OT:RR:CTF:FTM H314186 MJD
Center Director
Apparel, Footwear, and Textiles Center
U.S. Customs and Border Protection
33 New Montgomery St.
San Francisco, CA 94105
Attention: Import Specialist Patricia Klein
Re: Application for Further Review of Protest No. 2304-20-101510; Tariff classification of comber noils and eligibility for preferential tariff treatment under the North American Free Trade Agreement ("NAFTA")
Dear Center Director:
This is in reference to the Application for Further Review ("AFR") of Protest No. 2304-20-101510, timely filed by Baker & McKenzie, LLP on August 11, 2020, on behalf of their client, [****], (hereinafter "Protestant"), regarding the tariff classification under the Harmonized Tariff Schedule of the United States ("HTSUS") and preferential tariff treatment under the North American Free Trade Agreement ("NAFTA") of certain comber noils.
You have asked that certain information submitted in connection with this ruling request be treated as confidential. Inasmuch as your request conforms to the requirements of 19 C.F.R. 177.2(b)(7), your request for confidentiality is approved. The information contained within brackets will not be released to the public and will be withheld from published versions of this ruling.
FACTS:
The subject merchandise covers one line entry, [****], of [****] kg of comber noils. According to Protestant, [****], is a Mexican company (hereinafter "Mexican company") that manufactures cotton yarn in Mexico and produces the comber noils during the yarn manufacturing process. In the process of making yarn, the Mexican company passes raw cotton through a machine which combs the fibers. Combing the fibers results in long cotton fibers which are retained for use in yarn production, and short fibers known in the industry as "comber noils." Protestant provides that the Mexican company sells the comber noils to a middleman, [****], which then sells the comber noils in the same condition to [****], the exporter and seller of the imported cotton at issue.
At the time of importation, the comber noils were classified under heading 5203, specifically subheading 5203.00.50, Harmonized Tariff Schedule of the United States ("HTSUS"), which provides for "Cotton, carded or combed: Other." On July 1, 2019, CBP issued to Protestant a Proposed Notice of Action ("CBP Form 29") explaining that the comber noils at issue did not qualify for preferential tariff treatment under NAFTA and that they were properly classified in subheading 5203.00.3000, HTSUSA, which provides for "Cotton, carded or combed: Fibers of cotton processed but not spun: Other." In response to the CBP Form 29, Protestant submitted a letter, dated August 7, 2019, stating, in part, that the comber noils are an originating good under NAFTA, "based on preference criterion C, which covers goods produced entirely within the territory of one or more NAFTA countries (here, Mexico) exclusively from originating materials (here, cotton scrap resulting from yarn production in Mexico)." Protestant also provided that "[****], the exporter and seller of the imported cotton at issue, further processes the cotton in Mexico by bleaching and carding the scrap." (emphasis added). The protestant did not provide any information on the source of the raw cotton when requested by the port.
In its Protest, dated August 11, 2020, however, the Protestant now claims that the comber noils are properly classified in subheading 5202.99.50, HTSUS, which provides for "Cotton waste (including yarn waste and garneted stock): Other: Other: Other." Moreover, Protestant claims that "describe [****] treated the comber noils with minimal process[ing]. Namely, the comber noils were humidified, compacted into cakes, scoured and bleached, centrifuged to eliminate the water, dried, and then compacted in bales. Importantly, the comber noils were NOT subjected to any further combing or carding process prior to importation." (emphasis added). CBP reclassified the comber noils under subheading 5203.00.30, HTSUS, and denied the product NAFTA preferential tariff treatment. Subsequently, on November 29, 2021, CBP's New York laboratory tested a sample of the comber noils and reported via laboratory report no. NY20211268 that the cotton fibers were carded.
ISSUE:
1) What is the tariff classification of the comber noils?
2) Are the comber noils eligible for preferential tariff treatment under NAFTA?
