OT:RR:CTF:VS H148716 ARU
Andrea Cote, CEO
Annie Marie Padoire inc.
1660 St-James Street
Winnipeg, MB
R3H 0L3
RE: NAFTA preference eligibility of certain reusable diaper products
Dear Ms. Cote:
This is in response to your letter, dated January 6, 2011, concerning the eligibility of certain reusable diaper products for preferential tariff treatment under the North American Free Trade Agreement (“NAFTA”). You also ask about the procedures for filing a post-importation NAFTA claim. You provided additional information upon request in e-mails dated March 14, 2011; April, 4, 2011; April 4, 2011; and April 27, 2011.
FACTS:
According to your submission, “Annie Marie Padoire inc. (AMPdiapers)” manufactures one size reusable diaper/covers, hemp diaper inserts, and “bamboo” diaper inserts in Canada. The three items at issue are sold individually. You provided a sample and the following details for each product:
One size reusable diaper/cover
You state that this product is classified under subheading 6111.30.50, Harmonized Tariff Schedule of the United States (“HTSUS”) which provides for "Babies’ garments and clothing accessories, knitted or crocheted: Of synthetic fibers: Other, Other, Other." The diaper/cover is constructed of two fabrics sewn together in Canada along the edges creating a pocket of space in between them. The garment consists of an exterior fabric from the U.S. which is a woven man-made fabric with a polyurethane laminate applied to the interior side. You state that the fabric is classified in heading 5902, HTSUS, and is formed from yarn in the U.S., and that the polyurethane laminate is applied in the United States. The interior lining fabric is a polyester knit from China. The remaining components include elastic from the U.S., snaps from Taiwan, and thread from China.
Hemp diaper insert
You state that this product is classified under subheading 6111.90.90, HTSUS, which provides for “Babies’ garments and clothing accessories, knitted or crocheted: of other textile materials: other, other: other.” This product consists of two layers of 55 percent hemp, 45 percent cotton knitted fabric from China. The two layers are sewn together along the edges with thread made in Canada.
“Bamboo” diaper insert
You state that this product is classified under subheading 6111.30.50, HTSUS, which provides for "Babies’ garments and clothing accessories, knitted or crocheted: Of synthetic fibers: Other, Other, Other." This product consists of two layers of 70 percent rayon derived from bamboo, 30 percent organic cotton fleece knitted fabric. The two layers are sewn together along the edges with thread made in Canada.
You state that all products are cut and sewn in Winnipeg, Canada. You also state that the diaper/cover and the two types of inserts are sold separately. The following components are non-originating and are classified as follows:
Item Origin HTSUS Classification
Polyester Knit China 6001
Snaps Taiwan 9606
55% Hemp/ China 6006
45% Cotton Knitted Fabric
70% Rayon Derived from China 6006
“Bamboo”/ 30% Organic Cotton
Fleece Knitted Fabric
ISSUES:
Whether the one size re-usable diaper/cover, hemp diaper insert, or “bamboo” diaper insert qualify for preferential tariff treatment under NAFTA.
Whether an importer may claim NAFTA preference after entry.
LAW AND ANALYSIS:
NAFTA
General Note (“GN”) 12, HTSUS, incorporates Article 401 of NAFTA into the HTSUS. GN 12(a)(i), HTSUS, provides:
Goods that originate in the territory of a NAFTA party under the terms of 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 the Treasury (without regard to whether the goods are marked), and goods enumerated in subdivision (u) of this note, 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 reusable diaper products will be eligible for the “Special” “CA” rate of duty provided that they are NAFTA originating under GN 12(b), HTSUS, and qualify to be marked as a product of Canada under the NAFTA Marking Rules which are set forth in 19 C.F.R. Part 102. GN 12(b), HTSUS, 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 –
(i) they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or
(ii) they have been transformed in the territory of Canada, Mexico and/or the United States so that—
(A) except as provided in subdivision (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
(B) the goods otherwise satisfy the applicable requirements of subdivisions (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note; or
(iii) they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials.
In this case, since the three products (one size re-usable diaper/cover, hemp diaper insert, and “bamboo” diaper insert) are each comprised, in part, of non-originating materials, GN 12(b)(i), HTSUS, does not apply. Therefore, we must determine whether the non-originating materials undergo the tariff shift and other applicable requirement provided for under GN 12(b)(ii), HTSUS. You state that all three products are classified under heading 6111, HTSUS. The applicable rule set forth in GN 12(t)/61.35, HTSUS, requires:
a change to headings 6109 through 6111 from any other chapter, except from headings 5106 through 5113, 5204 through 5212, 5307 through 5308 or 5310 through 5311, chapter 54, or headings 5508 through 5516 or 6001 through 6006, provided that the good is both cut (or knit to shape) and sewn or otherwise assembled in the territory of one of more of the NAFTA parties.
