HQ 0953946 - Seed and Bulb Kits - United States International Trade Commision Rulings

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HQ 953946

August 30, 1993

CLA-2 CO:R:C:F 953946 ALS

CATEGORY: CLASSIFICATION

TARIFF NO.: 0601.10.6000; 0601.10.9080; 1206.00.0040

Mr. Ed Baker
A.N. Deringer, Inc.
30 West Service Road
Champlain, NY 12919

RE: Seed and Bulb Kits

Dear Mr. Baker:

This is in reference to your ruling request of April 1, 1993, concerning "Easy-Gro Bulb Kits" and "Easy-Gro Dwarf Sunflower Kits" assembled in Canada from components originating in Canada and other countries.

FACTS:

The articles under consideration are kits composed of a 5 inch terra cotta pot and saucer; a bag of growing mix containing peat moss, vermiculite, perlite, calcitic lime, dolomite lime, nitrogen phosphorous, potassium, trace elements and a wetting agent; amaryllis, paperwhite narcissus, white calla lily bulbs or sunflower seeds; straw fill and a fiberboard canister with a lid and label. The bulbs and seeds are not in growth or flower. The growing mix, straw fill and packaging are of Canadian origin. The pot and saucer are from Germany. The amaryllis bulbs are from Holland, the Narcissus bulbs are from Israel, and the Calla Lily bulbs are from the U.S. The sunflower seeds are from Japan. The non-Canadian components are assembled, in Canada, with products of Canadian origin into kits. The value and origin of items common to each kit are:

5 inch terra cotta pot and saucer - Cdn $ .60 - Germany Growing mix - .15 - Canada
Straw fill - .15 - Canada
Fiberboard Canister/Lid/ Labelling- 1.83 - Canada Assembly Labor - .50 - Canada

The kits also contain one type of bulb or seed, as follows:

An Amaryllis bulb valued at Cdn $4.05 each, Narcissus bulbs valued at Cdn $1.96 (4 in each kit @ Cdn $.49 each),
A Calla Lily bulb valued at Cdn $1.35 each, or A Dwarf Sunflower Seed at Cdn $.41

These prices are based on spring 1993 purchases by the Canadian supplier of the kits and will be good for shipments to the United States from September 1993 through March 1994.

ISSUE:

What is the classification of the subject kits and are they eligible for preferential treatment under the U.S. - Canada Free- Trade Agreement (CFTA)?

LAW AND ANALYSIS:

Classification of merchandise under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA) is governed by the General Rules of Interpretation taken in order. GRI 1 provides that the classification is determined first in accordance with the terms of the headings and any relative section and chapter notes. If GRI 1 fails to classify the goods and if the heading and legal notes do not otherwise require, the remaining GRI's are applied taken in order.

In considering the headings eligible for classification of these goods, we noted that the components of the kits are classifiable in 3 different headings of the HTSUSA. For purposes of classification, the packaging and straw fill were not considered. There is no specific heading that refers to all the components of the kits. Since each of the headings refer to only a part of the kit, we referred to GRI 3 which, pursuant to GRI 2, provides that goods classifiable under 2 or more headings shall be classified according to the provisions of GRI 3. Although GRI 3(a) provides that the heading with the most specific description shall be preferred to other headings, when 2 or more headings refer to a part only of the materials or substances contained in - 3 -
mixed or composite goods, the headings are to be considered as equally specific. We found that to be the case with this article so it could not be classified under that GRI.

We next referred to GRI 3(b) which covers mixtures, composite goods consisting of different materials or made up of different components and goods put up in sets for retail sale which cannot be classified by reference to GRI 3(a). In considering whether the subject articles are sets for retail sale in accord with GRI 3(b), we evaluated the articles against the specified requirements which a product must meet to qualify for classification thereunder. The articles must:

(a) consist of at least 2 different articles which are prima facie classifiable in different headings;

(b) consist of products or articles put up together to meet a particular need or carry out a specific activity; and

(c) be put up in a manner suitable for retail sale directly to users without repacking.

