HQ 558891 - Country of origin marking of a cushion; NAFTA Article 509; 19 CFR Part 102; Originating good - United States International Trade Commision Rulings

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HQ 558891

March 7, 1995

MAR-2-05 CARCASE 558891 WAS

CATEGORY: MARKING

Ms. Louise Jette
Leveille et Fils Inc.
250, rue St-Urbain Street
Granby, (Que.), Canada
J2G 8M8

RE: Country of origin marking of a cushion; NAFTA Article 509; 19 CFR Part 102; Originating good

Dear Ms. Jette:

This is in reference to your letter dated October 31, 1994, concerning the proper country of origin marking of cushions assembled in Canada from U.S. and Chinese-origin components and whether these cushions qualify as "originating goods" under the North American Free Trade Agreement (NAFTA).

FACTS:

You state that your Canadian customer plans to import from China woolen needlepoint cushion covers. You claim that, when imported into Canada, these cushion covers are classified in subheading 6304.99, HTSUS. In addition, your customer also plans to import cushion stuffers from the U.S. You claim that the cushion stuffers are classified in subheading 9404.90, HTSUS. The finished cushion will then be assembled in Canada from the Chinese and U.S.-origin components and is classified in subheading 9404.90, HTSUS.

ISSUE:

(1) What are the country of origin marking requirements applicable to the imported cushions?

(2) Whether the cushions qualify as an originating article under the NAFTA.

LAW AND ANALYSIS:

I. Country of Origin Marking Requirements

The marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, 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 its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the country of origin of the article. Part 134, Customs Regulations (19 CFR Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.

The country of origin marking requirements for a "good of a NAFTA country" are also determined in accordance with Annex 311 of the North American Free Trade Agreement ("NAFTA"), as implemented by section 207 of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057) (December 8, 1993) and the interim amendments to the Customs Regulations published as T.D. 94-4 (59 Fed. Reg. 109, January 3, 1994) with corrections (59 Fed. Reg. 5082, February 3, 1994) and T.D. 94-1 (59 Fed. Reg. 69460, December 30, 1993). These interim amendments took effect on January 1, 1994, to coincide with the effective date of the NAFTA. The Marking Rules used for determining whether a good is a good of a NAFTA country are contained in T.D. 94-4 (adding a new Part 102, Customs Regulations). The marking requirements for these goods are set forth in T.D. 94-1 (interim amendments to various provisions of Part 134, Customs Regulations).

Section 134.45(a)(2) of the interim regulations, provides that "a good of a NAFTA country may be marked with the name of the country of origin in English, French, or Spanish. Section 134.1(g) of the interim regulations, defines a "good of a NAFTA country" as an article for which the country of origin is Canada, Mexico or the United States as determined under the NAFTA Marking Rules.

The interim NAFTA regulations provide an exception from marking for a good of a NAFTA country which is to be processed in the U.S. in a manner that would result in the good becoming a good of the U.S. under the NAFTA Marking Rules. See 19 CFR 134.35(b). The outermost container of an article which qualifies for this exception must be marked with the article's origin, unless the good is processed by the importer or on its behalf.

Part 102 of the interim regulations, sets forth the "NAFTA Marking Rules" for purposes of determining whether a good is a good of a NAFTA country for marking purposes. Section 102.11 of the interim regulations, sets forth the required hierarchy for determining country of origin for marking purposes. Section 102.11(a) of the interim regulations states that "[t]he country of origin of a good is the country in which:

(1) The good is wholly obtained or produced; (2) The good is produced exclusively from domestic materials; or
(3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other requirements of these rules are satisfied."

Neither section 102.11(a)(1) or (2) are applicable to the facts at issue in this case because the cushion is neither wholly obtained or produced in Canada nor is it produced exclusively from domestic materials. Since an analysis of sections 102.11(a)(1) and 102.11(a)(2) do not yield a country of origin determination, we look to section 102.11(a)(3). Pursuant to section 102.11(a)(3), the country of origin of a good is the country in which each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20. Section 102.20 of the interim rules, sets forth the specific tariff classification changes and/or other operations, which are specifically required in order for country of origin to be determined on the basis of operations performed on the foreign materials contained in a good. In the instant case, as the cushions are classified in 9404.90, HTSUS, the change in tariff classification must be made in accordance with section 102.20(t), Section XX: Chapters 94 through 96, subheading 9404.90, HTSUS, of the interim regulations, which states in part that:

A change to subheading 9404.90 from any other heading.

Therefore, the imported Chinese and U.S. material incorporated in the cushion must be classified in a different heading than 9404.90, HTSUS. In the instant case, as the cushion stuffer is classified in the same tariff provision as the completed cushion, the requisite change in tariff classification as set forth in section 102.11(a)(3) does not occur.

