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HQ 084533


AUGUST 31, 1989

CLA-2 CO:R:C:G 084533 PR

CATEGORY: CLASSIFICATION

TARIFF NO.: None

Ms. Ann M. Williams
A.N. Deringer, Inc.
30 West Service Road
Champlain, New York 12919-9703

RE: Country of Origin of Rayon Yarn

Dear Ms. Williams:

This ruling is in response to your letter of May 9, 1989, on behalf of Filtex, Inc., concerning the country of origin of certain rayon yarn.

FACTS:

Filtex, Inc., imports into Canada from the United States, Brazil, and Japan, under the Harmonized Tariff System Subheading 5403.41, filament viscose rayon yarn put up on cones, with 1.9 turns per inch twist, at a cost of $2.10(US) per pound. In Canada the yarns are wound on bobbins, twisted 9 turns per inch with an "S" twist, removed from the bobbins, and combined with another yarn. The two yarns are twisted 7.5 turns per inch with a "Z" twist. The resulting product, which is exported to the United States under Subheading 5403.31, Harmonized Tariff Schedule of the United States Annotated (HTSUSA),is a 167 decitex 2 ply filament rayon yarn that is then wound into skeins, dyed, dried, and wound onto Schiffli embroidery spools. The labor cost for processing is $4.80(US) per pound and the selling price of the yarn is $8.40(US) per pound.

ISSUE:

The question asked by the Canadian manufacturer is whether the merchandise described above is eligible for reduced duty pursuant to the United States-Canada Free Trade Agreement (FTA).

LAW AND ANALYSIS:

General Note 3(c)(vii), Harmonized Tariff Schedule of the United States Annotated (HTSUSA), sets out the provisions of the FTA Implementation Act of 1988. General Note 3(c)(vii)(B) states that goods imported into the United States are eligible for treatment under the FTA only if--

(1) they are goods wholly obtained or produced in the territory of Canada and/or the United States, or

(2) they have been transformed in the territory of Canada and/or the United States, so as to be subject--

(I) to a change in the tariff classification in Canada as described in the rules of subdivision (c)(vii)(R) of this note

When read in conjunction with the above note, General Note 3(c)(vii)(R)(11)(ff), HTSUSA, provides that merchandise produced in Canada from material manufactured in another country, other than the United States, and exported to the United States under a heading in Chapter 54, HTSUSA, shall be eligible for treatment under the FTA as "goods originating in the territory of Canada" if the goods, when imported into Canada, were classifiable in another chapter of the HTSUSA. Since Subheadings 5403.31 and 5403.41 are both within Chapter 54, the yarn which originates in Brazil and Japan will not be sufficiently processed in Canada to make it subject to the provisions of the FTA.

Without more information concerning the yarn imported into Canada from the United States (i.e. the origin of the material and the nature of the processing in the United States), we are unable to rule on the dutiable status of the yarn produced therefrom.

HOLDING:

The subject yarn which is derived from yarn originating in Brazil and Japan is not subject to the provisions of the FTA and is classifiable under the provision for other multiple or cabled viscose rayon yarn, in Subheading 5403.41.0000, HTSUSA, with duty at the rate of 9.1 percent ad valorem.

Sincerely,

John Durant, Director

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