then shipped to Bangladesh, the European Union (EU), or the U.S. for further processing. In Bangladesh, the EU, or the U.S., the fabric is dyed, cut to size, sewn and made into flat sheets, fitted sheets, pillow cases, and bed ruffles. The fabric is also dyed, cut to size, and sewn into empty shells for pillows and comforters. The shells are created by sewing three sides and leaving the fourth side open. At this point, all items that are not already in the U.S. are shipped to the U.S.
In the U.S., the pillow and comforter shells are filled with batting fabric made in the U.S. The open sides of the pillow and comforter shells are then sewn shut and the comforters are quilted. All of the components (fitted and flat sheets, bed ruffles, pillows, and comforters) are then packaged together and exported to Mexico or Canada.
You claim the flat and fitted sheets are classified under subheading 6302.31, Harmonized Tariff Schedule of the United States (HTSUS); the cotton pillow cases are classified under subheading 6302.31, HTSUS; the polyester pillow cases are classified under subheading 6303.32, HTSUS; and the bed ruffles are classified under subheading 6303.91, HTSUS, for cotton and subheading 6303.92, HTSUS, for polyester. You also claim that the unfinished pillow and comforter shells are classified under subheading 6307.90.89, HTSUS, for cotton and subheading 6307.90.98, HTSUS, for polyester. You assert that the finished comforters, when exported to Mexico or Canada and when reimported into the U.S., are classified in subheading 9404.90.85, HTSUS, for cotton and subheading 9404.90.95, HTSUS, for polyester. We assume that the bed-in-a-bag sets are classified in the same subheadings, as the comforter will impart the essential character of the set. For purposes of this ruling, we assume that these proposed classifications are correct; however, doing so is not to be misconstrued as agreeing with these classifications.
ISSUE:
What is the proper country of origin upon return to the U.S. from Mexico or Canada?
What is the proper tariff treatment of the sets upon re-importation from Mexico or Canada?
LAW AND ANALYSIS:
You state that you will export the bed-in-bag sets to Mexico or Canada under the North American Free Trade Agreement (NAFTA). If the bed-in-a-bag sets are NAFTA eligible and qualify to be marked as a product of the U.S. upon exportation to Mexico or Canada, the U.S. will accept the U.S. as the country of origin upon re-importation. Our office, however, will not issue a ruling on the NAFTA eligibility or marking requirements of the bed-in-a-bag upon exportation to Mexico or Canada as this would be under the jurisdiction of those countries. However, assuming the bed-in-a-bag set is eligible for NAFTA treatment and qualifies to be marked as a product of the U.S. upon exportation to Mexico or Canada, we will consider it a product of the U.S. upon re-importation.
As the goods do not become a product of Mexico or Canada by virtue of the attachment of the label under the U.S. NAFTA Marking Rules (not a product of Mexico or Canada under 19 C.F.R. § 102.21 or the NAFTA Preference Override of 19 C.F.R. § 102.19), the bed-in-a-bag sets may not be reimported under NAFTA. See General Note 12(a) (a good must qualify to be marked as a product of Mexico or Canada).
As a product of the U.S., however, the bed-in-a-bag set may be eligible for duty-free treatment under subheading 9801.00.10, HTSUS, upon re-importation, provided a Certificate of Origin was issued upon exportation to Mexico or Canada. Subheading 9801.00.10, HTSUS, provides that “products of the United States when returned after having been exported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad” may be entered duty-free, provided that the documentary requirements of 19 C.F.R. § 10.1 are satisfied.
The bed-in-a-bag set must be imported into the U.S. without having been advanced in value or improved in condition while in Mexico. While some change in the condition of the product while it is abroad is permissible, operations which either advance the value or improve the condition of the exported product render it ineligible for duty free entry upon return to the U.S. See, Border Brokerage Company Inc. v. United States, 65 Cust.Ct. 50, C.D. 4052, 314 F.Supp. 788 (1970), appeal dismissed, 58 CCPA 165 (1970). In Headquarters Ruling Letter (HRL) 555148, dated March 15, 1990, bulk oils were imported into Canada to be packaged into consumer size bottles and labeled. It was held that these operations did not amount to an advancement in value or improvement in condition as the oils were exported in a finished condition. The same is true here. The bed-in-a-bag set is exported in a finished condition and only labeled in Mexico or Canada; no operations are performed on the set itself. This is unlike the relabeled t shirts in HRL H014657, dated November 8, 2007. In that case, the labeling operation was considered an alteration, but was performed on the article itself, and was not simple packaging. The bed-in-a-bag sets are not advanced in value or improved in condition. As the sets would be a product of the U.S. exported and returned, they would be exempt from the marking requirements pursuant to 19 C.F.R. § 134.32(m). Please note that if you wish to indicate that the bed-in-a-bag set is "Made in USA", the marking must comply with the requirements of the Federal Trade Commission (FTC). We suggest that you direct any questions on this aspect of the issue to the FTC.
HOLDING:
Provided the bed-in-a-bag sets are eligible for NAFTA treatment and qualify to be marked as a product of the U.S. upon entry into Canada or Mexico, and the company can meet the documentary requirements of 19 C.F.R. § 10.1, the bed-in-a-bag sets will qualify for duty-free treatment under subheading 9801.00.10, HTSUS. As the sets would be a product of the U.S. exported and returned, they would be exempt from the marking requirements pursuant to 19 C.F.R. § 134.32(m).
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. 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,
Monika R. Brenner
Chief, Valuation & Special Programs Branch