LAW AND ANALYSIS:
Initially, we note that the matter is protestable under 19 U.S.C. 1514(a)(2) as a decision on classification. The protest was timely filed on or about August 11, 2020, within 180 days of liquidation. (Miscellaneous Trade and Technical Corrections Act of 2004, Pub. L. 108-429, 2103(2)(B)(ii), (iii) (codified as amended at 19 U.S.C. 1514(c)(3) (2006)). Further Review of Protest No. 2304-20-101510 was properly accorded to Protestant pursuant to 19 C.F.R. 174.24(c) because the decision against which the protest was filed is alleged to be inconsistent with matters previously ruled upon by the Commissioner of Customs or his designee or by the Customs courts.
1) Tariff Classification
Classification of goods under the HTSUS is made in accordance with the General Rules of Interpretation ("GRI"). GRI 1 provides that the classification shall be determined according to the terms of the headings of the tariff schedule and any relative section or chapter notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRI may be applied in order. Pursuant to GRI 6, classification at the subheading level uses the same rules, mutatis mutandis, as classification at the heading level.
The 2018 HTSUS provisions under consideration are as follows:
5202: Cotton waste (including yarn waste and garneted stock):
Other:
5202.99: Other:
5202.99.5000: Other:
* * *
5203: Cotton, carded or combed:
Fibers of cotton processed but not spun:
5203.00.3000: Other:
5203.00.5000: Other:
* * *
In addition, in interpreting the HTSUS, the Explanatory Notes ("ENs") of the Harmonized Commodity Description and Coding System may be utilized. The ENs to the Harmonized Commodity Description and Coding System represent the official interpretation of the tariff at the international level. While neither legally binding nor dispositive, the ENs provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of these headings. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
The ENs to heading 52.02 state, in relevant part:
In general, this heading covers waste cotton obtained when cotton is prepared for spinning, or during spinning operations, weaving, knitting, etc., or from the garnetting of cotton goods.
It thus includes:
Combing waste, usually referred to as comber noils; strippings recovered from carding or combing cylinders; broken fibres detached during the drawing process; fragments of slivers or rovings; carding fly; tangled yarn and other yarn waste; yarn and fibres resulting from the garnetting of rags.
This waste may contain greasy matter, dust or other extraneous matter or may have been cleaned, bleached or dyed. It may be used for spinning or may serve for other purposes.
The heading excludes:
. . .
(c) Carded or combed cotton waste (heading 52.03).
* * *
The ENs to heading 52.03 state, in relevant part:
This heading covers cotton (including garnetted stock and other cotton waste) which has been carded or combed, whether or not further prepared for spinning.
The main purpose of carding is to disentangle the cotton fibres, lay them more or less parallel, and entirely or largely free them from any extraneous matter they may still contain. The fibres are then in the form of wide webs (laps) which are generally condensed into slivers. These slivers may or may not be combed before being converted into rovings.
Combing, which is chiefly practised for the spinning of long staple cotton, removes the last traces of extraneous matter clinging to the fibres and eliminates the shorter fibres in the form of combing waste; only the longer fibres, lying parallel, remain.
. . .
The products of this heading may be bleached or dyed.
* * *
Protestant argues that the comber noils at issue are classified in subheading 5202.99.50, HTSUS, which provides for "Cotton waste (including yarn waste and garneted stock): Other: Other: Other." According to the ENs to heading 52.02, this heading includes "[c]ombing waste, usually referred to as comber noils." The ENs to heading 52.02 further provide that the cotton waste "may contain greasy matter, dust or other extraneous matter or may have been cleaned, bleached or dyed." However, the ENs to heading 52.02 specifically exclude "[c]arded or combed cotton waste (heading 52.03)." See the ENs to heading 52.02(c).
In the instant case, the cotton fibers here are a byproduct of the yarn making process when raw cotton is combed. They are the short fibers that are retained after the combing process and are known as comber noils. Protestant provides that the comber noils are minimally processed. Specifically, Protestant states that the comber noils are "humidified, compacted into cakes, scoured and bleached, centrifuged to eliminate the water, dried, and then compacted in bales." Protestant further explains that the comber noils are "NOT subjected to any further combing or carding process prior to importation." However, Protestant provided contrary information in their August 7, 2019, communication to CBP in response to the CBP Form 29 stating that "describe [****] further processes the cotton in Mexico by bleaching and carding the scrap." (emphasis added).
