CLA-2-42:OT:RR:NC:N4:441
Ms. Kay Morrell
JCPenney Purchasing Corporation
6501 Legacy Drive, MS 2316
Plano, TX 75024
RE: The tariff classification, country of origin determination and status under the North American Free Trade Agreement (NAFTA), of tote bags from Mexico and China; Article 509
Dear Ms. Morrell:
In your letter dated March 2, 2012 you requested a ruling on the classification and country of origin of tote bags from Mexico and China. You have also inquired as to the status of the tote bags from Mexico under the NAFTA.
Your sample is a tote bag constructed of non-woven polypropylene textile material that is coated on the outer surface with plastic sheeting material. The bag is designed to provide storage, protection, portability and organization to groceries of other personal effects during travel. It is of a durable construction and suitable for repetitive reuse.
You have proposed two manufacturing options. The manufacturing operations for the tote bags are as follows:
Option 1 – The coated or laminated nonwoven fabric is manufactured in the United States. Rolls of fabric are shipped to Mexico where they are cut into components and assembled by sewing to form the tote bags. The tote bags are packed and shipped to the United States.
Option 2 – The coated or laminated nonwoven fabric is manufactured in the United States. Rolls of fabric are shipped to China where they are cut into components and assembled by sewing to form the tote bags. The tote bags are packed and shipped to the United States.
The applicable tariff provision for the tote bags will be 4202.92.4500, Harmonized Tariff Schedule of the United States (HTSUS), which provides for travel, sports, and similar bags, with outer surface of sheeting of plastic, other. The general rate of duty will be 20% ad valorem.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on World Wide Web at http://www.usitc.gov/tata/hts/.
In Option 1 the tote bags undergo processing operations in the United States and Mexico. General Note 12(b), HTSUS, sets forth the criteria for determining whether a good is originating under the NAFTA. General Note 12(b), HTSUS, (19 U.S.C. § 1202) states, in pertinent part, that
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 subdivisions (r), (s) and (t) of this note or the rules set forth therein, or
(B) the goods otherwise satisfy the applicable requirements of subdivisions (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;
These products will be eligible for the NAFTA preference if they qualify to be marked as a good of Mexico and if they are wholly obtained or produced in the NAFTA territories or transformed in Mexico so that the non-originating material undergoes a change in tariff classification described in subdivision (t) to General Note 12, HTSUS. You have not provided sufficient information to determine if the tote bags in Option 1 are wholly obtained or produced in the NAFTA territories. For subheading 4202.92, HTSUS, the appropriate subdivision (t) rule states that:
A change to subheading 4202.92 from any other chapter, except from headings 5407, 5408 or 5512 through 5516 or tariff items 5903.10.15, 5903.10.18, 5903.10.20, 5903.10.25, 5903.20.15, 5903.20.18, 5903.20.20, 5903.20.25, 5903.90.15, 5903.90.18, 5903.90.20, 5903.90.25, 5906.99.20, 5906.99.25, 5907.00.05, 5907.00.15 or 5907.00.60.
When the nonwoven fabric enters Mexico, it is classified in heading 5603, HTSUS. As heading 5603, HTSUS is not excepted by subdivision (t), the merchandise undergoes the requisite change in tariff classification and the tote bags qualify for NAFTA preference
Pursuant to the analysis set forth above, the tote bags in Option 1 qualify as an originating good. Accordingly, they will be entitled to the special "MX" rate of duty of Free if they qualify to be marked as a good of Mexico and provided that all other NAFTA requirements are met. With regard to the country of origin of the tote bags, Section 102.11, Customs Regulations (19 CFR102.11), sets forth the required hierarchy for determining whether a good is a good of a NAFTA country for the purposes of country of origin marking of imported goods. Paragraph (a) of this section provides that the country of origin of a good is the country in which (1) the good is wholly obtained or produced, or (2) the good is produced exclusively from domestic materials, or (3) each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 of the regulations. For subheading 4202.92.45, HTSUS, the appropriate rule states:
A change to subheading 4202.91 through 4202.99 from any other heading, provided that the change does not result from the assembly of foreign cut components.
As the nonwoven fabric is cut and assembled into a finished product in Mexico, the country of origin of the Option 1 tote bags is Mexico and these tote bags are eligible for the NAFTA preferential rate.
The country of origin for the Option 2 tote bags is China where the rolls of fabric were transformed into the finished product. You have inquired as to a possible partial duty reduction due to the fact that the fabric used for manufacturing the tote bags is made in the United States. As the fabric is not exported in a condition ready for assembly and as the fabric is advanced in value or improved in condition abroad, the tote bags made in China are not eligible for a partial duty exemption.
This ruling is being issued under the provisions of Part 181 of the Customs Regulations (19 C.F.R. 181).
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 Vikki Lazaro at (646) 733-3041.
Sincerely,
Thomas J. Russo
Director
National Commodity Specialist Division