CLA-2 CO:R:C:T 088425 CRS
Mr. Terry Pilant
Manager
Carson Customs Brokers (USA), Inc.
1122 Fir Street, Building C-2
Blaine, WA 98230
RE: Country of origin of diapers and nursing pad cut in Canada
from Chinese fabric. HRL 086779. HRL 086549.
Dear Mr. Pilant:
This is in reply to your letter dated December 12, 1990, on
behalf of your client, Indisposable Cotton Diaper Company, Ltd.,
in which you requested a ruling as to the country of origin of a
diaper and nursing pad assembled in Canada from Chinese and
Canadian fabric.
FACTS:
The merchandise in question consists of two diapers and one
nursing pad. The first diaper, discussed at Exhibit A, is known
as a "Darlings Dryper" (diaper). It is manufactured in Canada
from 100 percent cotton fabric imported from the People's
Republic of China and from 50 percent rayon, 50 percent polyester
fabric made in Canada.
You state that the "dryper" is manufactured as follows. Six
pieces of fabric (two center panels; four wing panels) are cut to
size in Canada from 100 percent cotton flannelette fabric from
China that is flatfolded and brushed on both sides. One piece of
50 percent rayon, 50 percent polyester filler fabric is cut to
the same dimension as the cotton center panels and inserted
between the center panels and the wing panel which are stitched
together thereby encasing the polyester/rayon filler. The
article is then serged along its perimeter.
The second article at issue, discussed at Exhibit B, is a
diaper in an unassembled state. It consists of three panels cut
from 100 percent cotton flannelette fabric imported from China.
A piece of 50 percent rayon, 50 percent polyester fabric of
Canadian origin, and a piece of 100 percent nylon fabric imported
from the U.S., are cut to the same size as the cotton panels.
The rayon/polyester fabric acts as the absorbent layer of the
unassembled article while the nylon fabric forms the outer shell.
The unassembled diaper is sent to the U.S. where it is made into
a finished diaper.
The third article, a nursing pad, is described at Exhibit C.
The pad is made from 100 percent cotton flannelette fabric
imported from China. In Canada, the fabric is cut into twelve
semi-elliptical pieces. In addition, nylon fabric imported from
the U.S. is cut into two semi-elliptical pieces. The cut cotton
pieces are joined together to form six roughly elliptical pieces
while the two nylon pieces are joined to form a single piece.
The nylon piece is placed atop the six cotton pieces and the
whole is serged around the circumference to form the finished
nursing pad.
ISSUE:
Whether diapers and nursing pads made in Canada from Chinese
fabric have been substantially transformed in Canada such that
the country of origin of the articles is Canada for quota/visa
purposes.
Whether Canada is the country of origin for duty purposes
under the Harmonized Tariff Schedule of the United States
Annotated (HTSUSA).
LAW AND ANALYSIS:
Pursuant to section 12.130, Customs Regulations (19 CFR
12.130), a textile or textile product which consists of materials
produced or derived from, or processed in, more than one foreign
territory or country shall be a product of that foreign territory
or country where it last underwent a substantial transformation.
A textile or textile product will be considered to have undergone
a substantial transformation if it has been transformed by means
of substantial manufacturing or processing operations into a new
and different article of commerce.
Section 12.130(d) establishes criteria for determining
whether an article has been substantially transformed. These
include: the physical change in the material or article; the
time involved in the manufacturing or processing operations; the
complexity of the operations; the level or degree of skill and/or
technology required; and the value added to the article. These
criteria are not exhaustive; one or any combination of these
criteria may be determinative and additional factors may be
considered.
In this case, when the cotton fabric is exported from China
it is not identifiable as being intended for use as diapers. As
we stated in Headquarters Ruling Letter (HRL) 086779 dated April
25, 1990, a ruling which also concerned the country of origin of
diapers cut in Canada from Chinese fabric:
Upon exportation from China, the merchandise is
mere cotton fabric, suitable for multiple uses. There
is no evidence, i.e., lines of demarcation . . . that
the fabric is meant to be diapers.
The facts in the instant case are analogous to those in HRL
086779. The fabric has no lines of demarcation and is cut and
sewn in Canada. The change that occurs through processing fabric
into diapers and nursing pads is accomplished by means of a
relatively complex manufacturing operation which results in a new
and different article of commerce. Consequently, Customs
considers the fabric to have been substantially transformed
pursuant to 19 CFR 12.130.
General Note 3(c)(vii), HTSUSA, embodies the United States-
Canada Free-Trade Agreement of 1988. Subdivision (vii)(A)
provides that "[g]oods originating ... in Canada" and imported
into the United States may be subject to a distinct rate of duty
set forth in the "Special" subcolumn of the HTSUSA. For the
purposes of this subdivision, General Note 3(c)(vii)(B) provides
in pertinent part that merchandise is eligible for consideration
as "goods originating in the territory of Canada" if:
(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 in
Canada as described in the rules of
subdivision (c)(vii)(R) of this note ...
(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) ... (G), (H), (J) and
(R) of this note.
The cotton fabric used in the manufacture of the diapers is
classifiable in heading 5208 or 5209, depending on its weight.
The finished diapers are classifiable in heading 6209. The
nursing pads are classifiable in heading 6217. Subdivision
(R)(11)(oo) states that goods will be considered to have
originated in Canada by changing to any heading of Chapter 62
from any heading outside that Chapter other than, inter alia,
headings 5208 through 5212.
However, General Note 3(c)(vii)(R)(11)(qq), HTSUSA, provides
that:
Notwithstanding rules (nn) and (oo), apparel goods
provided for in chapters 61 and 62 that are both cut
and sewn in the territory of Canada and/or the United
States from fabric produced or obtained in a third
country, and that meet other applicable conditions for
preferred tariff treatment under subdivision (c)(vii)
of this note, shall be subject to the rate if duty
provided in the "Special" subcolumn for goods that
originate in China, in the annual quantities set forth
below, and shall, above those quantities for the
remainder of the annual period, be subject to duty at
the rates provided for in the "General" subcolumn of
column 1:
Non-wool apparel 41,806,500
square meters
Wool apparel 5,016,780
square meters
The diapers and nursing pad are cut and sewn in the territory of
Canada from Chinese cotton flannelette fabric, as well as from
Canadian rayon/polyester filler fabric and U.S. nylon fabric.
Accordingly, they are eligible rate of duty set forth in the
"Special" subcolumn of the HTSUSA as goods originating in the
territory of Canada. HRL 086549 dated March 13, 1990.
HOLDING:
The country of origin of the diapers and the nursing pad is
Canada for quota/visa purposes.
The diapers are classifiable in subheading 6209.20.5040,
HTSUSA, under the provision for babies' garments and clothing
accessories; of cotton; other; other; diapers. They are dutiable
at the rate of 6.9 percent ad valorem. If the quota for non-wool
apparel under the U.S.-Canada Free-Trade Agreement is exceeded,
the diapers would be dutiable at the rate of 9.9 percent ad
valorem and would be subject to textile quota category 239.
The nursing pads are classifiable in subheading
6217.10.0010, HTSUSA, under the provision for other made up
clothing accessories ...; accessories; of cotton. They are
dutiable at the rate of 10.8 percent ad valorem. If the quota
for non-wool apparel under the U.S.-Canada Free-Trade Agreement
is exceeded, the nursing pads would be dutiable at the rate of
15.5 percent ad valorem and would be subject to textile quota
category 359.
The holding in this ruling applies only to the specific
factual situation and merchandise identified in the ruling
request. This position is clearly set forth in section
177.9(b)(1), Customs Regulations (19 CFR 177.9(b)(1)). This
section states that a ruling letter is issued on the assumption
that all of the information furnished in connection with the
ruling request and incorporated in the ruling letter, either
directly, by reference, or by implication, is accurate and
complete in every material respect. Should it subsequently be
determined that the information furnished is not complete and
does not comply with 19 CFR 177.9(b)(1), the ruling will be
subject to modification or revocation. In the event there is a
change in the facts previously furnished this may affect the
determination of country of origin. In such a case, it is
recommended that a new ruling request be submitted in accordance
with section 177.2, Customs Regulations (19 CFR 177.2).
Sincerely,
John Durant, Director