CLA-2 RR:CR:TE 965309 SS
Mr. Gilles Desjardins
Milgram & Company Inc.
407, rue McGill, Suite 500
Montreal (Quebec), Canada, H2Y 2G7
RE: Classification, Status under the North American Free Trade Agreement and Country of Origin Determination for a Bed in a Bag Comforter Set; General Note 12; Appendix to Part 181, Part II, Section 4(8); Self Produced Materials; 19 CFR 102.21(d); Sets; 19 CFR 102.21 (c)(1), (2) and (4); 19 CFR 102.19(a); NAFTA Preference Override; CITA Directive Concerning Visa and Quota Reporting for Textiles and Textile Products Entered as Sets (67 FR 12977); Article 509
Dear Mr. Desjardins:
This letter is in reply to your correspondence dated November 5, 2001, on behalf of Lady Sandra of Canada Ltd., in which you requested a binding ruling regarding classification, status under the North American Free Trade Agreement (NAFTA) and a country of origin determination for a comforter set which will be imported into the United States.
A sample was not submitted with your request.
FACTS:
The subject merchandise is described as a “bed in a bag comforter set.” The comforter set is comprised of a comforter, dust ruffle (bed skirt), pillow shams, and “sheet set” (which you indicate consists of pillowcases, flat sheet and fitted sheet). The comforter, dust ruffle, pillow shams, and sheet set will be made from either a 65 percent polyester/35 percent cotton woven fabric or a 50 percent polyester/50 percent cotton woven fabric.
Based on your submission and telephone conversations, the manufacturing scenario for the comforter set was described as follows:
PAKISTAN:
Polyester/cotton (65/35 or 50/50) fabric is formed;
Fabric is cut and sewn forming finished sheet set (pillowcases, flat sheet and fitted sheet);
Rolls of fabric and finished sheet set are sent to Canada.
CANADA:
Fabric is cut into panels and sewn together on three sides forming the comforter shell;
Polyester batting fabric is formed and cut to size and shape;
Shell and batting are joined, fourth side of shell is sewn closed;
Fabric is cut and sewn forming finished dust ruffle and pillow shams;
All components of the comforter set are packaged for retail sale and shipped to the US.
In the alternative, the finished sheet set could be sent directly to the United States to be combined with the remaining set components imported from Canada into the United States.
ISSUES:
How is the subject merchandise classified?
Is the subject merchandise eligible for preferential treatment under the NAFTA?
What is the country of origin of the subject merchandise?
LAW AND ANALYSIS:
I. Classification
Classification of merchandise under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA) is in accordance with the General Rules of Interpretation (GRI), taken in order. GRI 1 provides that classification shall be determined according to the terms of the headings and any relative section or chapter notes.
The comforter is classifiable under heading 9404, HTSUSA. The sheets and pillowcases are classifiable under heading 6302, HTSUS. The dust ruffle is classifiable under heading 6303, HTSUS. The pillow shams are classifiable under heading 6304, HTSUS. Since classification of the submitted merchandise under a single heading cannot be determined by applying GRI 1, we must apply the other GRI.
GRI 3 provides for goods that are, prima facie, classifiable in two or more headings. GRI 3(b) provides that goods put up in sets for retail sale shall be classified as if they consisted of the material or component that gives them their essential character. According to the Harmonized Commodity Description and Coding System Explanatory Notes, the official interpretation of the Harmonized System at the international level, "goods put up in sets for retail sale" refers to goods which:
consist of at least two different articles which are, prima facie, classifiable in different headings;
consist of products or articles put up together to meet a particular need or carry out a specific activity; and
are put up in a manner suitable for sale directly to users without repacking.
The subject set meets the qualifications of "goods put up in sets for retail sale." The components of the set consist of different articles that are, prima facie, classifiable in different headings. They are put up together to carry out the specific activity of furnishing a bed and they are packaged for sale directly to users without repacking. Customs has previously held that the comforter is the component that gives a comforter set its essential character. See Headquarters Ruling Letter (HQ) 959813, dated April 10, 1998. Accordingly, the comforter set is classifiable under heading 9404, HTSUSA.
With respect to the alternative scenario, the comforter, pillow shams and dust ruffle will also qualify for classification as a set with the comforter imparting the essential character assuming the components meet the packaging requirement. We are unable to classify the sheets and pillowcases imported separately into the United States beyond the heading level based on the information submitted. However, since the sheets and pillowcases are comprised of the same fabric and would be classified in the same subheading, it is clear they would not qualify for classification as a GRI 3(b) set. Accordingly, the sheets and pillowcases imported alone into the United States would be classified separately.
