OT:RR:CTF:VS H319826 UBB
Misty Gibbins
Pacific Customs Brokers, Inc.
1400 A St.
Blaine, WA 98230
RE: Country of origin of cotton wadding; Classification; USMCA; Waste and scrap
Dear Ms. Gibbins:
This is in response to your ruling request dated June 21, 2021, submitted on behalf of your client, Canadian Mattress Recycling Inc. (“Canadian Mattress”). Your request was forwarded to our office from the National Commodities Specialist Division (NCSD). You request a ruling regarding tariff classification, country of origin and United States Mexico Canada Agreement (“USMCA”) preference eligibility for cotton wadding that Canadian Mattress collects from used furniture and plans to ship to Phoenix Fibers in Arizona, United States, for use in various new products.
FACTS:
In your ruling request, you state that Canadian Mattress collects used furniture and mattresses at their facility in Delta, British Columbia, Canada, in order to recover raw materials such as metal, wood, polyurethane foam, plastic, coir, cardboard, and cotton wadding. Workers dismantle the furniture and mattresses and remove the salvaged materials, collecting and sorting the materials as they go. The cotton wadding, at issue, is compressed into large bales for shipment to the United States, where it will be used by your buyer, Phoenix Fibers, in new products, such as building insulation or new institutional mattresses.
In correspondence with NCSD, you noted that the furniture and mattresses (from which the cotton wadding is obtained) are sourced from retailers, hotels, offices, hospitals, and through city solid waste and recycling contracts which collect the items from people’s homes. Additionally, the furniture and mattresses may originate from anywhere in the world. You also noted to the NCSD that Canadian Mattress does not wash or treat the cotton wadding and that once it is salvaged from the mattresses and furniture, the cotton wadding is baled and stored until it is shipped to the United States.
In further correspondence with our office, you stated that prior to having the cotton wadding removed, beds are sorted from other furniture for logistical and efficiency reasons. You also confirmed that all items that are received at the Canadian Mattress facility are treated the same way, i.e. they are deconstructed in order to salvage various materials and that the cotton wadding obtained in this manner is the only material that will be sent to the United States. Moreover, you explained that it is not possible to clean or repair any of the furniture/mattresses in order to return those items to their original use as they are too old, worn out, broken, unwanted, dirty or damaged for such recovery. The items are sent to Canadian Mattress for deconstruction and recycling, in lieu of sending the items to a landfill. You also stated that the wadding that is removed from the used furniture/mattresses would not be usable without cleaning and/or some processing. Finally, you informed us that the U.S. buyers of the cotton wadding (Phoenix Fibers) will clean the cotton through a step cleaner, which beats the cotton to loosen solids and removes waste. The cotton will then be combined with other foundation textiles and then, in the case of making building insulation, added into one of their insulation blends. You note that, the salvaged wadding would not be usable for insulation pads without it first being blended with other textiles and fibers.
You state that cotton wadding is provided for under subheading 5601.21.0010, Harmonized Tariff Schedule of the United States Annotated (“HTSUSA”), which provides for wadding of textile fibers, not exceeding 5 mm in length (flock), textile dust and mill neps: Wadding of textile materials and articles thereof, of cotton: wadding in one piece. In correspondence with the NCSD, you confirmed that the furniture and mattresses (from which the cotton wadding is obtained) are goods of Chapter 94, HTSUS.
You also claim that pursuant to USMCA Article 4.3, the cotton wadding qualifies as an originating good of Canada as it is waste and scrap derived from used goods collected in Canada.
ISSUE:
What is the proper tariff classification of the cotton wadding?
What is the country of origin of the cotton wadding for marking purposes?
Does the cotton wadding qualify for preferential tariff treatment under the USMCA?
LAW AND ANALYSIS:
Classification
Classification of goods under the HTSUS is governed by the General Rules of Interpretation (“GRI”). GRI 1 provides that the classification of goods 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 GRIs 2 through 6 may then be applied in order.
The 2022 HTSUS provisions under consideration are as follows:
5601 Wadding of textile materials and articles thereof; textile fibers, not exceeding 5 mm in length (flock), textile dust and mill neps:
Wadding of textile materials and articles thereof:
5601.21.00 Of cotton
5601.21.0010 Wadding, in the piece
5601.21.0090
Other
* * *
In understanding the language of the HTSUS, the Explanatory Notes (“ENs”) of the Harmonized Commodity Description and Coding System may be utilized. The ENs, although not dispositive or legally binding, provide a commentary on the scope of each heading, and are generally indicative of the proper interpretation of the Harmonized System at the international level. See T.D. 89-80, 54 Fed. Reg. 35127 (August 23, 1989).
ENs to heading 5601 provide in relevant part as follows:
56.01 Wadding of textile materials and articles thereof; textile fibres, not exceeding 5 mm in length (flock), textile dust and mill neps.
