CLA-2 CO:R:C:T 954406 HP
Mr. David Kennedy
Customer Service
W.Y. Moberly, Inc.
Box 164
Sweetgrass, Montana 59484
RE: Needlcraft kit. Country of origin marking; simply packaged;
Canada; FTA; CFTA
Dear Mr. Kennedy:
This is in reply to your letter of May 26, 1993. That
letter concerned the tariff classification, under the Harmonized
Tariff Schedule of the United States Annotated (HTSUSA), of
needlework kit, imported from Canada through the port of
Sweetgrass, Montana. In addition, you have also inquired as to
country of origin marking instructions and eligibility for duty
reduction under the U.S.-Canada Free Trade Agreement. Please
reference your client The Essamplaire.
FACTS:
The merchandise at issue consists of a needlecraft kit
composed of: yarns cut to size, some packaged loosely and some
wrapped in paper labels; a rectangular piece of woven linen
fabric with unfinished edges; needle; and instruction charts.
The items are packaged for retail sale in a clear plastic bag
with header card.
The yarns are 100% cotton, produced in France, and imported
into Canada from the United States. The loose yarns are imported
into Canada in rolls and are cut to size in Canada. The paper-
wrapped yarns are imported into Canada from the United States in
that condition. The linen fabric is imported into Canada from
Belgium in bolts, and is cut to size and dyed in Canada. The
needle is from England. The instruction charts and packaging are
from Canada.
ISSUE:
How are the needlecraft kits classified under the HTSUSA?
Are they eligible for duty preference under the CFTA? How are
they marked?
LAW AND ANALYSIS:
Classification
The General Rules of Interpretation (GRIs) to the HTSUSA
govern the classification of goods in the tariff schedule. GRI 1
states, in pertinent part, that such "classification shall be
determined according to the terms of the headings and any
relative section or chapter notes. . . ." Goods which cannot be
classified in accordance with GRI 1 are to be classified in
accordance with subsequent GRIs, taken in order. Heading 6308,
HTSUSA, provides for needlecraft kits, with or without
accessories. The merchandise at issue is appropriately
classifiable herein.
CFTA Eligibility
Goods which originate in the territory of Canada are
potentially eligibly for special tariff treatment in accordance
with section 201 of the United States-Canada Free-Trade
Implementation Act of 1988. General Note 3(c)(vii)(A), HTSUSA.
Goods are considered "originating in the territory of Canada" if,
inter alia,
"they have been transformed in Canada and/or
the United States so as to be subject--"
(I) to a change in tariff
classification as described in the
rules of subdivision (c)(vii)(R) of
this note....
General Note 3(c)(vii)(B)(2), HTSUSA. However, goods having
undergone "simple packaging" - i.e., imported items put together
in Canada - are not considered to have originated in Canada, even
if that packaging results in a change of classification. General
Note 3(c)(vii)(C)(1), HTSUSA.
The only item in the needlecraft kit which is processed in
Canada is the linen, which, as we stated above, is cut to size
and hand-dyed. Textile commodities produced in more than one
foreign country are subject to the country of origin requirements
delineated in section 12.130 of the Customs Regulations (19
C.F.R. 12.130). These regulations provide that:
. . . a textile product . . . which consists
of materials produced or derived from, or
processed in, more than one foreign . . .
country shall be a product of that foreign .
. . country where it last underwent a
substantial transformation.
12.130(b). A textile product undergoes a substantial
transformation when it is ". . . transformed by means of
substantial manufacturing or processing operations into a new
and different article of commerce."
Section 12.130 of the regulations outlines the criteria used
to determine the country of origin for textiles and textile
products. Specifically, this provision of the regulations is
considered in determining whether a textile product has undergone
substantial manufacturing or processing operations, and what
constitutes a new and different article of commerce. In
12.130(e)(1), it is clearly stated that cutting of fabric into
parts will substantially transform that fabric when the parts are
assembled into the completed article. Additionally, dying of
fabric will substantially transform that fabric only when the
dying is accompanied by two or more delineated operations. Since
neither of these requirements has been met, the linen is
considered a product of Belgium.
In HRL 555999 of November 20, 1991, we underwent an analysis
of whether a toy set, packaged in Mexico from Mexican and Chinese
components, was eligible for tariff preference under the
Generalized System of Preferences (GSP). The GSP also has a
"product of" requirement, in that an article must be either
entirely of, or substantially transformed in, a beneficiary
country. Following the rule of HRL 555999, sets (like the
needlecraft set at issue) which include component parts which are
sourced outside the beneficiary country (Canada or the United
States) are clearly not wholly the growth, product or manufacture
of that beneficiary country (Canada or the United States). The
mere packaging of the English and Belgian components with the
other items in the needlecraft set clearly does not substantially
transform the non-Canada/U.S. components into "products of"
Canada or the United States. Accordingly, because the entire
needlecraft kit is not a "product of" Canada or the United
States, neither the set nor its components is entitled to tariff
preference under this program.
Country of Origin Marking
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C.
1304), provides, subject to certain exceptions, that 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 container) will
permit, in such manner as to indicate to the ultimate purchaser
in the U.S. the English name of the country of origin of the
article. Neither the statute nor the Customs Regulations
contains any provision regarding the marking of sets.
Accordingly, each item in the needlecraft kit must be separately
marked with its own country of origin. T.D. 91-7, 25 . Cus. Bul.
7, 17 (January 8, 1991) (Interpretive Rule on the "Tariff
Treatment and Country of Origin Marking of Sets, Mixtures, and
Composite Goods"). Where the marking of the container will
reasonably indicate the country of origin to the ultimate
purchaser, however, the container may be marked instead of the
individual articles. See 19 U.S.C. 1304(a)(3)(D) and 19 C.F.R.
134.32(d).
HOLDING:
As a result of the foregoing, the instant merchandise is
classified under subheading 6308.00.0020, HTSUSA, textile
category 669, as needlecraft sets put up for retail sale. The
applicable rate of duty is 13 percent ad valorem. The U.S.-
Canada Free-Trade Agreement duty preference does not apply.
The designated textile and apparel category may be
subdivided into parts. If so, visa and quota 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 that you check, close to the time of shipment, the Status
Report On Current Import Quotas (Restraint Levels), an issuance
of the U.S. Customs Service, which is updated weekly and is
available at your local Customs office.
Due to the changeable nature of the statistical annotation
(the ninth and tenth digits of the classification) and the
restraint (quota/visa) categories, you should contact your local
Customs office prior to importing the merchandise to determine
the current status of any import restraints or requirements.
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