If the outer shell of the comforter is made from 65 percent polyester/35 percent cotton fabric, the set is classifiable under 9404.90.8522, HTSUS, which provides for: “[m]attress supports; articles of bedding and similar furnishing (for example, mattresses, quilts, eiderdowns, cushions, pouffes and pillows) fitted with springs or stuffed or internally fitted with any material or of cellular rubber or plastics, whether or not covered: Other: Other: Other: Quilts, eiderdowns, comforters and similar articles, With outer shell of man-made fibers. The ad valorem rate of duty is 13.1 percent. The comforter, pillow shams, dust ruffle, pillowcases and sheets fall within textile category designation 666.
If the outer shell of the comforter is made from 50 percent polyester/50 percent cotton fabric, classification is governed by HTSUSA Section XI Note 2(A) and Subheading Note 2(A). Additional U.S. Rule of Interpretation 1(d) states that the principles of Section XI regarding mixtures of two or more textile materials shall apply to the classification of goods in any provision in which a textile material is named. Thus, the comforter will be classified as if it consisted wholly of that one textile material which is covered by the heading that occurs last in numerical order among those which equally merit consideration. The competing subheadings in this instance are 9404.90.8020, 9404.90.8505 and 9404.90.8522, HTSUSA. Therefore, the comforter made from a 50 percent polyester/50 percent cotton fabric will also be classified under subheading 9404.90.8522, HTSUSA.
Nafta Eligibility/Originating Status
The comforter set undergoes processing operations in Canada which is a country provided for under the North American Free Trade Agreement (NAFTA).
General Note 12, HTSUS, incorporates Article 401 of NAFTA into the HTSUSA. General Note 12(a) provides, in pertinent part:
* * *
(i) Goods that originate in the territory of a NAFTA party under subdivision (b) of this note and that qualify to be marked as goods of Canada under the terms of the marking rules set forth in regulations issued by the Secretary of Treasury (without regard to whether the goods are marked), when such goods are imported into the customs territory of the United States and 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 such duty rate, in accordance with section 201 of the North American Free Trade Agreement Implementation Act.
Accordingly, the comforter set will be eligible for the “Special” “CA” rate of duty provided it is a NAFTA “originating” good under General Note 12(b), HTSUS, and it qualifies to be marked a good of Canada.
With respect to the “originating” requirement, General Note 12(b) provides in pertinent part:
For the purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule 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
they have been transformed in the territory of Canada, Mexico and/or the United States so that –
except as provided in subsection (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,
* * *
Since the comforter set is not wholly obtained or produced entirely in Canada, it will only qualify as an originating good of Canada if the merchandise has been transformed in Canada such that the non-originating materials undergo the applicable change in tariff classification. Customs has previously stated that all the items, not just the item that imparts the essential character to the set (i.e., the comforter), must meet the terms of General Note 12(b). See HQ 963904, dated May 30, 2002.
Therefore, we must ascertain whether the non-originating materials in the subject comforter set are transformed in Canada pursuant to General Note 12(b)(ii)(A). To qualify under this provision, the non-originating materials must undergo the change in tariff classification set forth in General Note12(t), HTSUSA. The comforter set is classifiable in subheading 9404.90, HTSUSA. The NAFTA rule of origin for subheading 9404.90, HTSUSA, states:
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.
Pursuant to the manufacturing operation described above, fabric for all the bedding items is woven in Pakistan. Some fabric is shipped in rolls to Canada. However, some fabric is cut and sewn into finished sheets and pillowcases and sent to Canada.
At the time the rolls of fabric are exported from Pakistan, it is believed they are classifiable under HTSUS headings 5407 or 5512 through 5515, HTSUS, which provides for various types of man-made fiber woven fabrics. As these headings are excepted by subdivision (t), it would initially appear that these non-originating materials do not undergo the requisite change in tariff classification.
It is noted, however, that the Appendix to Part 181 of the Customs Regulations (19 CFR Part 181), which sets forth the NAFTA rules of origin regulations, specifies rules for determining whether certain non-originating materials undergo an applicable change in tariff classification when used in self-made goods. The Appendix to Part 181, Part II, Section 4 (“Originating Goods”)(8), states:
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 the 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.
* * *
On the basis of the foregoing, the producer of the bed-in-a-bag comforter set (“the good”) has the option of identifying the comforter shell, dust ruffle and pillow shams (“the self-produced materials”) as non-originating materials. If this choice is made, the comforter shell (classifiable under heading 6307, HTSUS), dust ruffle (classifiable under heading 6303, HTSUS) and the pillow shams (classifiable under heading 6304, HTSUS) fall within tariff provisions that are not excepted by the tariff shift rule set forth in subdivision (t). Accordingly, the comforter shell, dust ruffle and pillow shams would be deemed as undergoing the requisite change in tariff classification.
