Customs Ruling NY K88449 - 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 K88449
Aug 17, 2004

Type : Classification • HTSUS :
Related: 556214

CLA2-61-RR:NC:TA:359:K88449

Mr. Mok Wing David Lam
Come Long Fashion Knits Limited
2/F, Yick Shiu Industrial Building
No. 1, San On Street
Tuen Mun, N.T.
Hong Kong

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 Mr. Lam:

This is in reply to your letter dated August 4, 2004, 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 “Ladies Raglan Sleeves Jacket Spring”, a woman’s knitted jacket which features a rib knit collar; long raglan pieced sleeves with rib knit cuffs; two front zippered pockets; a zippered front opening and a rib knit waistband. The fiber content of the garment is 95% cotton and %% spandex.

Three manufacturing scenarios were presented. You have submitted the finished garment and the garment in its partial assembly stages for Version A, Version B and Version C.

The sample of Version A, representing the steps taken in China consists of three pieces: each sleeve is assembled and cuffed; and as one unit: the front and back panels, joined at the side seams, with the pockets completed and attached, the zipper and front placket completed, the collar attached in the front only and the bottom band sewn on.

The sample of Version B, representing the steps taken in China contains (in part), the front panels with the zipper on each side. The zipper is only sewn halfway up each side. This manufacturing procedure is highly unusual; you have given no practical rationale for such a procedure. We will not rule on a manufacturing scenario which we believe to be hypothetical in nature.

The sample of Version C contains seven parts: the zipper assembled; the rib knit cuffs assembled (turned on themselves) the rib knit collar; the sleeves assembled and sewn but not attached to the body and not attached to the cuffs; and, as one piece, the front and back panels joined at the side seams with the bottom band attached, the zippered pockets fully assembled and attached and portions of the front plackets attached. The manufacturing operations for the woman’s knitted jacket are as follows:

VERSION A:

CHINA

Cut the fabric into component parts Form the rib knit collar and attach to the front of the jacket Assembled the zippered pockets and attach to the front pockets Sew the side seams Sew the rib knit bottom to the jacket Sew the zipper to the front panels Assemble the sleeve panels, including closing the arm seam Attach the cuffs to the sleeves Attach the embroidery appliqués to the sleeves COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS (CNMI)

Attach the rib knit collar to the back of the jacket Sew the sleeves to the jacket Attach the labels Iron and finish the garment Inspect the garment VERSION C:

CHINA

Cut the fabric into component parts Sew the side seams to join the front and back Sew the pockets to the front panels Sew the rib knit bottom to the jacket Sew the contrast color trim to the sleeve parts Close the underarm of the sleeves Attach embroidery appliqués to the sleeves

CNMI

Attach the rib knit collar to the body Sew the zipper to the front panels Sew the rib knit cuffs to the sleeves Sew the sleeves to the body Attach the labels Iron and finish Inspection Packing

ISSUE:

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

CLASSIFICATION:

The applicable subheading for the woman’s knitted jacket will be 6102.20.0010, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for women’s windbreakers and similar articles, knitted or crocheted, other than those of heading 6104: of cotton: women’s. The general rate of duty is 15.9% ad valorem.

The jacket falls within textile category designation 335. 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":

HTSUSA 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 jacket 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 jacket, the most important assembly processes in Version A are sewing the collar to the front of the jacket; assembling the sleeve parts; attaching the cuffs; sewing the side seams; sewing the pockets to the front panels; attaching the bottom band; and sewing the zipper and placket to the garment; all of which occur in China. Accordingly, the country of origin of the woman’s knitted jacket as presented in Version A is China.

In the case of the subject merchandise, the woman’s knitted jacket, the most important assembly processes in Version C are attaching the collar; sewing the front zipper to both front panels with the placket; sewing the cuffs to the sleeves; and sewing the sleeves to the body; all of which occur in the CNMI. Accordingly, the country of origin of the woman’s knitted jacket as presented in Version C 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 jacket, is a textile article that is subject to textile agreements, the “foreign materials” which make up the jacket 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 jackets 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 jacket 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 jacket 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 jacket can only be made at the time of its importation into the United States.

HOLDING:

The country of origin of the garment is China in Version A. Based upon international textile trade agreements products of China are subject to quota and the requirement of a visa.

The country of origin of the woman’s knitted jacket is the Commonwealth of the Northern Mariana Islands in Version C. 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 jacket 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 jacket 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 Camille R. Ferraro at 646-733-3049.

Sincerely,

Robert B. Swierupski
Director,
National Commodity
Specialist Division