For the one size reusable diaper/cover, Chapter rule 2 of GN 12(t) also applies:
Chapter rule 2: For purposes of determining the origin of a good of this chapter, the rule applicable to that good shall only apply to the component that determines the tariff classification of the good, and such component must satisfy the tariff change requirements set out in the rule for that good. If the rule requires that the good must also satisfy the tariff change requirements for visible lining fabrics listed in chapter rule 1 for this chapter, such requirement shall only apply to the visible lining fabric in the main body of the garment, excluding sleeves, which covers the largest surface area, and shall not apply to removable linings.
Under Chapter rule 2, the exterior fabric of the reusable diaper/cover determines the classification. Classification of goods under the HTSUS is governed by the General Rules of Interpretation (GRIs). GRI 1 provides that "classification shall be determined according to the terms of the headings and any relative section or chapter notes and, provided such headings or notes do not otherwise require, according to [the remaining GRIs taken in order]."
Heading 5903, Harmonized Tariff Schedule of the United States (HTSUS), provides for "Textile fabrics impregnated, coated, covered or laminated with plastics, other than those of heading 5902 [tire cord fabric]." Note 2, Chapter 59, states in relevant part:
2. Heading 5903 applies to:
(a) Textile fabrics, impregnated, coated, covered or laminated with plastics, whatever the weight per square meter and whatever the nature of the plastic material (compact or cellular), other than:
(1) Fabrics in which the impregnation, coating or covering cannot be seen with the naked eye (usually chapters 50 to 55, 58 or 60); for the purpose of this provision, no account should be taken of any resulting change of color; …
In this case, the polyester knit is made in the United States and the polyurethane laminate is applied in the United States. The finished fabric is classified in heading 5903, HTSUS. As the external fabric is formed from yarn in the United States and the polyurethane laminate is applied in the United States, the fabric is originating under 12(b)(iii) above. Accordingly, the diaper cover is originating.
As for the hemp diaper insert and the “bamboo” diaper insert, both are constructed from non-originating knit fabric. As a change to heading 6111, HTSUS, from knit fabrics is excepted from the applicable tariff shift rule, the diaper inserts do not meet the required tariff change and do not qualify for NAFTA preferential treatment.
Country of Origin Marking
Next, we must determine if the diaper/cover qualifies to be marked as a good of Canada. Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), requires 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 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. The term "country of origin" is defined in § 134.1(b), Customs Regulations (19 CFR 134.1(b)), as the "country of manufacture, production, or growth of any article of foreign origin entering the U.S." The country of origin marking requirements for a "good of a NAFTA country" are 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).
The country of origin marking of textile and apparel products is determined by hierarchical application of general rules set forth in 19 CFR § 102.21(c)(1) through (c)(5). As the diaper/cover is not wholly obtained or produced in a single country, 19 CFR § 102.21(c)(1) is not applicable. Paragraph (c)(2) states that:
Where 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 foreign material 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.
The diaper cover is classified in heading 6111, HTSUS. The applicable rule in 19 CFR § 102.21(e) is, in pertinent part, as follows:
… 6101-6117: (1) If the good is not knit to shape and consists of two or more component parts, except for goods of subheading 6117.10 provided for in paragraph (e)(2) of this section, a change to an assembled good of heading 6101 through 6117 from unassembled components, provided that the change is the result of the good being wholly assembled in a single country, territory, or insular possession.
It is indicated that the exterior and interior fabric are sewn together in Canada. Therefore, since the components are wholly assembled in Canada, the country of origin of the diaper/cover is Canada.
Post-importation NAFTA Claim
You also ask about the timeline for filing a claim for NAFTA duty preference. Under section 520(d) of the Tariff Act of 1930, as amended (19 U.S.C. §1520(d)), U.S. Customs and Border Protection (“CBP”) may reliquidate an entry to refund any excess duties paid on a good qualifying under the NAFTA rules of origin. This opportunity is available to importers only with respect to goods for which no claim for NAFTA preferential tariff treatment was made at the time of importation. The importer’s claim must be filed within one year after the date of importation and must meet certain conditions. The claim must include a written declaration that the good qualified under the NAFTA rules of origin at the time of importation, copies of all applicable NAFTA Certificates of Origin, and such other documentation relating to the importation of the goods as is required by CBP. The CBP Regulations promulgated under this provision and setting forth these requirements are found in 19 CFR §181.31-33.
HOLDINGS:
As the external fabric is formed from yarn in the United States and the polyurethane laminate is applied in the United States, the fabric is originating under 12(b)(iii), and accordingly, so is the diaper/cover. Under 19 C.F.R. § 102.21(e)(1), the country of origin of the reusable diaper/cover is Canada. However, the hemp/cotton knitted fabric and “bamboo” derived rayon/organic cotton fleece imported from China do not meet the applicable tariff shift rule for diaper inserts of heading 6111, HTSUS. As a result, the diaper inserts do not qualify for NAFTA preferential treatment.
Reference to this ruling letter should be made in the entry of documents filed at the time the subject goods are entered. See CBP Form 7501 – Instructions, Additional Data Elements (available online at: www.cbp.gov). If the entry summary has been filed without reference to this ruling letter, the ruling letter should be brought to the attention of the appraising officer at the point of entry.
Sincerely,
Monika R. Brenner, Chief
Valuation & Special Programs Branch