With that said, CBP's laboratory tested the comber noils and confirmed via laboratory report no. NY20211268, dated November 29, 2021, that the comber noils are in fact carded. Absent a conclusive showing that the testing method used by the CBP laboratory is in error, or that the CBP's laboratory results are erroneous, there is a presumption that the results are correct. See Exxon Corp. v. United States, 462 F. Supp. 378, 81 Cust. Ct. 87, C.D. 4772 (1978). Therefore, while the cotton fibers are comber noils as described in the ENs to heading 5202, because the CBP laboratory found that the cotton is carded, it is specifically excluded from classification in heading 5202, HTSUS.
Instead, we find that the comber noils are classified in heading 5203, HTSUS, which provides for "Cotton, carded or combed." The ENs to heading 52.03 provide for, in pertinent part, cotton waste that has been "carded or combed, whether or not further prepared for spinning." In addition, the ENs to heading 52.03 allow for cotton that "may be bleached or dyed." Since the cotton in this case is both carded and bleached, we find that the comber noils are classified in heading 5203, HTSUS, and specifically in subheading 5203.00.30, HTSUS, which provides for "Cotton, carded or combed: Fibers of cotton processed but no spun: Other."
Protestant cites to New York Ruling Letter ("NY") N190397, dated November 4, 2011, where CBP classified cotton waste in heading 5202, HTSUS; NY K86433, dated June 10, 2004, where CBP discussed combing waste; Headquarters Ruling Letter ("HQ") 952757, dated March 9, 1993, where CBP classified cotton waste in heading 5202, HTSUS; and NY 883328, dated March 22, 1993, where CBP classified cotton comber waste or comber noils in heading 5202, HTSUS. However, the cotton in those cases were not carded like the cotton comber noils in this case. As stated above, EN 52.02(c) specifically excludes carded cotton waste from classification in heading 5202, HTSUS. Accordingly, we conclude that the comber noils under consideration are classified in heading 5203, HTSUS, specifically, subheading 5203.00.30, HTSUS, which provides for "Cotton, carded or combed: Fibers of cotton processed but no spun: Other."
2) NAFTA Preferential Tariff Treatment
Protestant argues that the subject comber noils are eligible for NAFTA preferential tariff treatment. NAFTA is implemented in General Note ("GN") 12 of the HTSUS. GN 12(a)(ii) provides that goods are eligible for the NAFTA rate of duty if they originate in the territory of a NAFTA party and qualify to be marked as goods of Mexico. GN 12(b) sets forth the various methods for determining whether a good originates in the territory of a NAFTA party. Specifically, these provisions provide, in relevant part, as follows:
b) 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 subdivision (r), (s) and (t) of this note or the rules set forth therein, or
(B) the goods otherwise satisfy the applicable requirements of subdivision (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; ...
Pursuant to GN 12(n)(ix)(A), goods imported into the United States may be considered "goods originating in the territory of a NAFTA party" only if:
(n) As used in subdivision (b)(i) of this note, the phrase "goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States" means-
. . .
(ix) waste and scrap derived from-
A) production in the territory of one or more of the NAFTA parties, or
. . .
According to Protestant the comber noils are originating because they are "wholly obtained or produced entirely in the territory of...Mexico." See GN 12(b)(i). Goods that are "wholly obtained or produced ... " pursuant to GN(b)(i) includes "waste and scrap derived from production in the territory of the NAFTA parties." See GN 12(n)(ix)(A). Protestant provides that the comber noils are a waste product and that they are "not suitable for the predominant use of cotton fiber-namely, the production of yarn and/or textiles." Protestant further contends that the comber noils have to be further processed by "scouring, cleaning and/or bleaching in order to find a useful commercial purpose, for example to be readied for manufacturing into batting for disposable diapers." Additionally, Protestant opines that the long cotton fibers combed out during the yarn making process are "worth approximately 125% more than the discarded waste comber noils," which further supports their argument that the product should be regarded as waste.
