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HQ 957978


August 21, 1995

CLA-2 R:C:T 957978 CAB

CATEGORY: CLASSIFICATION

Marie Diemer
Pillowtex Corporation
4111 Mint Way
Dallas, TX 75237

RE: Country of origin and eligibility for the North American Free Trade Agreement (NAFTA) duty preference of bed sheets

Dear Ms. Diemer:

This is in response to your inquiry of April 6, 1995, for a ruling on the applicability of a duty preference under the North American Free Trade Agreement (NAFTA) and the proper country of origin for bed sheets. Samples were submitted for examination.

FACTS:

The submitted samples consist of four flat sheets sized to fit twin, full, queen, and king beds. The sheets are constructed of 80 percent cotton/20 percent polyester woven printed fabric. The top of each sheet is finished with an approximately 10.5 inch band of fabric that has been folded to form a five inch border and is attached in a manner similar to capping. There is a four millimeter wide row of piping inserted in the seam between the border and the sheet. The twin, queen, and king size sheets have been cut on all four sides and hemmed on three sides. The full size sheet has been cut on three sides and hemmed on two sides. The bottom edge of the full size sheet is selvage.

The fabric is woven and printed in Pakistan. The rolls of fabric are shipped to Canada where they are cut and sewn to form the finished sheets.

ISSUES:

I. Whether the bed sheets at issue qualifies for NAFTA preferential treatment?

II. What is the country of origin of the bed sheets for marking and quota/visa purposes?

General Note 12 of the Harmonized Tariff Schedule of the United States Annotated (hereinafter HTSUSA) incorporated Article 401, NAFTA, into the HTSUSA. Note 12(b) provides in pertinent:

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, or,

(B) the goods otherwise satisfy the applicable requirements of subdivisions (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 flat sheets are produced from fabric manufactured in Pakistan, they do not meet the eligibility requirements of General Notes 12(b)(i) or 12(b)(iii). Thus, we must address whether the flat sheets qualify for NAFTA eligibility under General Note 12(b)(ii). To qualify under this provision, we must address whether the non-originating material, the woven fabric, undergoes the requisite change in tariff classification required in General Note 12(t).

The flat sheets are classifiable in subheading 6302.21.5020, HTSUSA. The rule applicable to goods of Heading 6302, HTUSA, is provided for in General Note 12(t), Chapter 63, Rule 1, which states, in pertinent part:

A change to headings 6301 through 6302 from any other chapter, except from headings * * * 5204 through 5212 * * * 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.

Chapter Rule 1 of General Note 12(t), Chapter 63, states:

For purposes of determining the origin of a good of this chapter, the rule applicable to that good shall only apply to the component that determines the tariff classification of the good
and such component must satisfy the tariff change requirements set out in the rule for the good.

Since a change from 5208 to 6302 is excepted from the applicable tariff shift rule, the woven printed fabric does not meet the required tariff change and therefore, the flat sheets do not qualify for NAFTA preferential treatment.

Because the subject sheets are subject to processing in Canada, a NAFTA country, they are subject to the country of origin marking rules set out in the interim amendments to the Customs Regulations (19 CFR Part 102). The interim amendments to the Customs Regulations were published as T.D. 94-4 (59 Fed. Reg. 109, January 3, 1994) and T.D. 94-1 (59 Fed. Reg. 69460, December 30, 1993). These interim amendments were effective on January 1, 1994, to coincide with the effective date of the NAFTA.

Section 102.11 sets forth the general rules to determine the country of origin. It provides, in pertinent part, in section 102.11(a)(3):

(a) The country of origin of a good is the country in which:

(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 applicable requirements of these rules are satisfied.

Section 102.20(k), Section XI (Chapters 50 through 63), states the tariff shift requirements for goods of 6302 is the following in pertinent part:

(1) * * * [A] change to 6302 from any other heading except heading * * * 5208 through 5212 * * *;

The change in classification of the woven printed fabric to the finished flat sheets is clearly a change to 6302 from another heading. However, the change to heading 6302 is the result of a change from heading 5208 which is excepted from the tariff shift rule. Thus, the sheets fail to meet the specific tariff shift rule requirements.

Section 102.20(k), Section XI (Chapter 50 through 63), contains Notes applicable to the various tariff shift requirements contained therein. Note 3 provides:

For the purposes of Section 102.11(b) of the General Rules, except for sets, where a good classifiable in Chapter 61 through 63 does not meet the tariff shift and/or other requirements of the heading or subheading under which it is classifiable, the country of origin of that good shall be the single country where the component which determines the classification of that good was cut or formed (e.g., knit to shape).

In this case, the bed sheets which are classifiable under Heading 6302, HTSUSA, do not meet the tariff shift classification requirements. As the fabric for the flat sheets was cut solely in Canada, pursuant to Note 3, Section 102.20(k), the country of origin of the flat sheets is Canada.

It is important to note that on May 17, 1995, in the Customs Bulletin,Volume 29, Number 20, Customs published a proposal to amend the interim Customs Regulations, published in the Federal Register on January 3, 1994, as T.D. 94-4. The proposed amendment to Section 102.20(k), Section XI (Chapter 50 through 63) would add a Note applicable to the various tariff shift requirements. The added Note would be as follows:

Except for quilted goods provided for in (2) below, a change to heading 6302 from heading 5007, 5111 through 5113, 5208 through 5212, 5309 through 5311, 5407 through 5408, 5512 through 5516, 5602 through 5603, 5801 through 5804, 5806, 5809 through 5810, 5901, 5903, 5906 through 5907, and 6001 through 6002, provided that the change is the result of cutting finished fabric on all sides and hemming all cut edges plus at least one other subsequent process, with no consideration being given to the addition of minor embellishments.

In addition to the aforementioned Note, another Note would also be inserted to Section 102.20(k), Section XI (Chapter 50 through 63) which would expound on the phrase "minor embellishments". This Note would be as follows:
d. The phrase "minor embellishments", as used in heading 6302 and 6304, refers to relatively insignificant methods used to enhance the visual appeal of a good, e.g., piping, capping, small amounts of embroidery.

The transaction in the instant scenario would be directly affected by the proposed amendments to the interim rules. Accordingly, you should be aware that if the proposed rules are adopted as published, this ruling will no longer be valid and a different result may apply.

HOLDING:

The sheets at issue are not eligible for NAFTA preferential treatment. However, under 19 CFR Part 102, they are products of Canada for marking purposes.

Sincerely,

John Durant, Director
Commercial Rulings Division

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