At the time the finished sheets and pillowcases leave Pakistan and are imported into Canada, the sheets and pillowcases are classified under heading 6302, HTSUS. As this heading is not excepted by subdivision (t), each of these bedding items undergoes the requisite change in tariff classification and they qualify for NAFTA preference. The fact that some of the bedding items are merely packaged together in Canada does not disqualify the comforter set from being considered an originating good. See HQ 963904, cited above (there is no language in General Note 12, HTSUSA, which would disqualify a good from obtaining originating status by virtue of merely having undergone simple packaging or combining operations).
Pursuant to the analysis set forth above, the comforter set qualifies as an originating good. Accordingly, it will be entitled to the special “CA” rate of duty if it qualifies to be marked as a good of Canada and provided that all other NAFTA requirements are met.
III. Country of Origin/NAFTA Marking Rules
On December 8, 1994, the President signed into law the Uruguay Round Agreements Act. Section 334 of that Act (codified at 19 U.S.C. 3592) provides new rules of origin for textiles and apparel entered, or withdrawn from warehouse, for consumption, on and after July 1, 1996. On September 5, 1995, Customs published § 102.21, Customs Regulations, in the Federal Register, implementing section 334 (60 FR 46188). Thus, effective July 1, 1996, the country of origin of a textile or apparel product shall be determined by sequential application of the general rules set forth in § 102.21(c)(1) through (5), as amended.
Additionally, § 102.21(d) addresses the treatment of sets for country of origin purposes. Section 102.21(d) provides the following:
Where a good classifiable in the HTSUS as a set includes one or more components that are textile or apparel products and a single country of origin for all of the components of the set cannot be determined under paragraph (c) of this section, the country of origin of each component of the set that is a textile or apparel product shall be determined separately under paragraph (c) of this section.
Thus, per the terms of § 102.21(d), the country of origin of each item in the set must be determined separately if there is not a single country of origin for the entire set.
Section 102.21(c)(1) states 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.” The sheets and pillowcases were wholly obtained or produced in Pakistan. Thus, the country of origin for the sheets and pillowcases initially appears to be Pakistan. Since the comforter, dust ruffle and pillow shams were not wholly obtained or produced in a single country, territory or insular possession, § 102.21(c)(1) is inapplicable to those items.
Section 102.21(c)(2) states that “[w]here the country of origin of a textile or apparel product cannot be determined under paragraph (c)(1) of this section, the country of origin of the good is the single country, territory, or insular possession in which each of the foreign materials 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 this section:”
Paragraph (e) in pertinent part states that “[t]he following rules shall apply for purposes of determining the country of origin of a textile or apparel product under paragraph (c)(2) of this section:”
HTSUS Tariff shift and/or other requirements
6301 – 6306 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.
9404.90 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 dust ruffle and pillow shams are comprised of fabric that was formed in a single country. Therefore, pursuant to § 102.21(c)(2), the country of origin of the dust ruffle and pillow shams, initially appears to be Pakistan where the fabric was woven. Since the comforter is comprised of fabrics formed in two different countries, § 102.21(c)(2) is inapplicable for purposes of determining the origin of the comforter.
Section 102.21(c)(3) states that, “[w]here the country of origin of a textile
or apparel product cannot be determined under paragraph (c)(1) or (2) of this section:
(i) If the good was knit to shape, the country of origin of the good is the single country, territory, or insular possession in which the good was knit; or
(ii) Except for goods of heading 5609, 5807, 5811, 6213, 6214, 6301 through 6306, and 6308, and subheadings 6209.20.5040, 6307.10, 6307.90, and 9404.90, if the good was not knit to shape and the good was wholly assembled in a single country, territory, or insular possession, the country of origin of the good is the country, territory, or insular possession in which the good was wholly assembled.
As the subject comforter is not knit and subheading 9404.90, HTSUS, is excepted from provision (ii), § 102.21(c)(3) is not determinative of origin for the comforter.
Section 102.21(c)(4) states, “[w]here the country of origin of a textile or apparel product cannot be determined under paragraph (c)(1), (2) or (3) of this section, the country of origin of the good is the single country, territory or insular possession in which the most important assembly or manufacturing process occurred.”
The fabric making process for the outer shell of the comforter in
Pakistan constitutes the most important manufacturing process. Therefore, the country of origin of the subject comforter initially appears to be Pakistan.
However, § 102.19(a) of the Customs Regulations (19 CFR 102.19(a)) provides for a NAFTA override and states as follows:
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.
