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HQ 956044




July 20, 1994

CLA-2 CO:R:C:T 956044 NLP

CATEGORY: CLASSIFICATION

Mr. Bruce Tucker
Happy Fella
112 West 34th Street
New York, NY 10120

RE: Eligibility for NAFTA duty preferences of woven cotton shorts and knit cotton cardigans made of fabrics imported from India and cut and sewn into the finished garments in the U.S.; General Note 12(b)(ii)(A); non-originating materials

Dear Mr. Tucker:

This is in response to your letter of March 8, 1994, concerning the eligibility of certain garments for tariff preferences under the North American Free Trade Agreement (NAFTA). In addition, in response to a phone conversation with Nancy Plumer, a member of my staff, you provided us with supplemental information in a letter dated June 6, 1994.

FACTS:

According to your letters and a submitted photograph, you are producing three combinations of garments and each one has three parts: a knit cardigan, a knit shirt and a woven pair of shorts. The garments are designed to be worn by children and will be sold in sizes 2-4 Toddler. These garments will be packaged, put on a hanger and sold as a set in the U.S. In addition, you stated that they may also be exported to Mexico for sale there.

The first two garment combinations are comprised of a knit cardigan made up of 50% polyester/50% cotton and a knit shirt made of 55% cotton/45% polyester. The shorts are made up of 100% woven cotton. The cardigan and shirt are made of U.S. fabrics and are produced in the U.S. The shorts are made of fabric manufactured in India and this fabric is cut into component parts and assembled by sewing into shorts in the U.S.

The third garment combination is comprised of a knit cardigan made up of 100% cotton, a knit shirt made of 55% cotton/45% polyester and woven shorts made up of 100% cotton. In this instance, the shirt and shorts fabric is of U.S. origin and is cut and sewn into the shirt and shorts in the U.S. The
cardigan is made of cotton fabric manufactured in India and the fabric is cut into component parts and assembled by sewing into the cardigan in the U.S.

The weights of the garments are as follows:

1) The knit cardigan weighs 3.1 oz.
2) The knit shirt weighs 2.1 oz.
3) The woven shorts weigh 1.5 oz.

ISSUE:

Does non-originating fabric that is cut and sewn into finished garments in the U.S. qualify for NAFTA preferential tariff treatment?

LAW AND ANALYSIS:

Chapter 4 of the NAFTA sets forth rules for determining whether an imported good qualifies as an originating good of a NAFTA country. A good that qualifies as an originating good is eligible for preferential tariff (duty free or reduced duty) treatment as provided for under Article 302(2) and Annex 302.2 of the NAFTA. The basic rules of origin in Chapter 4 of the NAFTA, as well as the specific rules of origin found in Annex 401 of the NAFTA, are set forth in General Note 12, Harmonized Tariff Schedule of the United States Annotated (HTSUSA). (See 58 Fed. Reg. 69, 460 (Dec. 30, 1993).

Subdivision (b) of General Note 12, HTSUSA, sets forth the rules of origin for determining whether an imported good is an originating good. It provides, in pertinent part, the following:

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 entirely 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 goods
undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein....

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

As the fabric is produced in India, it does not meet the eligibility requirements of General Note 12(b)(i) or 12(b)(iii), HTSUSA. Therefore, we must ascertain whether the non-originating fabric qualifies for NAFTA eligibility under General Note 12(b)(ii), HTSUSA. To qualify under this provision, we must determine if the non-originating cotton fabric undergoes the requisite change in tariff classification required in General Note 12(t), HTSUSA.

The finished 100% woven cotton shorts that are produced with the non-originating fabric are classified in subheading 6203.42.4060, HTSUSA. The applicable subdivision (t) rule for Chapter 63, HTSUS, provides the following:

16. A change to subheadings 6203.41 through 6203.49 from any other chapter, except from headings 5106 through 5113, 5204 through 5212, etc... provided that the good is both cut and sewn or otherwise assembled in the territory of one or more of the NAFTA parties.

The woven cotton fabric imported from India used to manufacture the shorts is classifiable under heading 5208, HTSUSA, or 5209, HTSUSA, depending on whether the fabric weighs more or less than 200 grams/meter squared. As a change from heading 5208, HTSUSA, or heading 5209, HTSUSA, to subheading 6203.42, HTSUSA, is excepted from the applicable tariff shift rule, the cotton fabric does not meet the required tariff change and it does not qualify for NAFTA preferential treatment. Therefore, the imported fabric is not considered a good originating in the territory of a NAFTA party and is not entitled to preferential duty treatment under the NAFTA.

The knit cardigan made from non-originating fabric is classified in subheading 6110.20.10, HTSUSA. The applicable subdivision (t) rule for Chapter 61, HTSUSA, provides the following:

35. A change to headings 6109 through 6111 from any other chapter, except from headings 5106 through 5113... or 6001 through 6002, provided that the good is both cut

(or knit to shape) and sewn or otherwise assembled in the territory of one or more of the NAFTA parties.

The 100% cotton knit fabric imported from India is classifiable under heading 6002, HTSUSA. As a change to heading 6110, HTSUSA, from heading 6002, HTSUSA, is excepted from the applicable tariff shift rule, the knit cotton fabric does not meet the required tariff change and it does not qualify for NAFTA preferential treatment. Therefore, the imported fabric is not considered a good originating in the territory of a NAFTA party and is not entitled to preferential duty treatment under the NAFTA.

We note that, if you intend to sell the subject garments in the U.S., there is no NAFTA duty issue concerning the garments. It is only if the garments are to be exported to another NAFTA party that a NAFTA duty issue may arise. In fact, in a phone conversation with Ms. Plumer, you indicated that the three combinations of garments may also be exported to Mexico. If you are seeking the classification of a good for exportation into Mexico and whether it is entitled to NAFTA duty preferences, you are considered to be a U.S. exporter and thus not eligible under section 181.92(b)(5), Customs Regulations, to request an advance ruling from the U.S. Customs Service. As a U.S. exporter of goods to Mexico requesting a ruling on the eligibility of your product for NAFTA treatment, you should direct your inquiry to Mexican Customs at the following address:

Secretaria de Hacienda y Credito Publico
Subsecretaria de Ingresos
Direccion General Fiscal Internacional
Avenida Hidalgo #77, Modulo 1
Planta Baja, Colonia Guerrero
Delegacion Cuauhtemoc
06300 Mexico, D.F.

HOLDING:

The fabrics imported from India do not undergo a tariff classification change after processing in the U.S., as required by General Note 12(b)(ii), HTSUSA, and General Note 12(t), HTSUSA. Therefore, the fabrics imported into the U.S. are not considered goods originating in the territory of a NAFTA party and are not entitled to preferential duty treatment under NAFTA. The fabrics are dutiable based on their HTSUS classifications at the time of importation into the U.S. We note that without more information as to the compositions and weights of these fabrics, we are unable to provide you with a specific HTSUSA subheading
classification and duty rate. If you would like a HTSUSA binding classification ruling on these fabrics, you may request one from our New York office at the following address:

U.S. Customs Service
Area Director, New York Seaport
6 World Trade Center
New York, NY 10048

Sincerely,

John Durant, Director
Commercial Rulings Division

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