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HQ 954406


August 9, 1993

CLA-2 CO:R:C:T 954406 HP

CATEGORY: CLASSIFICATION

TARIFF NO.: 6308.00.0020

Mr. David Kennedy
Customer Service
W.Y. Moberly, Inc.
Box 164
Sweetgrass, Montana 59484

RE: Needlcraft kit. Country of origin marking; simply packaged; Canada; FTA; CFTA

Dear Mr. Kennedy:

This is in reply to your letter of May 26, 1993. That letter concerned the tariff classification, under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA), of needlework kit, imported from Canada through the port of Sweetgrass, Montana. In addition, you have also inquired as to country of origin marking instructions and eligibility for duty reduction under the U.S.-Canada Free Trade Agreement. Please reference your client The Essamplaire.

FACTS:

The merchandise at issue consists of a needlecraft kit composed of: yarns cut to size, some packaged loosely and some wrapped in paper labels; a rectangular piece of woven linen fabric with unfinished edges; needle; and instruction charts. The items are packaged for retail sale in a clear plastic bag with header card.

The yarns are 100% cotton, produced in France, and imported into Canada from the United States. The loose yarns are imported into Canada in rolls and are cut to size in Canada. The paper- wrapped yarns are imported into Canada from the United States in that condition. The linen fabric is imported into Canada from Belgium in bolts, and is cut to size and dyed in Canada. The needle is from England. The instruction charts and packaging are from Canada.

ISSUE:

How are the needlecraft kits classified under the HTSUSA? Are they eligible for duty preference under the CFTA? How are they marked?

LAW AND ANALYSIS:

Classification

The General Rules of Interpretation (GRIs) to the HTSUSA govern the classification of goods in the tariff schedule. GRI 1 states, in pertinent part, that such "classification shall be determined according to the terms of the headings and any relative section or chapter notes. . . ." Goods which cannot be classified in accordance with GRI 1 are to be classified in accordance with subsequent GRIs, taken in order. Heading 6308, HTSUSA, provides for needlecraft kits, with or without accessories. The merchandise at issue is appropriately classifiable herein.

CFTA Eligibility

Goods which originate in the territory of Canada are potentially eligibly for special tariff treatment in accordance with section 201 of the United States-Canada Free-Trade Implementation Act of 1988. General Note 3(c)(vii)(A), HTSUSA. Goods are considered "originating in the territory of Canada" if, inter alia,

"they have been transformed in Canada and/or the United States so as to be subject--"

(I) to a change in tariff classification as described in the rules of subdivision (c)(vii)(R) of this note....

General Note 3(c)(vii)(B)(2), HTSUSA. However, goods having undergone "simple packaging" - i.e., imported items put together in Canada - are not considered to have originated in Canada, even if that packaging results in a change of classification. General Note 3(c)(vii)(C)(1), HTSUSA.

The only item in the needlecraft kit which is processed in Canada is the linen, which, as we stated above, is cut to size and hand-dyed. Textile commodities produced in more than one foreign country are subject to the country of origin requirements delineated in section 12.130 of the Customs Regulations (19 C.F.R. 12.130). These regulations provide that:

. . . a textile product . . . which consists of materials produced or derived from, or processed in, more than one foreign . . . country shall be a product of that foreign . . . country where it last underwent a substantial transformation.

12.130(b). A textile product undergoes a substantial transformation when it is ". . . transformed by means of substantial manufacturing or processing operations into a new and different article of commerce."

Section 12.130 of the regulations outlines the criteria used to determine the country of origin for textiles and textile products. Specifically, this provision of the regulations is considered in determining whether a textile product has undergone substantial manufacturing or processing operations, and what constitutes a new and different article of commerce. In 12.130(e)(1), it is clearly stated that cutting of fabric into parts will substantially transform that fabric when the parts are assembled into the completed article. Additionally, dying of fabric will substantially transform that fabric only when the dying is accompanied by two or more delineated operations. Since neither of these requirements has been met, the linen is considered a product of Belgium.

In HRL 555999 of November 20, 1991, we underwent an analysis of whether a toy set, packaged in Mexico from Mexican and Chinese components, was eligible for tariff preference under the Generalized System of Preferences (GSP). The GSP also has a "product of" requirement, in that an article must be either entirely of, or substantially transformed in, a beneficiary country. Following the rule of HRL 555999, sets (like the needlecraft set at issue) which include component parts which are sourced outside the beneficiary country (Canada or the United States) are clearly not wholly the growth, product or manufacture of that beneficiary country (Canada or the United States). The mere packaging of the English and Belgian components with the other items in the needlecraft set clearly does not substantially transform the non-Canada/U.S. components into "products of" Canada or the United States. Accordingly, because the entire needlecraft kit is not a "product of" Canada or the United States, neither the set nor its components is entitled to tariff preference under this program.

Country of Origin Marking

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides, subject to certain exceptions, that every article of foreign origin (or its container) imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or container) will permit, in such manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. Neither the statute nor the Customs Regulations contains any provision regarding the marking of sets. Accordingly, each item in the needlecraft kit must be separately marked with its own country of origin. T.D. 91-7, 25 . Cus. Bul. 7, 17 (January 8, 1991) (Interpretive Rule on the "Tariff Treatment and Country of Origin Marking of Sets, Mixtures, and Composite Goods"). Where the marking of the container will reasonably indicate the country of origin to the ultimate purchaser, however, the container may be marked instead of the individual articles. See 19 U.S.C. 1304(a)(3)(D) and 19 C.F.R. 134.32(d).

HOLDING:

As a result of the foregoing, the instant merchandise is classified under subheading 6308.00.0020, HTSUSA, textile category 669, as needlecraft sets put up for retail sale. The applicable rate of duty is 13 percent ad valorem. The U.S.- Canada Free-Trade Agreement duty preference does not apply.

The designated textile and apparel category may be subdivided into parts. If so, visa and quota requirements applicable to the subject merchandise may be affected. Since part categories are the result of international bilateral agreements which are subject to frequent negotiations and changes, to obtain the most current information available, we suggest that you check, close to the time of shipment, the Status Report On Current Import Quotas (Restraint Levels), an issuance of the U.S. Customs Service, which is updated weekly and is available at your local Customs office.

Due to the changeable nature of the statistical annotation (the ninth and tenth digits of the classification) and the restraint (quota/visa) categories, you should contact your local Customs office prior to importing the merchandise to determine the current status of any import restraints or requirements.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is imported. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

John Durant, Director
Commercial Rulings Division

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