Wadding; other articles of wadding:
5601.21 Of cotton . . .
(A) WADDING OF TEXTILE MATERIALS AND ARTICLES THEREOF
The wadding referred to here is made by superimposing several layers of carded or air laid textile fibres one on the other, and then compressing them in order to increase the cohesion of the fibres. Wadding is sometimes lightly punched in order to increase the cohesion of the fibres and, in some cases, to fix the layer of wadding on a support of woven or other textile fabrics.
Wadding takes the form of a flexible, spongy, high bulk sheet, of even thickness, the fibres in which are readily separable. It is generally made of cotton fibres (absorbent or other cotton waddings) or of artificial staple fibres. Low grade wadding, made from waste from carding or garnetting, usually contains a proportion of neps or yarn waste.
Wadding is classified here whether or not bleached, dyed or printed. The heading also covers wadding on which a small quantity of agglutinating substance has been dispersed in order to improve the cohesion of the surface fibres; in contrast to nonwovens, the fibres of the inner layers of such wadding are readily separable . . .
This heading also covers wadding in the piece or cut to length, and articles of wadding other than those covered more specifically by other headings of the Nomenclature (see exclusions below) . . .
You propose that the subject merchandise is a cotton wadding classified under
5601.21.0010, HTSUSA.
Based on the descriptions and photographs of the cotton wadding included in your submission, and an examination of the small sample material provided to our offices, we find that the applicable subheading for the subject merchandise is 5601.21.00, HTSUS.
Marking
Section 334 of the Uruguay Round Agreements Act (“URAA”) (codified at 19 U.S.C. § 3592), enacted on December 8, 1994, provides rules of origin for textiles and apparel products entered, or withdrawn from warehouse, for consumption on or after July 1, 1996. Section 102.21 of the Code of Federal Regulations (19 C.F.R. § 102.21), implements the URAA. The country of origin of a textile or apparel product is determined by the sequential application of paragraphs (1) through (5) of section 102.21 (19 C.F.R. § 102.21(c)(1)-(5)).
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.” As the subject cotton wadding is obtained from mattresses and furniture that may originate from anywhere in the world, it is not wholly obtained or produced in a single country. Therefore paragraph (c)(1) is inapplicable.
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 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.” Paragraph (e) of section 102.21 states, in relevant part, that “[t]he following rules will 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
A change to wadding of heading 5601 from any other heading, except from heading 5105, 5203, 5501 through 5507, and articles of wadding of heading 9619.
You previously indicated that the furniture and mattresses are articles of chapter 94, HTSUS, and we agree that the cotton wadding obtained from the mattresses/furniture, is properly classified under heading 5601. The subject merchandise has therefore met the applicable tariff shift requirement. The country of origin for marking purposes will be Canada under section 102.21(c)(2).
USMCA Preferential Tariff Treatment
The United States-Mexico-Canada Agreement (“USMCA”) was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. § 4511(a)). GN 11 of the HTSUS implements the USMCA. GN 11(a)(i) provides:
Goods that originate in the territory of Mexico, Canada or the United States (hereinafter referred to as “USMCA country” or “USMCA countries” as further defined in subdivision (l)(xxiv) of this note) under the terms of subdivision (b) of this note and regulations issued by the Secretary of the Treasury (including Uniform Regulations provided for in the USMCA), and goods enumerated in subdivision (p) 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 “S” in parentheses, are eligible for such duty rate, in accordance with section 202 of the United States-Mexico-Canada Agreement Implementation Act; and . . .
GN 11(b) sets forth the criteria for determining whether a good is an originating good for purposes of the USMCA. GN 11(b) states:
For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country, as defined in subdivision (l) of this note, is eligible for the preferential tariff treatment provided for in the applicable subheading and quantitative limitations set forth in the tariff schedule as a “good originating in the territory of a USMCA country” only if—
the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries;
…
GN 11(l)(iv) provides a list of goods of the type that would qualify as a “good wholly obtained or produced entirely in the territory of one or more USMCA countries,” including:
(10) waste and scrap derived from –
production in the territory of one or more USMCA countries; or
used goods collected in the territory of one or more USMCA countries, if such goods are fit only for the recovery of raw materials;
…
CBP has yet to issue a ruling addressing “waste and scrap” pursuant to the USMCA; however, CBP has numerous decisions interpreting the “waste and scrap” provisions of the North America Free Trade Agreement (NAFTA). As the NAFTA provisions were essentially identical, CBP decisions interpreting those provisions are instructive in the interpretation of the “waste and scrap” provisions in the USMCA.
CBP decisions interpreting “waste and scrap” for purposes of NAFTA turned on whether the merchandise claimed to be waste or scrap could be repaired for use according to its original purpose. For example, in Headquarters Ruling (“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)(B). 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)(B). 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)(B). See HQ 559199, dated May 15, 1995.