CBP decisions interpreting "waste and scrap" for purposes of GN 12(n)(ix) have turned on whether the merchandise claimed to be waste or scrap could be repaired for use according to its original purpose. For example, in HQ 558823, dated February 6, 1995, we held that certain used air-brake parts returned to the United States after export to Mexico for re-machining and honing would not qualify as "waste" or "scrap" under NAFTA GN 12(n)(ix). In that case, although some of the used parts were scrapped in Mexico, other parts were re-machined and honed to return them to their original condition. These parts were then either combined with various new parts to form rebuilt air-brake systems for sale in the United States or returned to the United States as individual parts. Because the re-machined parts could be used for their original purpose as air-brake system parts, they did not qualify as "waste" or "scrap" under GN 12(n)(ix). See also HQ 559247, dated September 5, 1995 (reconsidering and affirming HQ 558823). Similarly, defective air-conditioning and refrigeration compressors that were returned to the United States after having been "rebuil[t] to new condition" in Mexico were not considered "scrap" or "waste" under GN 12(n)(ix). See HQ 559199, dated May 15, 1995.
In contrast, CBP has found that goods that cannot be repaired or rebuilt for use as originally intended may qualify as "waste and scrap" under NAFTA GN 12(n)(ix). For example, in HQ H044166, dated January 23, 2009, CBP found that defective electronics parts returned to U.S. customers from a Mexican repair facility qualified as "waste and scrap." In that case, the importer maintained that the defective parts were damaged beyond repair and were returned to customers only to comply with state warranty-law requirements. Since the defective parts could not be repaired for use as intended in an electronic device, the parts had no value except as scrap metal. Accordingly, the parts were "waste and scrap" for purposes of GN 12(n)(ix). See also, HQ H061739, dated April 23, 2012 (used coir pith that was typically discarded in a landfill after the growing season qualified as "waste or scrap" as poor performance could be expected if it was used again, and it could not be returned to a condition for use as originally intended).
Based on the foregoing, the comber noils at issue are not waste within the meaning of GN 12(n)(ix)(A). Protestant provides that comber noils are not suitable for the predominant use of cotton fiber, i.e., the production of yarn and/or textiles. We disagree. Comber noils or noils, while a by-product of the yarn making process, can be used for their original purpose in blends for the manufacture of yarns and fabrics.[1] They may be a lower quality or grade of yarn or fabric, like Protestant states, the combed long fibers of cotton are "worth approximately 125% more than discarded waste comber noils," but when comber noils are repurposed to be used in blends of yarn and fabric, the comber noils are nevertheless still a type of yarn or textile fabric. Lastly, Protestant explains that it has to further process the comber noils to make them useful by scouring, cleaning and/or bleaching the cotton so that they can be used in batting for diapers. We find that minimally processing the comber noils does not further the argument that they are waste. Therefore, the subject comber noils are not waste for purposes of GN 12(n)(ix)(A).
Accordingly, the subject comber noils do not qualify for NAFTA preferential tariff treatment because they do not meet the definition of waste and scrap as defined under GN 12(n)(ix)(A).
HOLDING:
By application of GRI 1, we find that the comber noils at issue are classified under heading 5203, HTSUS, and specifically under subheading, 5203.00.30, HTSUS, which provides for "Cotton, carded or combed: Fibers of cotton processed but not spun: Other." The 2018 column one, general rate of duty is 31.4/kg.
The comber noils are not eligible for preferential tariff treatment under NAFTA.
You are instructed to DENY the protest.
You are instructed to notify the protestant of this decision no later than 60 days from the date of this decision. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to this notification. Sixty days from the date of the decision, the Office of Trade, Regulations and Rulings will make the decision available to CBP personnel and the public on the Customs Rulings Online Search System (CROSS) at https://rulings.cbp.gov/, or other methods of public distribution.
Sincerely,
Yuliya A. Gulis, Director
Commercial and Trade Facilitation Division
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[1] The Fairchild Books Dictionary of Textiles defines "noil" or "comber noil" as "[s]hort fibers removed during the combing operation of yarn making. This occurs in production of such yarns as worsted, combed cotton, and spun silk. The fibers sometimes are mixed with other fibers to make low-quality yarns or are used for purposes other than yarn making, such as padding, stuffing. See Bourette Silk." Ajoy K. Sarkar & Phyllis. G. Tortora, The Fairchild Books Dictionary of Textiles 325 (Ingrid Johnson et al. eds., 9th ed. 2023).
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