We believe that the articles under consideration meet all those requirements. The individual components of the kits are clearly packaged to be sold at retail, they are composed of at least 2 different articles classifiable in different headings, and the contents of each kit are designed to permit an interested person to grow a flower.

In considering which of the materials give the kits their essential character we noted that the factor which determines essential character will vary as between different kinds of goods. It may, for example, be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of a constituent material in relation to the use of the goods. We believe that the bulbs or seeds form the essential character of the kits because without them the kits would serve no purpose.

We next considered the eligibility of the kits for preferential treatment under the CFTA. General Note 3(c)(vii) of the HTSUSA provides the rules which determine what products imported into the United States from Canada are entitled to special duty treatment under the CFTA. Eligible goods must be goods "originating" in Canada, as stated in General Note 3(c)(vii)(A), HTSUSA.

Pursuant to General Note 3(c)(vii)(B), HTSUSA, goods imported into the Customs territory of the United States are eligible for treatment as "goods originating in the territory of Canada" only

(1) they are goods wholly obtained or produced in the territory of Canada and/or the United States,

(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 as described in the rules of subdivision (c)(vii)(R) of this note, or

(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)(F),(G),

Since the nature of goods imported into Canada and assembled with various Canadian products to form the subject kits is not altered in any way and the classification of such individual components is not changed, subdivision (c)(vii)(B)(2)(I) is not applicable hereto. We, however, believe that paragraph (II) of the subdivision may apply. After concluding that most of the references in paragraph (II) were inapplicable, we considered the applicability of subdivision 3(c)(vii)(H). That provision provides:

(H) Notwithstanding subdivision (c)(vii)(G), goods described in that paragraph shall be considered to have been transformed in the territory of Canada and be treated as goods originating in the territory of Canada if--

(1) the value of materials originating in the territory of Canada and/or the United States that are used or consumed in the production of the goods plus the direct cost of assembling the goods in the territory of Canada and/or the United States constitute not less than 50 percent of the value of the goods when exported to the territory of the United States, and

(2) the goods have not subsequent to assembly undergone processing or further assembly in a third country....

In order to determine whether the subject kits meet the requirements of subdivision 3(c)(vii)(H), we considered the information provided by the requester as to the origin and value of each component of the kits. In regard to the bulb kits we concluded:

1. The Amaryllis bulb kit is not eligible for CFTA treatment since 63.9 percent of the value relates to components whose origin is other than Canada or the U.S.

2. The White Calla Lily bulb kit is eligible for CFTA treatment since 87.4 percent of its value relates to components whose origin is either Canada or the U.S.

3. The Paperwhite Narcissus bulb kit is eligible for CFTA treatment. Based on figures which will be steady until March 1994, the Canadian component of the kit (there is no U.S. component) forms 50.67 percent of the value. (Fluctuation of the value of any of the components of the kit, will make it necessary to reevaluate the conclusion as to CFTA eligibility).

4. The Sunflower seed kit is eligible for CFTA treatment since 72.3 percent of its value relates to components whose origin is either Canada or U.S.

HOLDING:

Kits composed of a terra cotta pot and saucer, a bag of growing mix, straw fill, and a fiberboard canister and which contain an amaryllis or calla lily bulb, not in growth or flower, are classifiable in subheading 0601.10.9080, HTSUSA. They are subject to a general rate of duty of 5.5 percent ad valorem. Such kits containing a narcissus bulb, not in growth or flower, are classifiable in subheading 0601.10.6000, HTSUSA, and are subject to a general rate of duty of $2.10 per 1000. Such kits containing sunflower seeds are classifiable in subheading 1206.00.0040, HTSUSA, and are subject to a free general rate of duty.

The above kits, which are the product of Canada, may be eligible, in accordance with General Note 3(c)(vii)(B), HTSUSA, for a reduced rate of duty upon compliance with the provisions of the United States - Canada Free-Trade Agreement and section 10.301 et seq., Customs Regulations (19 CFR 10.301 et seq.).

Sincerely,

John Durant, Director
Commercial Rulings Division

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