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HQ 951996


August 24, 1992

CLA-2 CO:R:C:M 951996 KCC

CATEGORY: CLASSIFICATION

TARIFF NO.: 9404.90.20

Mr. Ian MacDonald
Polliwogs Handcrafted Ltd.
#407-1952 Kingsway Avenue
Port Coquitlam, B.C. Canada V3C 6C2

RE: Padded car seat covers and an infant head rest/cushions; CFTA; originating goods; General Rule 3(c)(vii)(B); change in tariff classification; General Rule 3(c)(vii)(R)(20)(aa)

Dear Mr. MacDonald:

This is in reference to a ruling issued to you by Customs in New York, on April 1, 1992 (NY 872130), concerning the tariff classification under the Harmonized Tariff Schedule of the United States ("HTSUS"), and eligibility under the United States-Canada Free Trade Agreement ("CFTA"), of various infant products from Canada.

FACTS:

NY 872130 classified various infant products. At issue in this decision is the applicability of the CFTA to the cozy cover (style 105), cuddle up (style 204) and head rest (style 206) ("covers and cushions"). These products are made from Chinese 65/35 polycotton shell fabric and Canadian polyester fiber fill. The fabric is cut, sewn and assembled with the fiber fill in Canada. The completed covers and cushions are then imported into the U.S.

NY 872130 classified these articles under subheading 9404.90.20, HTSUS, which provides for "Mattress supports; articles of bedding and similar furnishings (for example, mattresses, quilts, eiderdowns, cushions, pouffes and pillows) fitted with springs or stuffed or internally fitted with any material...Other...Pillows, cushions and similar furnishings...Other." NY 872130 stated that goods classifiable under subheading 9404.90.20, HTSUS, which have originated in the territory of Canada will be entitled to a 3.6 percent rate of duty under the CFTA. Furthermore, NY 872130 stated that to be considered an originating good "the value of materials originating in the territory of Canada and/or the United States plus the direct cost of processing performed in the territory of Canada and/or the United States must constitute not less than 50 percent of the value of the goods" for items classifiable in subheading 9404.90.20, HTSUS.

ISSUE:

Whether the infant covers and cushions are eligible for preferential duty treatment 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), HTSUS. There are two primary means in General Note 3(c)(vii)(B), HTSUS, 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." General Note 3(c)(vii)(B)(1), HTSUS. 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), HTSUS.

A product which is "wholly obtained or produced in the territory of Canada and or the 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), HTSUS. The covers and cushions contain fabric from a third country, China. Since they contain foreign materials, the covers and cushions are not "wholly obtained or produced in the territory of Canada and/or the United States."

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), HTSUS. A transformation occurs when a change in tariff classification occurs that is authorized by General Note 3(c)(vii)(R), HTSUS. Pursuant to General Note 3(c)(vii)(R)(20)(aa), HTSUS, a transformation is evident for Chapter 94, HTSUS, when:

A change from one chapter to another, except a change to subheading 9404.90 from headings 5007, 5111 through 5113, 5208 through 5212, 5309 through 5311, 5407 through 5408, and 5512 through 5516.

In this instance, the fabric is classified in either heading 5513 or 5514, HTSUS, when it enters Canada. Upon importation into the U.S., the fabric incorporated into the covers and cushions is classified in subheading 9404.90.20, HTSUS. A change in tariff classification occurs. However, the change is not a change required by General Note 3(c)(vii)(R)(20)(aa), HTSUS, for goods of subheading 9404.90.20, HTSUS. Therefore, these articles are not considered to be "goods originating in the territory of Canada."

HOLDING:

The covers and cushions are not transformed in Canada so to affect a required change in tariff classification in accordance with General Notes 3(c)(vii)(B)(2) and 3(c)(vii)(R), HTSUS. Thus, the covers and cushions are not "goods originating in the territory of Canada" for CFTA purposes in accordance with General Note 3(c)(vii)(B), HTSUS.

The covers and cushions are classified under subheading 9404.90.20, HTSUS, which provides for "Mattress supports; articles of bedding and similar furnishings (for example, mattresses, quilts, eiderdowns, cushions, pouffes and pillows) fitted with springs or stuffed or internally fitted with any material...Other...Pillows, cushions and similar furnishings...Other", which is dutiable at the rate of 6 percent ad valorem.

This notice to you should be considered a modification of NY 872130 under 19 CFR 177.9(d)(1). It is not to be applied retroactively to NY 872130 (19 CFR 177.9(d)(1)) and will not, therefore, affect past transactions for the importation of your client's merchandise under that ruling. However, for the purposes of future transactions in merchandise of this type, NY 872130 will not be valid precedent. We recognize that pending transactions may be adversely affected by this revocation, in that current contracts for importations arriving at a port subsequent to this decision will be classified pursuant to it. If such a situation arises, you may, at your discretion, notify this office and apply for relief from the binding effects of this decision as may be warranted by the circumstances.

Sincerely,

John Durant, Director
Commercial Rulings Division

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