Since the country of origin is not determined by section 102.11(a) (incorporating section 102.20) of the interim regulations, the next step in the country of origin interim regulations hierarchy is section 102.11(b). Section 102.11(b) of the interim regulations states as follows:

Except for a good that is specifically described in the Harmonized Tariff Schedule as a set, or is classified as a set pursuant to General Rule of Interpretation 2, where the country of origin cannot be determined under paragraph (a), the country of origin of the good:

(1) Is the country or countries of origin of the single material that imparts the essential character of the good. . .

"Material" is defined in section 102.1(1) of the interim regulations as "a good that is incorporated into another good as a result of production with respect to that other good, and includes parts, ingredients, subassemblies, and components."

Pursuant to section 102.18(b)(2), "for purposes of applying section 102.11, only domestic and foreign materials (including self-produced materials) that are classified in a tariff provision from which a change in tariff classification is not allowed in the rule for the good set out in section 102.20 shall be taken into consideration in determining the parts or materials that determine the essential character of the good." In the instant case, only the cushion stuffers (classified in subheading 9404.90, HTSUS) are classified in a provision from which a change in tariff classification is not allowed. Therefore, as the cushion stuffer is the only material of the finished cushion which does not undergo the requisite tariff shift, it will be deemed to impart the essential character of the article. However, pursuant to section 102.14, the country of origin of the cushion cannot be the U.S. Section 102.14 states that:

No good last advanced in value or improved in condition outside the United States has United States origin. If under any other provision of this part such a good is determined to be a good of the United States, that determination will be disregarded and the country of origin of the good will be the last foreign country in which the good was advanced in value or improved in condition.

"Advanced in value" is defined in section 102.1(a) of the interim regulations as "an increase in the value of a good as a result of production with respect to that good, other than by means of those minor processing' operations described in paragraphs (m)(5), (m)(6) and (m)(7) of this section." "Improved in Condition" is defined in section 102.1(I) as "the enhancement of the physical condition of a good as a result of production with respect to that good, other than by means of those minor processing' operations described in paragraphs (m)(5), (m)(6) and (m)(7) of this section." "Minor processing" operations described in sections (m)(5), (m)(6) and (m)(7) of the interim regulations include unloading, reloading or any other operation necessary to maintain the good in good condition; putting up in measured doses, packing, repacking, packaging, repackaging; testing, marking, sorting or grading.

We find that the cushions have been advanced in value or improved in condition as a result of the assembly operation performed in Canada. Accordingly, pursuant to section 102.14 of the interim regulations, the country of origin of the imported cushions is Canada -- the last foreign country in which the good was advanced in value or improved in condition. Therefore, for purposes of the country of origin marking requirements of 19 U.S.C. 1304, the imported cushions must be marked to indicate that the country of origin of the cushion is "Canada."

Section 134.43(e) of the interim regulations, provides in part that "where the country of origin of an article is determined in accordance with section 102.14, part 102 of this Chapter, such article, at the choice of the importer, exporter or producer of the good, may be marked, as appropriate, in a manner such as the following:

(1) Assembled in (name of foreign country) from U.S. components;

(2) Further processed in (name of foreign country) from U.S. materials;

(3) Product of (name of foreign country) made from U.S. components; or

(4) Product of (name of foreign country).

II. NAFTA Originating Material

General Note 12, Harmonized Tariff Schedule of the United States (HTSUS) provides that:

(b) For the purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as 'goods originating in the territory of a NAFTA party' only if--
(I) they are goods wholly obtained or produced in the territory of Canada, Mexico and/or the United States; or

(ii) they have been transformed in the territory of Canada, Mexico and/or the United States so that--

(A) except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such good undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein, or

(B) the goods otherwise satisfy the applicable requirements of subdivision (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note; or

(iii) they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials. . .

As the cushions are not "wholly obtained or produced in the territory of Canada," General Note 12(b)(I) is not applicable. Therefore, to become "originating goods," the non-originating components (Chinese-origin cushion cover) must meet the tariff shift provision applicable to the finished cushion which is classified under subheading 9404.90, HTSUS. The applicable General Note 12(t) rule for this good provides as follows:

A change to subheading 9404.90 from any other chapter, except from headings 5007, 5111 through 5113, 5208 through 5212, 5309 through 5311, 5407 through 5408 or 5512 through 5516.

Since the Chinese-origin cushion cover which is used in the assembly of the cushion is classified in a separate chapter than subheading 9404.90 (subheading 6304.99, HTSUS), and is not classified in one of the headings for which a tariff shift is precluded, the assembly of the cushion in Canada will result in the Chinese-origin component undergoing the requisite tariff shift. Therefore, as the tariff shift takes place in a NAFTA country, Canada, the finished cushion will be deemed "originating" and eligible for NAFTA preferential duty treatment.

HOLDING:

On the basis of the information presented, we are of the opinion that, pursuant to section 102.14 of the interim regulations, the cushions are considered to be a product of Canada for purposes of country of origin marking. The origin of the cushions may be indicated by one of the methods specified in section 134.43(e) of the interim regulations.

Furthermore, the cushions are eligible for the NAFTA tariff preference, upon compliance with all the applicable regulations.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. 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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