Customs Ruling NY K86877 - Classification and country of origin determination for women’s knitwear; 19 CFR 102.21(c)(4); Commonwealth of the Northern Mariana Islands: General Note 3(a)(iv), HTSUSA; 19 CFR 7.3(d)

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NY K86877
Jun 15, 2004

Type : Classification • HTSUS :
Related: 556214

CLA2-61-RR:NC:TA-359:K86877

Ms. Rhoda Salus
Sandler, Travis & Rosenberg, P.A.
The Waterford
5200 Blue Lagoon Drive
Miami, Florida 33126-2022

RE: Classification and country of origin determination for women’s knitwear; 19 CFR 102.21(c)(4); Commonwealth of the Northern Mariana Islands: General Note 3(a)(iv), HTSUSA; 19 CFR 7.3(d)

Dear Ms. Salus:

This is in reply to your letter dated June 3, 2004, which you submitted on behalf of your client, United International Corp., in which you requested a classification and country of origin determination for women’s knitwear that will be imported into the United States. Your sample and its component parts are returned as requested.

FACTS:

The subject merchandise consists of Style AHO-9105, a woman’s knitted vest which features a stand up collar; a full front zippered opening; two side seam zippered pockets; front and back yokes, over-sized armholes; a zippered pocket on the left front panel and a longer back panel with a curved hem which is capped with contrasting binding tape. The fabric consists of two layers of 100% polyester knit fabric, each layer brushed on one side and laminated together on the flat (non-brushed) surfaces. The lamination is not visible in cross-section.

You have submitted the finished garment; the component parts from which the vest is constructed; and the garment in its two stages of assembly.

The sample of the first assembly stage, representing the steps taken in China consist of each front panel pieced together; each side panel attached halfway to the front panels; each side pocket with zipper formed; the back panel and yoke joined; the collar pieces sewn together; and the front panel facing material overlocked.

The sample of the second assembly stage, representing only some of the steps performed in CNMI, consist of all the panels joined together, front to sides and back, shoulder seams sewn, armholes and bottom hem capped. Not represented are the sewing of the front zipper and placket and the attaching of the collar to the garment. The manufacturing operations for the woman’s knitted vest are as follows:

In China: -cut the fabric into component parts -form the collar -overlock the placket facing -sew the left front panel with chest facing, pocket panel and zipper -join the yoke and side panels to the front panel, forming the front panel -join the bottom of the side seam with facing, pocket panel and zipper -join the yoke panel to the back panel In the Commonwealth of the Northern Mariana Islands (CNMI):

-join the shoulder seams with elastic tape -join the side panels to the back panel -sew the armholes with black capping elastic tape -join the top of the side seam -sew the bottom end with black capping elastic tape -join the collar and placket facing at the neckline of the garment -sew the placket with zipper -sew the elastic tape and labels at the back neckline of the garment

ISSUE:

What are the classification and country of origin of the subject merchandise?

CLASSIFICATION:

The applicable subheading for the woman’s knitted vest will be 6110.30.3035, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for sweaters, vests---and similar articles, knitted or crocheted: of man-made fibers, other: other: other: other: vests, other than sweater vests: women’s or girls’. The general rate of duty is 32% ad valorem.

The vest falls within textile category designation 659. The designated textile and apparel categories and their quota and visa status are the result of international agreements that are subject to frequent renegotiations and changes. To obtain the most current information, we suggest that you check, close to the time of shipment, the U.S. Customs Service Textile Status Report, an internal issuance of the U.S. Customs Service, which is available at the Customs Web Site at WWW.CUSTOMS.GOV. In addition, the designated textile and apparel categories may be subdivided into parts. If so, visa and quota requirements applicable to the subject merchandise may be affected and should also be verified at the time of shipment.

COUNTRY OF ORIGIN - LAW AND ANALYSIS:

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 Section 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 paragraphs (c)(1) through (5) of Section 102.21.

Paragraph (c)(1) states that "The 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 merchandise is not wholly obtained or produced in a single country, territory or insular possession, paragraph (c)(1) of Section 102.21 is inapplicable.

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 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 "The 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

6101 - 6117 If the good is not knit to shape and consists of two or more component parts, 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.

Section 102.21(e) states that the good must be assembled in a single country, territory or insular possession. Accordingly, as the vest is assembled in more than one country, territory or insular possession, it does not satisfy the conditions of the tariff shift and therefore, Section 102.21(c)(2) is inapplicable.

Section 102.21(c)(3) states that, "Where 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 merchandise is neither knit to shape nor wholly assembled in a single country, territory or insular possession Section 102.21 (c)(3) is inapplicable.

Section 102.21 (c)(4) states, "Where 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".

