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HQ 089467


June 13, 1991

CLA-2 CO:R:C:M 089467 JMH

CATEGORY: CLASSIFICATION

TARIFF NO.: 9506.91.00

Mr. David Coutts
BodyPro Inc.
Box 475
2384 Yonge Street
Toronto, Ontario M4P 2G9
CANADA

RE: Modification of Headquarters Ruling 086895, dated August 17, 1989, and modification of Headquarter Ruling 084935, dated August 23, 1990; pocket gym; United States-Canada Free Trade Agreement ("CFTA"); General Note 3(c)(vii); set; composite good; essential character; GRI 3(a); GRI 3(b)

Dear Mr. Coutts:

It has been brought to the attention of this office that Headquarters Ruling 086895 ("HQ 086895"), dated August 17, 1990, is in error regarding to the application of the United States- Canada Free Trade Agreement ("CFTA"). Below please find the modified position of this office.

FACTS:

This office issued Headquarters Ruling 084935 ("HQ 084935"), dated August 23, 1989, which concerned the tariff classification and marking requirements applicable to the BodyPro "Pocket Gym". The Pocket Gym, as imported, includes the following:
two injection molded plastic handles made in Canada; two aluminum extension tubes extruded and machined in Canada; one 2' x 3' folded instruction poster printed in Canada; one 8 1/2" x 14" sports specific/product sheet printed in Canada; one 8 1/2" x 5 1/2" exercise sheet printed in Canada; one 9 1/4" long x 4" wide x 3 1/2" high nylon bag made in Korea; and one 10" twist tie made in Canada.

HQ 084935 determined that the Pocket Gym is a set under the meaning of General Rule of Interpretation ("GRI") 3(a), Harmonized Tariff Schedule of the United States Annotated ("HTSUSA"). The essential character of the set was found to be imparted, in accordance with GRI 3(b), by the exercise equipment. Thus, the Pocket Gym was classified under the provision for the exercise equipment in subheading 9506.91.00, HTSUSA, as "Articles and equipment for gymnastics, athletics, other sports (including table-tennis) or outdoor games, not specified or included elsewhere in this chapter...Other...Gymnasium or other exercise articles and equipment; parts and accessories thereof..." This ruling concluded that the Pocket Gym is an "originating good" under General Note 3(c)(vii), HTSUSA, and therefore, eligible for the tariff preferences under the CFTA. HQ 084935 also determined that the nylon bag was subject to textile visa and quota requirements.

HQ 084935 was modified in HQ 086895. The Pocket Gym was determined to be a composite good and not a set under GRI 3(a). The two headings which describe the Pocket Gym are heading 9506 (the heading for exercise equipment), heading 4202 (the heading for the nylon bag), and heading 4901 (the heading for the instruction posters and sheets). The essential character of the composite good under GRI 3(b) was found to be imparted by the exercise equipment, as in HQ 084935. Therefore, the classification of the Pocket Gym remained in subheading 9506.91.00. HQ 086895 did not analyze the CFTA status of the Pocket Gym, nor did it analyze the textile visa and quota requirements.

The classification of the Pocket Gym in subheading 9506.91.00 is not at issue in this ruling.

ISSUE:

Whether the BodyPro Pocket Gym is an "originating good in Canada" under General Note 3(c)(vii), and thus, eligible for tariff preferences under the CFTA.

LAW AND ANALYSIS:

To be eligible for tariff preferences under the CFTA, goods must be "originating goods" within the rule of origin in General Note 3(c)(vii)(B), HTSUSA. There are two primary means in General Note 3(c)(vii)(B) by which articles imported into the United States may be "goods originating in the territory of Canada." The first method is if the goods are "wholly obtained or produced in the territory of Canada and/or the United States." General Note 3(c)(vii)(B)(1). The second method is if the goods are "transformed in the territory of Canada and/or the United States." General Note 3(c)(vii)(B)(2).

A product which is "wholly obtained or produced in the territory of Canada and/or United States" is one which is grown, mined, harvested, born and raised in Canada and/or the United States, or otherwise intimately connected to the two countries and their land, air and sea territories as defined in General Note 3(c)(vii)(L), HTSUSA. The Pocket Gym includes articles from a third country. The Pocket Gym is not "wholly obtained or produced" in Canada under General Note 3(c)(vii)(B)(1).

The second method to become an originating good for CFTA purposes is for an article made of foreign materials to be transformed in Canada and/or the United States in accordance with General Note 3(c)(vii)(B)(2). A transformation is evident when a change in tariff classification occurs that is authorized by General Note 3(c)(vii)(R), HTSUSA.

In the present situation the Pocket Gym has been determined to be a composite good, a good made of different components with differing classifications. The Pocket Gym consists of articles classified in headings 9506, 4202, and 4901. As a composite good, the Pocket Gym is classified under the heading of the article which imparts the Pocket Gym's essential character. The articles which by themselves are classified in headings 4202 and 4901 are now classified under heading 9506. A classification change does occur for these articles. However, this is not the type of classification change to which the CFTA refers.

General Note 3(c)(vii)(C)(1), HTSUSA, states:

(C) Goods shall not be considered to originate in the territory of Canada pursuant to subdivision (c)(vii)(B)(2) merely by virtue of having undergone--

(1) simple packaging or, except as expressly provided by the rules of subdivision
(c)(vii)(R) of this note, combining operations...

The House Committee on Ways and Means report on the CFTA stated:

Goods containing materials from third countries will qualify for preferential treatment only if the materials undergo a sufficient degree of processing or assembly in one or both Parties to result in physically and commercially significant changes in the product that change its tariff classification under the Harmonized System. H. Rep. 816, Part 1, 100th cong., 2d Sess. 15 (1988) (emphasis added).

The House Ways and Means Committee focused on the change in classification which occurs to third country materials after the third county materials undergo some processing or assembly. Third country articles that change their classification simply because they are entered with other articles have not undergone any processing or assembly. The change in classification which occurs to such third country articles occurs merely because of the packaging or combining of the articles. The articles themselves have not been transformed in any way.

In the instant case, the third country nylon bag does not undergo any manufacturing or assembly. The foreign article is not changed in any way. It is merely repackaged into the composite good . It is the opinion of this office that the change in classification this article undergoes is a change brought about by simple packaging. Thus, this classification change is not allowed under the CFTA. The Pocket Gym is not entitled to the tariff preferences under the CFTA.

HOLDING:

HQ 086895 and HQ 084935 are hereby modified. The Pocket Gym is correctly classified in subheading 9506.91.00, as "Articles and equipment for gymnastics, athletics, other sports (including table-tennis) or outdoor games, not specified or included elsewhere n this chapter...Other...Gymnasium or other exercise articles and equipment; parts and accessories thereof..."

However, the Pocket Gym is not an originating good for purposes of the CFTA, and thus, the Pocket Gym is not entitled to tariff preferences under the CFTA. The articles in the composite good change their classifications to the classification of the article which imparts the composite good's essential character. However, this change in classification occurs through the packaging of the composite good. This type of classification change does not transform the third country good as required by General Note 3(c)(vii)(B)(2). General Note 3(c)(vii)(C) states that a change in classification which results from simple packaging does not create goods which originate in Canada for CFTA purposes. The BodyPro Pocket Gym is not entitled to the tariff preferences under CFTA.

Sincerely,

John Durant, Director
Commercial Rulings Division

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