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HQ 088425


May 20, 1991

CLA-2 CO:R:C:T 088425 CRS

CATEGORY: CLASSIFICATION

Mr. Terry Pilant
Manager
Carson Customs Brokers (USA), Inc.
1122 Fir Street, Building C-2
Blaine, WA 98230

RE: Country of origin of diapers and nursing pad cut in Canada from Chinese fabric. HRL 086779. HRL 086549.

Dear Mr. Pilant:

This is in reply to your letter dated December 12, 1990, on behalf of your client, Indisposable Cotton Diaper Company, Ltd., in which you requested a ruling as to the country of origin of a diaper and nursing pad assembled in Canada from Chinese and Canadian fabric.

FACTS:

The merchandise in question consists of two diapers and one nursing pad. The first diaper, discussed at Exhibit A, is known as a "Darlings Dryper" (diaper). It is manufactured in Canada from 100 percent cotton fabric imported from the People's Republic of China and from 50 percent rayon, 50 percent polyester fabric made in Canada.

You state that the "dryper" is manufactured as follows. Six pieces of fabric (two center panels; four wing panels) are cut to size in Canada from 100 percent cotton flannelette fabric from China that is flatfolded and brushed on both sides. One piece of 50 percent rayon, 50 percent polyester filler fabric is cut to the same dimension as the cotton center panels and inserted between the center panels and the wing panel which are stitched together thereby encasing the polyester/rayon filler. The article is then serged along its perimeter.

The second article at issue, discussed at Exhibit B, is a diaper in an unassembled state. It consists of three panels cut from 100 percent cotton flannelette fabric imported from China. A piece of 50 percent rayon, 50 percent polyester fabric of Canadian origin, and a piece of 100 percent nylon fabric imported from the U.S., are cut to the same size as the cotton panels. The rayon/polyester fabric acts as the absorbent layer of the unassembled article while the nylon fabric forms the outer shell. The unassembled diaper is sent to the U.S. where it is made into a finished diaper.

The third article, a nursing pad, is described at Exhibit C. The pad is made from 100 percent cotton flannelette fabric imported from China. In Canada, the fabric is cut into twelve semi-elliptical pieces. In addition, nylon fabric imported from the U.S. is cut into two semi-elliptical pieces. The cut cotton pieces are joined together to form six roughly elliptical pieces while the two nylon pieces are joined to form a single piece. The nylon piece is placed atop the six cotton pieces and the whole is serged around the circumference to form the finished nursing pad.

ISSUE:

Whether diapers and nursing pads made in Canada from Chinese fabric have been substantially transformed in Canada such that the country of origin of the articles is Canada for quota/visa purposes.

Whether Canada is the country of origin for duty purposes under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA).

LAW AND ANALYSIS:

Pursuant to section 12.130, Customs Regulations (19 CFR 12.130), a textile or textile product which consists of materials produced or derived from, or processed in, more than one foreign territory or country shall be a product of that foreign territory or country where it last underwent a substantial transformation. A textile or textile product will be considered to have undergone a substantial transformation if it has been transformed by means of substantial manufacturing or processing operations into a new and different article of commerce.

Section 12.130(d) establishes criteria for determining whether an article has been substantially transformed. These include: the physical change in the material or article; the time involved in the manufacturing or processing operations; the complexity of the operations; the level or degree of skill and/or technology required; and the value added to the article. These criteria are not exhaustive; one or any combination of these criteria may be determinative and additional factors may be considered.

In this case, when the cotton fabric is exported from China it is not identifiable as being intended for use as diapers. As we stated in Headquarters Ruling Letter (HRL) 086779 dated April 25, 1990, a ruling which also concerned the country of origin of diapers cut in Canada from Chinese fabric:

Upon exportation from China, the merchandise is mere cotton fabric, suitable for multiple uses. There is no evidence, i.e., lines of demarcation . . . that the fabric is meant to be diapers.

