CLA-2 CO:R:C:S 557870 WAS
Mr. David King
7308 Haverford
Dallas, TX 75214
RE: Eligibility of certain lace table coverings for duty-free
treatment under subheading 9802.00.90; country of origin
marking; NAFTA; section 102.14; advanced in value; improved in
condition
Dear Mr. King:
This is in response to your letter dated March 30, 1994,
concerning the eligibility of certain polyester lace table
coverings for duty-free treatment under subheading 9802.00.90,
Harmonized Tariff Schedule of the United States (HTSUS). You
have provided samples of the merchandise for our review. We have
referred the classification issue that you have raised to our
Textiles Classification Branch for a separate response.
FACTS:
You state that the merchandise consists of 100 percent
polyester lace table coverings, such as runners, placemats and
tablecloths, which are knit on a mayer double-jacquard machine.
You state that these table coverings are knit in the U.S. from
polyester of U.S.-origin which has been extruded in the U.S.
These articles also undergo a dyeing and finishing operation in
the U.S. The final product will be sold directly at retail by
catalogue and/or sold wholesale.
You state that the polyester material will be sent to Mexico
in the form of panels on a continuous roll. In Mexico, the
material will be ripped and/or trimmed by hand into what you
describe as separate units, which will subsequently be returned
to the U.S. You note that for one of the samples (sample "B")
which was submitted with your ruling request, the final products
are easily identifiable in their finished form.
ISSUES:
(1) Whether the subject polyester lace table coverings are
eligible for duty-free treatment under subheading 9802.00.90,
HTSUS, when returned to the U.S.
(2) Whether the returned coverings are subject to country of
origin marking requirements.
LAW AND ANALYSIS:
I. Eligibility for duty-free treatment of lace table coverings
under subheading 9802.00.90, HTSUS.
One of the special provisions contained in Annex 300-B of
the North American Free Trade Agreement ("NAFTA") is Appendix
2.4, which provides for the elimination of customs duties on
textile and apparel goods that are assembled in Mexico from
fabrics wholly formed and cut in the U.S. To implement this
provision, a new tariff item was created in subheading
9802.00.90, HTSUS.
Subheading 9802.00.90, HTSUS, provides as follows:
Textile and apparel goods, assembled in Mexico in whole of
fabrics wholly formed and cut in the United States, which
(a) were exported in condition ready for assembly without
further fabrication, (b) have not lost their physical
identity in such articles by change in form, shape or
otherwise, and (c) have not been advanced in value or
improved in condition abroad except by being assembled and
except by operations incidental to the assembly process;
provided that goods classifiable in Chapters 61, 62, or 63
may have been subject to bleaching, garment dyeing, stone-washing, acid-washing or perma-pressing after assembly as
provided for herein.
In the instant case, you state that you plan on shipping
polyester material in the form of panels on a continuous roll to
Mexico where the panels will be ripped and/or trimmed by hand
into separate units, which are then imported into Mexico. The
process of ripping and/or trimming which you describe as taking
place in Mexico does not constitute a proper assembly operation.
The fabric is not being joined or assembled to itself or to
another component. Therefore, we are of the opinion that the
merchandise will not qualify for duty-free treatment under
subheading 9802.00.90, HTSUS.
II. Country of Origin Marking Requirements
The marking statute, section 304, Tariff Act of 1930, as
amended (19 U.S.C. 1304), provides that, unless excepted, every
article of foreign origin (or its container) imported into the
U.S. shall be marked in a conspicuous place as legibly, indelibly
and permanently as the nature of the article (or its container)
will permit, in such a manner as to indicate to the ultimate
purchaser in the U.S. the English name of the country of origin
of the article. Part 134, Customs Regulations (19 CFR Part 134)
implements the country of origin marking requirements and
exceptions of 19 U.S.C. 1304.
The country of origin marking requirements for a "good of a
NAFTA country" are also determined in accordance with Annex 311
of the North American Free Trade Agreement ("NAFTA"), as
implemented by section 207 of the North American Free Trade
Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057)
(December 8, 1993) and the interim amendments to the Customs
Regulations published as T.D. 94-4 (59 Fed. Reg. 109, January 3,
1994) with corrections (59 Fed. Reg. 5082, February 3, 1994) and
T.D. 94-1 (59 Fed. Reg. 69460, December 30, 1993). These interim
amendments took effect on January 1, 1994, to coincide with the
effective date of the NAFTA. The Marking Rules used for
determining whether a good is a good of a NAFTA country are
contained in T.D. 94-4 (adding a new Part 102, Customs
Regulations). The marking requirements for these goods are set
forth in T.D. 94-1 (interim amendments to various provisions of
Part 134, Customs Regulations).
Section 134.45(a)(2) of the interim regulations, provides
that "a good of a NAFTA country may be marked with the name of
the country of origin in English, French, or Spanish. Section
134.1(g) of the interim regulations, defines a "good of a NAFTA
country" as an article for which the country of origin is Canada,
Mexico or the United States as determined under the NAFTA Marking
Rules.