Although packing is considered to be a non-qualifying operation under
§ 102.17 of the Customs Regulations (19 CFR 102.17), the assembly of the comforter, dust ruffle and pillow shams in Canada meets the requirement that the good underwent production other than minor processing. Customs has previously stated that as long as one item in the set undergoes production other than minor processing, the remaining items in the set will receive the benefit of the NAFTA override. See HQ 963904, cited above. Thus, each item in the set qualifies to be marked “CA.” As each item in the comforter set has been found to be originating and qualifies to be marked “CA”, the set is entitled to the special “CA” duty rate provided that all other requirements of the NAFTA are met.
It is noted that the Committee for the Implementation of Textile Agreements (CITA) has directed Customs to apply applicable quota and visa requirements to textiles and textile products that are classified as components of a set. See 54 FR 35223, dated August 24, 1989, clarifying 53 FR 52765, dated December 29, 1988. CITA recently reconfirmed the previous directive concerning the applicability of visa requirements and quota reporting of textiles and textile products entered as parts of sets under GRI 3 of the HTSUSA. See 67 FR 12977, dated March 20, 2002. The directive states in pertinent part:
…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 have required a visa and the reporting of quota.
Customs recognizes that section 204 of the Agricultural Act of 1956, as amended (7 U.S.C. 1854), authorizes the President to limit the importation into the United States of any textiles or textile products and that the authority to supervise and implement all textiles agreements and arrangements negotiated pursuant to 7 U.S.C. 1854 has been delegated to CITA. See Executive Order 11651, 37 FR 4699, dated March 4, 1972.
If the comforter had been imported into the United States separately, it would have qualified as an originating good and to be marked “CA” by operation of the NAFTA override of § 102.19(a). Thus, the country of origin of the comforter is Canada for duty, marking and quota/visa purposes.
However, if the dust ruffle, pillow shams, sheets and pillowcases had been imported into the United States separately, they would not have qualified as originating goods and would not receive the benefit of the NAFTA override. Thus, the country of origin of the dust ruffle, pillow shams, sheets and pillowcases for duty and marking purposes is Canada, but the country of origin for quota/visa purposes is Pakistan.
HOLDING:
The bed-in-a-bag comforter set is classified based on the comforter, under subheading 9404.90.8522, HTSUSA, which provides for: “[m]attress supports; articles of bedding and similar furnishing (for example, mattresses, quilts, eiderdowns, cushions, pouffes and pillows) fitted with springs or stuffed or internally fitted with any material or of cellular rubber or plastics, whether or not covered: Other: Other: Other: Quilts, eiderdowns, comforters and similar articles, With outer shell of man-made fibers.
By virtue of each item in the set meeting the applicable tariff shift rule, the bed-in-a-bag comforter set is originating for NAFTA purposes.
By virtue of the NAFTA override in 19 CFR 102.19(a), each item in the set must be marked country of origin Canada in order to receive preferential treatment under the NAFTA as claimed.
All of the items in the set are entitled to the NAFTA “CA” special duty rate which is “Free”. However, since Pakistan is the country of origin for the dust ruffle, pillow shams, sheets and pillowcases for quota and visa purposes, they are subject to quota/visa requirements. The applicable textile category code is 666. We note that textile category code 666 has been partially integrated. Accordingly, there are no applicable quota/visa requirements for the products of World Trade Organization (“WTO”) members classified under subheadings 9404.90.8522, 6303.92.2020 and 6304.93.0000, HTSUSA.
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 renegotiations and changes, to obtain the most current information available, we suggest that your client check, close to the time of shipment, the Status Report on Current Import Quotas (Restraint Levels), an internal issuance of the U.S. Customs Service, which is available for inspection at your local Customs office. The Status Report on Current Import Quota (Restraint Levels) is also available on the Customs Electronic Bulletin Board (CEBB) which can be found on the U.S. Customs Service Website at www.customs.treas.gov.
Due to the changeable nature of the statistical annotation (the ninth and tenth digits of the classification) and the restraint (quota/visa) categories applicable to textile merchandise, your client should contact the local Customs office prior to importation of this merchandise to determine the current status of any import restraints or requirements.
The holding set forth above applies only to the specific factual situation and merchandise identified in the ruling request. This position is clearly set forth in section 19 CFR 181.100(a)(2). This section states that a ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect.
This ruling is being issued under the provisions of Part 181 of the Customs Regulations (19 C.F.R. 181). Should it be subsequently determined that the information furnished is not complete and does not comply with 19 CFR 181.100(a)(2), 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. Accordingly, if there is any change in the facts submitted to Customs, it is recommended that a new ruling request be submitted.
Sincerely,
Myles B. Harmon, Acting Director
Commercial Rulings Division