In the case of the subject merchandise, the woman’s knitted vest, the following constitute the most important assembly processes: -sewing the front and back panels together at the shoulders -completing sewing the side panel seams - that portion above the pockets -sewing the side panels to the back panel, thus closing the sides of the garment -sewing the collar to the garment -sewing the zipper and front placket All of these processes occur in the CNMI. Accordingly, the country of origin of the woman’s knitted vest is the CNMI.

General Note 3(a)(iv), HTSUSA, permits products of insular possessions of the United States, of which the CNMI is one, to be imported into the United States free of duty obligations if certain requirements are met. Duty free status is granted to those goods that

-are the growth or product of the possession; or -are manufactured or produced in any such possession from materials which are the growth, product or manufacture of any such possession or of the customs territory of the United States, or of both: and -do not contain foreign materials which represent more than 50% of the goods total value (for textile and apparel articles subject to textile agreements); and -are shipped directly to the customs territory of the United States from the insular possession.

Since the CNMI is an insular possession of the United States, and since the good which is produced in the CNMI, namely, the woman’s knitted vest, is a textile article that is subject to textile agreements, the “foreign materials” which make up the vest must not represent more than 50% of the article’s value.

In order to meet the requirements of General Note 3(a)(iv), HTSUSA, we must determine whether the component panels which are imported into the CNMI from China are substantially transformed by the processing in the CNMI and therefore, become a product of that insular possession. A substantial transformation occurs when an item emerges from a process with a new name, character or use that is different from that possessed by the item prior to processing.

In determining whether the cost or the value of the Chinese component panels should be considered part of the cost of the “foreign materials” or of the cost of the materials produced in the CNMI for the purpose of applying the 50% foreign value limitation under General Note 3(a)(iv), we must consider whether the component panels undergo a double substantial transformation during the processing in the insular possession. Treasury Decision (T.D.) 88-17, effective April 13, 1988, determined that the concept of the double substantial transformation should be used in deciding whether foreign material that does not originate in the insular possession may, nevertheless, qualify as part of the value of material produced in the insular possession. To do this the foreign material must be substantially transformed in the insular possession into a new and different product and then that product must be transformed yet again into another new and different product that is exported directly to the United States. If this happens to the foreign material, then its cost can be considered part of the value of materials produced in the insular possession.

For an example of the double substantial transformation principle as it was applied to textile wearing apparel we look to Headquarters Ruling Letter (HRL) 556214, dated March 20, 1992, in which Customs ruled that the foreign rolled fabric that was imported into the CNMI where it was cut to shape and then assembled into golf shirts and vests did undergo a double substantial transformation. In contrast, the present question involves component panels that are cut in China, not in the CNMI. Further, those panels are partially assembled in China. Thus, the component panels do not undergo a double substantial transformation in the insular possession and their cost may not be included as part of the value of materials produced in the CNMI.

Despite the fact that the Chinese knitted and cut component panels of the vest are considered foreign materials when they are shipped to the CNMI, and regardless of the determination that those foreign panels do not undergo a double substantial transformation when they are processed in the insular possession, the vest may still qualify for duty free tariff status as long as it does not contain foreign materials which represent more than 50% of the total value of the good and it is shipped directly to the United States from the insular possession. Section 7.3 of the Customs Regulations (C.R.) states that such a determination must be based on a cost comparison between

-the manufacturer’s actual materials cost plus the cost of transporting those materials to the insular possession (excluding duties, taxes and charges after landing)

VERSUS -the final appraised value of the imported goods under Section 402a, Tariff Act of 1930, as amended.

We note that the final determination regarding whether the foreign value limitation is satisfied for the vest can only be made at the time of its importation into the United States.

HOLDING:

The country of origin of the woman’s knitted vest is the Commonwealth of the Northern Mariana Islands. The component panels that are knitted, cut and partly assembled in China are considered foreign materials for the purpose of calculating the 50% foreign value limitation under General Note 3(a)(iv), HTSUSA. However, the vest may still be entitled to duty free status under the same General Note to the tariff schedule provided that it is imported directly from the CNMI to the United States, and that the 50% foreign value limitation is satisfied at the time of entry of the merchandise into the United States. Since the CNMI is not a foreign country and therefore, the United States has no quota or visa agreement with it, the vest is neither subject to quota restraints nor to the requirement of a visa.

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 177.9(b)(1). 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 177 of the Customs Regulations (19 C.F.R. 177). Should it be subsequently determined that the information furnished is not complete and does not comply with 19 CFR 177.9(b)(1), 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 in accordance with 19 CFR 177.2.

A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Mike Crowley at 646-733-3049.

Sincerely,

Robert B. Swierupski
Director,
National Commodity
Specialist Division