Customs Ruling NY K83291 - Classification and country of origin determination for a men’s knit garment; 19 CFR 102.21(c)(4); most important assembly or manufacturing operation; Commonwealth of the Northern Mariana Islands; General Note 3 (a)(iv), HTSUSA; 19 CFR 7.3(d).

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NY K83291
Feb 20, 2004

Type : Classification • HTSUS :
Related: 502799; 556214

CLA2-RR:NC:TA:N3:356 K83291

Mr. Paul Zak
RIFU Apparel Corporation
Box 502799
Saipan, MP 96950

RE: Classification and country of origin determination for a men’s knit garment; 19 CFR 102.21(c)(4); most important assembly or manufacturing operation; Commonwealth of the Northern Mariana Islands; General Note 3 (a)(iv), HTSUSA; 19 CFR 7.3(d).

Dear Mr. Zak:

This is in reply to your letter dated January 29, 2004, requesting a classification and country of origin determination for a men’s knit garment that will be imported into the United States. You have provided a sample of the components in the condition in which they will arrive in the Commonwealth of the Northern Mariana Islands (Saipan) after processing in China. As requested, your samples will be returned.

FACTS:

The submitted sample is a man’s sweater constructed from 100% polyester, knit fabric that measures 7 stitches per two centimeters counted in the horizontal direction. The sweater has a rib knit crew neckline; long sleeves with rib knit cuffs; and a rib knit bottom.

The manufacturing operations for Version A are as follows:

CHINA: - the fabric for the body waistband, collar and cuffs is knit - the fabric is cut into component parts - the waistband is attached to the front and back panels - the rib cuffs are attached to the sleeve panels

COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS (SAIPAN): - the sleeve seams are sewn closed - the shoulder seams are sewn closed - the sleeves are attached to the body - the side seams are sewn closed - the neck labels are attached - the rib knit collar is attached - the garments are inspected, folded and packed for export

ISSUE:

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

CLASSIFICATION:

The applicable subheading for the submitted garment will be 6110.30.3010, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for men’s or boys’ sweaters, knitted or crocheted: of man-made fibers: other: other: sweaters: men’s. The general rate of duty is 32 percent ad valorem.

The garment falls within textile category designation 645. 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 Textile Status Report for Absolute Quotas, which is available at our Web Site at www.cpb.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:

Section 334 of the Uruguay Round Agreements Act (codified at 19 U.S.C. 3592), enacted on December 8, 1994, provided rules of origin for textiles and apparel entered, or withdrawn from warehouse for consumption, on and after July 1, 1996. Section 102.21, Customs Regulations (19 C.F.R. 102.21), published September 5, 1995, in the Federal Register, implements Section 334 (60 FR 46188). Section 334 of the URAA was amended by Section 405 of the Trade and Development Act of 2000, enacted on May 18, 2000, and accordingly, section 102.21 was amended (68 Fed. Reg. 8711). Thus, the country of origin of a textile or apparel product shall be determined by the 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.

Although the garment is not knit to shape and consists of two or more component parts, it is not wholly assembled in a single country, territory, or insular possession. Accordingly, as the terms of the tariff shift are not met, 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, 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 joining of the shoulders, the attachment of the sleeves, the joining of the side seams, and the attachment of the collar constitute the most important assembly processes.

Accordingly, under Section 102.21(c)(4), the country of origin of the sweater is the Commonwealth of the Northern Mariana Islands.

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

(1) are the growth or product of the possession, or (2) 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 (3) 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 (4) are shipped directly to the customs territory of the United States from the insular possession.

Since the Commonwealth of the Northern Mariana Islands is an insular possession of the United States, and since the good which is produced in the Commonwealth of the Northern Mariana Islands, namely, the man’s knit sweater, is a textile article that is subject to textile agreements, the “foreign materials” which make up the pullover must not represent more than 50% of the article’s appraised value.

In order to meet the requirements of General Note 3(a)(iv), HTSUSA, we must first determine whether the component parts which are imported into the Commonwealth of the Northern Mariana Islands from China are substantially transformed by processing in the Commonwealth and thereby 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 parts should be considered part of the cost of the “foreign materials” or part of the cost of the materials produced in the Commonwealth of the Northern Mariana Islands for the purpose of applying the 50% foreign value limitation under General Note 3(a)(iv), we must consider whether the component parts 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 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 the materials produced in the insular possession.

As an example of the double substantial transformation principle as it was applied to textile wearing apparel, see Headquarters Ruling Letter (HRL) 556214, dated March 20, 1992, in which Customs ruled that foreign rolled fabric that was imported into the Commonwealth of the Northern Mariana Islands where it was cut to shape and then assembled into golf shirts and pullovers did undergo a double substantial transformation. In contrast, the present question involves component parts that are cut in China, not in the Commonwealth of the Northern Mariana Islands. Therefore, the component parts 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 Northern Mariana Islands.

Despite the fact that the Chinese knit and cut component parts of the garment are considered foreign materials when they are shipped to the Commonwealth, and regardless of the determination that these parts do not undergo a double substantial transformation when they are processed in the insular possession, the garment 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 goods and it is shipped directly to the United States from the insular possession. Section 7.3(d) 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 a final determination regarding whether the foreign value limitation is satisfied for the instant merchandise can only be made at the time of entry of the goods into the United States.

HOLDING:

The country of origin of the subject garment is the Commonwealth of the Northern Mariana Islands (Saipan). The component parts knit and partially 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 garment may still be eligible for duty free status provided that it is imported directly from the Commonwealth of the Northern Mariana Islands to the United States, and that the 50% foreign value limitation is satisfied at the time of entry. Since the Commonwealth of the Northern Mariana Islands is not a foreign country and, therefore, the United States has no bilateral quota or visa agreement with it, the garment is not subject to quota or visa requirements.

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 Mary Ryan at 646-733-3271.

Sincerely,

Robert B. Swierupski
Director,
National Commodity
Specialist Division