Likewise, where used goods were not being processed in order to recover raw materials and could be used for some other purpose without the recovery of raw materials, even if that purpose was not identical to the original purpose of the used goods, CBP has found the used materials did not fall within the NAFTA waste and scrap provisions. In HQ H273103, dated March 2, 2017, CBP held that used t-shirt wipers made from used t-shirts that were irreparable for their original purpose did not qualify as “scrap” or “waste” for the purposes of GN12(b)(ix)(B) as the protestant did not address the requirement that the merchandise be “fit only for the recovery of raw materials.” Instead, the t-shirt wipers were marketed to many industries for use as rags, the merchandise was both suitable for and intended for a purpose other than the recovery of the fibers. CBP found that the t-shirt wipers were not “fit only for the recovery of raw materials” and therefore did not qualify as NAFTA originating.
Conversely, 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)(B). For example, in HQ H044166, dated January 23, 2009, we 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. This fact was confirmed by the importer’s practice of selling the defective parts that were not returned to U.S. customers to a recycling facility for recovery of raw materials. Accordingly, the parts were “waste and scrap . . . fit only for the recovery of raw materials” for purposes of GN 12(n)(ix)(B). 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).
CBP has also considered whether material would qualify as “waste or scrap” if it can be put through processing in order to recover raw materials that may be subsequently used. For instance, in New York Ruling Letter (NY) N246272, dated November 18, 2013, CBP held that used oil containing high levels of complex additives and contaminants that was no longer fit for use in primary products and required processing to convert it to base oils or fuel oils fell within the “waste and scrap” provisions of NAFTA. The processing involved chemical and physical treatment, in order to produce base and distillate oils. See NY N246272 (November 18, 2013). Similarly, in NY N266622, dated July 30, 2015, CBP found that slop oils consisting of crude oil, water and ultrafine solid waste and fit only for the recovery of raw materials (crude oil) via centrifugal processing fell within the “waste and scrap” provisions of NAFTA.
In this case, the merchandise to be imported into the United States is identified as “cotton wadding.” You state that the cotton wadding is salvaged from used furniture and mattresses that are fit only for deconstruction and recycling. The furniture and mattresses are collected at your facility in Canada; however, the used furniture and mattresses may originate anywhere in the world. The salvaged cotton wadding is baled and stored until it is shipped to the United States. You state that the U.S. buyers of the cotton wadding will first process the cotton through a step cleaner, which beats the cotton to loosen solids and removes waste. You state that once it is cleaned, “the cotton [will be] [ ] introduced with other foundation textiles [and] opened into a finer fiber.” It will then be used to make building insulation or new institutional mattresses.
The relevant USMCA provisions provide that a good may be originating if it is “waste and scrap derived from . . . used goods collected in the territory of one or more USMCA countries, if such goods are fit only for the recovery of raw materials.” It is undisputed that the used furniture and mattresses are used goods collected in the territory of a USMCA country and you have confirmed that the used furniture/mattresses are fit only for the salvage of materials, including the “cotton wadding.” We must therefore decide whether the cotton wadding constitutes “waste or scrap” under the relevant USMCA provisions.
In both NY N246272 and NY N266622, CBP considered whether used or slop oil containing additives, contaminants, or waste, qualified under the NAFTA “waste or scrap” provisions. In those cases, the oil was processed using chemical and/or physical methods in order to render base or crude oils that could be put to subsequent use. CBP found that the used and slop oils met the criteria for waste or scrap. Similarly, in HQ H044166, where defective electronics parts were damaged beyond repair and were returned to customers for warranty purposes, and the importer sent its defective parts to a recycling facility for the recovery of raw materials, CBP found that the parts were “waste and scrap” for purposes of GN 12(n)(ix)(B). As in these cases, the cotton wadding is recovered from used goods (furniture, mattresses) that are fit only to be recycled. The salvaged wadding is to be imported and sold to U.S. customers who will process the cotton wadding to remove waste and then combine it with other fibers. It will then be used in insulation and institutional mattresses. As such, the cotton wadding meets the criteria for “waste and scrap” under GN 11(l)(iv)(10) and will qualify as an originating good pursuant to GN 11(b).
HOLDING:
Based on the sample and information provided, the subject merchandise cotton wadding is classified under 5601.21.00, HTSUS.
Pursuant to 19 C.F.R. § 102.21(c)(2) and based on the information provided, the country of origin of the cotton wadding for marking purposes is Canada. The cotton wadding must be marked “made in Canada” under 19 U.S.C. 1304.
Based on the information provided, the cotton wadding qualifies for USMCA preference pursuant to GN 11(b) and GN 11(l)(iv)(10), HTSUS.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a [CBP] field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch