HQ 0556347 - Eligibility for tariff treatment under the U.S.-Canada Free- Trade Agreement of down filled comforters from Canada; HRL 950005 - United States International Trade Commision Rulings

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HQ 556347
April 13, 1992

CLA-2 CO:R:C:S 556347 SER

CATEGORY: CLASSIFICATION

TARIFF NO.: 9404.90.9010

Mr. Ron Stefaniuk
Robinson & Heath Limited
2800 Skymark Avenue
Suite 200
Mississauga, Ontario Canada L4W 5A6

RE: Eligibility for tariff treatment under the U.S.-Canada Free- Trade Agreement of down filled comforters from Canada; HRL 950005

Dear Mr. Stefaniuk:

This is in response to your letter of October 17, 1991, on behalf of Highland Down Products Manufacturing Inc., concerning the eligibility of down-filled comforters from Canada for special tariff treatment under the U.S.-Canada Free-Trade Agreement

FACTS:

Comforter covers, comprised of 100% cotton, and PVC bags are imported into Canada from China. The comforter covers, which are open at one end, are then filled with Canadian-origin goose down, sewn closed, and a textile label is affixed. The comforters are then packed in PVC bags which are placed in cartons for export to the U.S.

ISSUE:

Whether the comforters are considered "originating goods" for purposes of the FTA.

LAW AND ANALYSIS:

To be eligible for tariff preferences under the FTA, imported merchandise must qualify as "goods originating in the territory of Canada," pursuant to the rules of origin in General Note 3(c)(vii)(B), Harmonized Tariff Schedule of the United States Annotated (HTSUSA). Since, in this case, the comforters are made with some third country material, they are not considered goods "wholly obtained or produced in the territory of Canada and/or the United States" as provided for in General Note

3(c)(vii)(B)(1), HTSUSA. Therefore, they must be "transformed in the territory of Canada and/or the United States" as provided in General Note 3(c)(vii)(B)(2), HTSUSA.

A transformation is evident when a change in tariff classification occurs as prescribed by General Note 3(c)(vii)(R), HTSUSA. General Note 3(c)(vii)(R)(20)(aa), HTSUSA, provides that a transformation into "originating goods" occurs if the operations performed in Canada result in a change in tariff classification of the imported components from one chapter in the Harmonized Tariff Schedule to Chapter 94 through Chapter 96 of the Harmonized Tariff Schedule. In the instant case the 100% cotton comforter covers are classified in heading 6302, HTSUSA, upon entry into Canada. The completed comforters are classified in subheading 9404.90.9010, HTSUSA, upon entry into the U.S. Therefore, the change in classification requirements would be met for the foreign merchandise imported into Canada.

However, General Note 3(c)(vii)(C)(1), HTSUSA provides, that even if articles are considered to be "goods originating in the territory of Canada" pursuant to General Note 3(c)(vii)(B), HTSUSA, they will not be eligible for preferential tariff treatment under the FTA "merely by virtue of having undergone simple packaging or...combining operations."

In Headquarters Ruling Letter (HRL) 950005 dated January 9, 1992, as modified in HRL 951024, dated March 5, 1992, Customs examined whether the assembly of a sledge hammer head from Japan with a sledge hammer handle which was fabricated in Canada, constituted a simple assembly, thereby precluding preferential duty treatment under the FTA. Customs determined that the fabrication of the sledge hammer handle in Canada, coupled with the assembly of the handle with the head precluded the Canadian operations from being considered a simple combining operation pursuant to General Note 3(c)(vii)(C)(1), HTSUSA. The fabrication operations in Canada was the determining factor in this decision. Consistent with this ruling, since the comforters will utilize Canadian-origin goose down, the operations in Canada of filling the comforters with the Canadian goose down, sewing the open end of the comforters shut, affixing a label, and packaging would not constitute a simple packaging or combining operation.

In addition, pursuant to General Rule of Interpretation 5, HTSUSA, the PVC bags are classifiable with the comforters in subheading 9404.90.9010, HTSUSA.

HOLDING:

The Chinese-origin comforter covers imported into Canada undergo the requisite change in tariff classification in the creation of the comforters, thereby transforming the goods into

"originating goods" for FTA purposes. In addition, the operations involved in producing the comforters, which utilize Canadian-origin goose down, do not constitute simple packaging or combining operations. Upon importation into the U.S., the comforters are properly classified in subheading 9404.90.9010, HTSUSA, with a rate of duty of 8.7% ad valorem for items eligible under the FTA.

Sincerely,

John Durant, Director
Commercial Rulings Division

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