In this case, you state that the lace panels knit in the
U.S. from yarn extruded in the U.S. are exported to Mexico, a
NAFTA country, where they are processed prior to being reimported
into the U.S.
Part 102 of the interim regulations, sets forth the "NAFTA
Marking Rules" for purposes of determining whether a good is a
good of a NAFTA country for marking purposes. Section 102.11 of
the interim regulations, sets forth the required hierarchy for
determining country of origin for marking purposes. Section
102.11(a) of the interim regulations states that "[t]he 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) Each foreign material incorporated in that good
undergoes an applicable change in tariff classification
set out in section 102.20 and satisfies any other
applicable requirements of that section, and all other
requirements of these rules are satisfied."
Pursuant to section 102.11(a)(3) of the interim rules, the
country of origin of a good is the country in which each foreign
material incorporated in that good undergoes an applicable change
in tariff classification set out in section 102.20. Section
102.20 of the interim rules, sets forth the specific tariff
classification changes and/or other operations, which are
specifically required in order for country of origin to be
determined on the basis of operations performed on the foreign
materials contained in a good. In the instant case, as the
polyester lace material is classified in heading 6302, HTSUS, the
change in tariff classification must be made in accordance with
section 102.20(k), Section XI: Chapters 50 through 63, 6302 of
the interim regulations, which states in part that:
a change to heading 6302 from any other heading, except from
heading 5007, 5111 through 5113, 5208 through 5212, 5309
through 5311, 5407 through 5408, 5512 through 5516, 5602
through 5603, 5801 through 5804, 5806, 5809 through 5810,
5901, 5903, 5906 through 5907, and 6001 through 6002.
Therefore, each foreign material incorporated in the lace
material must come from a heading outside of heading 6302. In
the instant case, assuming that the polyester in its raw form is
imported into the U.S., prior to being extruded in the U.S., the
plastic material is classified in Chapter 39, HTSUS. Thus, a
change to heading 6302 from a Chapter 39 provision constitutes an
acceptable tariff shift under the interim marking rules.
Therefore, the country of origin of the lace which is produced in
the U.S. from imported polyester material in its raw form is the
U.S.
Section 102.14 of the interim regulations, provides in
pertinent part that no good, last advanced in value or improved
in condition outside the United States has United States origin.
If under any other provisions of Part 102 such a good is
determined to be a good of the United States, that determination
will be disregarded and the country or origin of the good will be
the last foreign country in which the goods was advanced in value
or improved in condition.
"Advanced in value" is defined in section 102.1(a) of the
interim regulations as "an increase in the value of goods as a
result of production with respect to that good, other than by
means of those "minor processing" operations described in
paragraphs (m)(5), (m)(6), and (m)(7) of this section."
"Improved in Condition" is defined in section 102.1(i) as "the
enhancement of the physical condition of a good as a result of
production with respect to that good, other than by means of
those "minor processing" operations described in paragraphs
(m)(5), (m)(6) and (m)(7) of this section." (Minor processing
operations described in paragraphs (m)(5), (m)(6) and (m)(7)
include unloading, reloading or any other operation necessary to
maintain the good in good condition; putting up in measured
doses, packing, repacking, packaging, repackaging; testing,
marking, sorting or grading).
In the instant case, we find that the U.S.-origin knit
fabric which is shipped to Mexico in the form of panels on a
continuous roll are advanced in value or improved in condition as
a result of the cutting and/or trimming operations which take
place in Mexico. Accordingly, pursuant to section 102.14 of the
interim regulations, the country of origin of the imported lace
table coverings (runners, placemats and tablecloths) is Mexico,
the last foreign country in which the good was advanced in value
or improved in condition. Therefore, for purposes of the country
of origin marking requirements of 19 U.S.C. 1304, the imported
goods must be marked to indicate that the country of origin of
the lace table coverings is Mexico. Section 134.43(e) of the
interim regulations, provides in part that "where the country of
origin of an article is determined in accordance with section
102.14, part 102 of this Chapter, such article, at the choice of
the importer, exporter or producer of the good may be marked, as
appropriate, in a manner such as the following:
(1) Assembled in (name of foreign country) from U.S.
components;
(2) Further processed in (name of country of origin) from
U.S. materials;
(3) Product of (name of foreign country) made from U.S.
components; or
(4) Product of (name of foreign country).
This ruling is being issued under the provisions of Part 183
of the Customs Regulations (19 CFR Part 183).
HOLDING:
Based on the information provided, as the fabric does not
undergo a proper assembly operation in Mexico, the merchandise
will not be eligible for duty-free treatment under subheading
9802.00.90, HTSUS. Furthermore, we find that the processing in
Mexico advances in value and improves in condition the U.S.-origin fabric. Accordingly, pursuant to section 102.13 of the
interim regulations, the country of origin of the imported table
coverings is Mexico, the last foreign country in which the good
was advanced in value or improved in condition.
Sincerely,
John Durant, Director
Commercial Rulings Division