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HQ 950632
January 27, 1992
CLA-2 CO:R:C:M 950632 DFC

CATEGORY: CLASSIFICATION

TARIFF NO.: 7102 7113

Mr. Leigh A. Schmid
Senior Manager
Peat Marwick Thorne
777 Dunsmuir Street
P.O. Box 10426
Vancouver B.C. Canada
V7Y1K3

RE: Jewelry, gold; FTA eligibility

Dear Mr. Schmid:

In a letter dated October 18, 1991, you inquired as to your client's eligibility for reduced duty rates under the U.S.- Canada Free-Trade Act for certain gold jewelry articles manufactured in Canada.

FACTS:

The merchandise involved consists of gold jewelry articles such as diamond rings(mostly engagement rings), gold wedding bands, gold and diamond pendants and diamond earrings produced in Canada. You maintain that all these goods are classifiable under headings 7113 and 7116, Harmonized Tariff Schedule of the United States Annotated (HTSUSA).

The only non-Canadian component of the jewelry articles are the diamonds imported into Canada from Belgium under heading 7102, (HTSUSA).

The manufacturing processes completed in Canada are extensive, involving a casting operation with 10 distinct operations which you have described in detail.

ISSUE:

Are the articles of jewelry described above eligible for reduced rates of duty as "goods originating in the territory of Canada"?

LAW AND ANALYSIS:

A determination as to whether the articles of jewelry qualify as "goods originating in the territory of Canada" is governed by General Note 3(c)(vii), HTSUSA, which reads in pertinent part as follows:

United States-Canada Free-Trade Agreement Implementation Act of 1988.

(B) For the purposes of subdivision (c)(vii) of this note, goods imported into the customs territory of the United States are eligible for treatment as "goods originating in the territory of Canada" 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--

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

General Rule 3(c)(vii)(R) reads in pertinent part as follows:

Rule (14) Section XIV: Chapter 71

(bb) A change to headings 7113 through 7118 from any other heading outside that group, except that pearls, temporarily or permanently strung but without the addition of clasps or other ornamental features of precious metals or stones, shall be treated as a good of the country in which the pearls were obtained.

The articles of jewelry in issue are eligible for treatment as "goods originating in the territory of Canada" because they have been transformed in the territory of Canada so as to be subject to a change in tariff classification. Specifically, the diamonds imported into Canada under heading 7102 are set in gold mountings--rings, pendants, earrings-- and the resulting jewelry articles are classifiable in heading 7113, HTSUSA. Classification in heading 7116, HTSUSA, which you claim is applicable, is precluded by virtue of Note 2 (b) to Chapter 71, HTSUSA, which provides that "[h]eading 7116 does not cover articles containing precious metal or metal clad with precious metal (other than as minor constituents)." The diamonds of heading 7102, HTSUSA, have been combined with Canadian gold in very extensive Canadian manufacturing processes that result in gold jewelry articles of heading 7113, HTSUSA.

HOLDING:

The gold jewelry articles are "goods originating in the territory of Canada" and as such are eligible for reduced duty rates under the U.S.-Canada Free-Trade Agreement Implementation Act of 1988.

Sincerely,

John Durant, Director
Commercial Rulings Division


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