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NY L89418
CLA2-61-RR:NC:TA:359:L89418
Ms. Rhoda Salus
Sandler, Travis & Rosenberg, P.A.
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 December 16, 2005, 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.
A sample was submitted along with its unassembled and partially assembled component parts. In your letter you requested that we not only make a country of origin determination considering China and Northern Marianas Island, but also a determination involving yet to be specified countries. To that end, we will identify the countries as "Country A" or China, and "Country B" or Northern Marianas Island (CNMI).
Style K0620L31GTM is a woman's pullover featuring short, raglan sleeves, a shelf bra and a v-shaped neckline. The garment is composed of two fabrics: the sleeves and binding accentuating the neckline are made of 100% silk woven fabric. The body of the garment, including the shelf bra, is made of 97% rayon and 3% spandex finely knit fabric. The essential character of the garment is imparted by the body of the garment and therefore is considered a knit garment for purposes of classification.
The manufacturing operations for the women's garment is as follows:
Cut the fabric into component parts
Attach the front lining panel to the front shell fabric at the neckline Attach the back lining panel to the back shell fabric at the neckline Pack and ship the component parts to the Commonwealth of the Northern Mariana Islands (CNMI)/Country "B" for assembly
Sew the shirring on the front lining panel Join the right side seam of the front and back lining panel Sew the elastic to bottom end of the lining panel Join the left side seam of front and back lining panel Hem the bottom
Join the right and left sleeves to the body (effectively closing the shoulders) Sew the labels at center back neckline of the garment Trim, wash, inspect, and pack the garments for export directly to the U.S.
What are the classification and country of origin of the subject merchandise?
The applicable subheading for style K0620L31GTM will be 6110.30.3055, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for sweaters, pulloversand similar articles, knitted or crocheted: Of man-made: Other: Other: Other: Other: Other: Other: Women's or girls'. The general rate of duty is 32% ad valorem.
Style K0620L31GTM falls within textile category designation 639. Quota and visa status are the result of international agreements that are subject to frequent renegotiations and changes. To obtain the most current information as to whether quota and visa requirements apply to this merchandise, we suggest that you check, close to the time of shipment, the "Textile Status Report for Absolute Quotas" available at our web site at www.cbp.gov. In addition, you will find current information on textile import quotas, textile safeguard actions and related issues at the web site of the Office of Textiles and Apparel, at otexa.ita.doc.gov.
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, "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 pullover 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 in either of the scenarios described above, 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, sewing the shirring on the front lining panel, joining the right side seam of the front and back panel lining, sewing the elastic to the bottom of the lining panel, joining the left side seam of the front and back lining panel, joining the side seams of the outer body, and joining the sleeves to the body of the garment (effectively creating the shoulders of the garment), all of which occur in the CNMI, constitute the most important assembly processes.
Accordingly, the country of origin of the garment is Country "B" or 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 Unites 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 pullover, 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 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 pullovers 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 pullover 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 pullover 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 above merchandise can only be made at the time of its importation into the United States.
The country of origin of the garment is Country "B" or the Commonwealth of the Northern Mariana Islands.
When considering the status of the merchandise if the country or origin is the CNMI the following must be considered: The component panels that are 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. The knit garments may still be entitled to duty free status under the same General Note to the tariff schedule provided that they are 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. That value determination cannot be made at this time.
Since the CNMI is not a foreign country and therefore, the United States has no quota or visa agreement with it, the knit merchandise is neither subject to quota restraints nor to the requirement of a visa. However, in the case of other countries, the merchandise may be subject to quota restraints and 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.
Tariff No.: 6110.30.30 - Sweaters, pullovers and similar articles, knitted or crocheted, of manmade fibers, nesoi
Tariff No.: 6209.20.50 - Babies' garments & clothing acc. nesoi, of cotton, incl. sunsuits & sim app, sets & parts of sets, & diapers, not knitted or crocheted