The facts in the instant case are analogous to those in HRL 086779. The fabric has no lines of demarcation and is cut and sewn in Canada. The change that occurs through processing fabric into diapers and nursing pads is accomplished by means of a relatively complex manufacturing operation which results in a new and different article of commerce. Consequently, Customs considers the fabric to have been substantially transformed pursuant to 19 CFR 12.130.

General Note 3(c)(vii), HTSUSA, embodies the United States- Canada Free-Trade Agreement of 1988. Subdivision (vii)(A) provides that "[g]oods originating ... in Canada" and imported into the United States may be subject to a distinct rate of duty set forth in the "Special" subcolumn of the HTSUSA. For the purposes of this subdivision, General Note 3(c)(vii)(B) provides in pertinent part that merchandise is eligible for consideration as "goods originating in the territory of Canada" if:

(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 tariff classification in Canada as described in the rules of subdivision (c)(vii)(R) of this note ...

(II) to such other requirements subdivision (c)(vii)(R) of this note may provide when no change in tariff classification occurs, and they meet the other conditions set out in subdivisions (c)(vii) ... (G), (H), (J) and (R) of this note.

The cotton fabric used in the manufacture of the diapers is classifiable in heading 5208 or 5209, depending on its weight. The finished diapers are classifiable in heading 6209. The nursing pads are classifiable in heading 6217. Subdivision (R)(11)(oo) states that goods will be considered to have originated in Canada by changing to any heading of Chapter 62 from any heading outside that Chapter other than, inter alia, headings 5208 through 5212.

However, General Note 3(c)(vii)(R)(11)(qq), HTSUSA, provides that:

Notwithstanding rules (nn) and (oo), apparel goods provided for in chapters 61 and 62 that are both cut and sewn in the territory of Canada and/or the United States from fabric produced or obtained in a third country, and that meet other applicable conditions for preferred tariff treatment under subdivision (c)(vii) of this note, shall be subject to the rate if duty provided in the "Special" subcolumn for goods that originate in China, in the annual quantities set forth below, and shall, above those quantities for the remainder of the annual period, be subject to duty at the rates provided for in the "General" subcolumn of column 1:

Non-wool apparel 41,806,500 square meters

Wool apparel 5,016,780 square meters

The diapers and nursing pad are cut and sewn in the territory of Canada from Chinese cotton flannelette fabric, as well as from Canadian rayon/polyester filler fabric and U.S. nylon fabric. Accordingly, they are eligible rate of duty set forth in the "Special" subcolumn of the HTSUSA as goods originating in the territory of Canada. HRL 086549 dated March 13, 1990.

HOLDING:

The country of origin of the diapers and the nursing pad is Canada for quota/visa purposes.

The diapers are classifiable in subheading 6209.20.5040, HTSUSA, under the provision for babies' garments and clothing accessories; of cotton; other; other; diapers. They are dutiable at the rate of 6.9 percent ad valorem. If the quota for non-wool apparel under the U.S.-Canada Free-Trade Agreement is exceeded, the diapers would be dutiable at the rate of 9.9 percent ad valorem and would be subject to textile quota category 239.

The nursing pads are classifiable in subheading 6217.10.0010, HTSUSA, under the provision for other made up clothing accessories ...; accessories; of cotton. They are dutiable at the rate of 10.8 percent ad valorem. If the quota for non-wool apparel under the U.S.-Canada Free-Trade Agreement is exceeded, the nursing pads would be dutiable at the rate of 15.5 percent ad valorem and would be subject to textile quota category 359.

The holding in this ruling applies only to the specific factual situation and merchandise identified in the ruling request. This position is clearly set forth in section 177.9(b)(1), Customs Regulations (19 CFR 177.9(b)(1)). This section states that a ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. Should it subsequently be 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. In such a case, it is recommended that a new ruling request be submitted in accordance with section 177.2, Customs Regulations (19 CFR 177.2).

Sincerely,


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