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HQ 959369





August 6, 1996
CLA-2 RR:TC:TE 959369 jb

CATEGORY: CLASSIFICATION

Michael A. Pipitone
John F. Kilroy Co., Inc.
JFK International Airport
Cargo Bldg. 80, Suite 227
Jamaica, NY 11430-1718

RE: Country of origin determination for a curtain panel; Section 102.21(c)(2); NAFTA; Section 12.130(c)

Dear Mr. Pipitone:

This is in reply to your letter dated May 21, 1996, on behalf of your client, Croscill Home Fashions, requesting a country of origin determination for a curtain panel which will be imported into the United States. A sample was submitted to this office for examination.

FACTS:

The subject merchandise consists of a curtain panel, referred to as style "Donegal", made of 55 percent cotton, 32 percent rayon, and 13 percent linen woven fabric. The panel measures approximately 40 by 82 inches and has four-1.5 inch hang loops evenly spaced across the top. The manufacturing operations are as follows:

USA

- cotton is grown;
- yarn is spun;
- fabric is woven.

MEXICO

- fabric is cut;
- fabric is sewn into panels.

ISSUE:

1. What is the proper tariff classification and duty rate for the subject merchandise?

2. Whether the subject merchandise is eligible for duty free treatment under the North American Free Trade Agreement (NAFTA)?

3. What is the country of origin of the subject merchandise?

4. What method of appraisement is used to determine the entered value of the subject merchandise?

LAW AND ANALYSIS:

Tariff Classification

Classification of merchandise under the Harmonized Tariff Schedule of the United States Annotated is in accordance with the General Rules of Interpretation (GRI). GRI 1 requires that classification be determined according to the terms of the headings and any relative section or chapter notes. Where goods cannot be classified solely on the basis of GRI 1, the remaining GRI will be applied, in the order of their appearance.

Heading 6303, HTSUS, provides for, among other things, curtains (including drapes). The subject merchandise is thus properly classified in subheading 6303.91.0000, HTSUSA, which provides for, curtains (including drapes) and interior blinds; curtains or bed valances: other: of cotton.

NAFTA Eligibility

The subject curtain panel undergoes processing operations in the United States and Mexico, which are countries provided for under the North American Free Trade Agreement (NAFTA). General Note 12, HTSUSA, incorporates Article 401 of the North American Free Trade Agreement (NAFTA) into the HTSUSA. Note 12(a) provides, in pertinent part:

(ii) Goods that originate in the territory of a NAFTA party under subdivision (b) of this note and that qualify to be marked as goods of Mexico under the terms of the marking rules...and are entered under a subheading for which a rate of duty appears in the "Special" subcolumn followed by the symbol "MX" in parentheses, are eligible for such duty rate... . [Emphasis added]

Accordingly, the curtain panel at issue will be eligible for the "Special" "MX" rate of duty provided it is a NAFTA "originating" good under General Note 12(b), HTSUSA, and it qualifies to be marked as a good of Mexico. Note 12(b) provides, in pertinent part:

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; or

As the subject curtain panel is constructed in Mexico of materials wholly obtained or produced in the territory of the United States (a NAFTA signatory country), it meets the criteria set out in General Note 12(b)(i). Accordingly, the curtain panel qualifies as a good originating in the territory of a NAFTA party. Assuming that the curtain panel qualifies to be marked as a good of Mexico, it is entitled to the special "MX" duty rate, provided that a Certificate of Origin is completed and submitted in accordance with 19 CFR 181.11.

Country of origin

On September 5, 1995, Customs published in the Federal Register (60 FR 46188)) T.D. 95-69 which set forth final amendments to the Customs Regulations to implement the provisions of section 334 (b) of the Uruguay Round Agreements Act ("the Act"), Public Law 103-465, 108 Stat. 4809, hereinafter 19 U.S.C. 3592, regarding the country of origin of textile and apparel products. These final regulations will apply to goods entered, or withdrawn from warehouse, for consumption on or after July 1, 1996. The regulatory provisions in T.D. 95-69 that implement the basic origin principles of section 334(b) of the Act are contained in a new ?102.21 of the Customs Regulations (19 CFR 102.21).

The final rule for the rules for determining country of origin of a good for purposes of Annex 311 of the NAFTA was published by Customs on June 6, 1996, in the Federal Register (61 FR 28932). Therein it was stated, in pertinent part:

New ?102.21 was modeled on the approach taken in the interim Part 102 texts as published in T.D. 94-4 and thus incorporates a general statement of applicability (paragraph (a)), various definitions (paragraph (b)), general origin rules (paragraphs (c) and (d)), and specific tariff shift and/or other requirements (paragraph (e)) that apply under the second general rule. Of particular note for purposes of the present document is the definition of "textile or apparel product" in ?102.21(b)(5) which delineates the class of goods covered by the ?102.21 rules. That definition identifies those goods with reference to classification in the HTSUS and refers to Chapters 50 through 63 (that is, all of Section XI) of the HTSUS as well as to specific headings and 6-, 8- or 10-digit subheadings of the HTSUS that fall outside Section XI. Thus, if a good is classifiable in an HTSUS provision listed in ?102.21(b)(5), precedence must be given to the ?102.21 rules over any other regulatory provision with regard to that good, including any origin rules contained elsewhere in part 102.

Accordingly, as the subject curtain panel is classified in heading 6303, HTSUS, a textile article identified by rules of origin to determine the appropriate country of origin.

Section 102.21(c)(1) states that, "The country of origin of a textile or apparel product is the single country, territory, or insular possession in which the good was wholly obtained or produced". As the subject merchandise was not wholly obtained or produced in a single country, Section 102.21(c)(1) is not applicable.

Section 102.21(c)(2) states that, "Where the country of origin of a textile or apparel product cannot be determined under paragraph (c)(1) of this section, the country of origin of the good is the single country, territory, or insular possession in which each foreign material incorporated in that good underwent an applicable change in tariff classification, and/or met any other requirement, specified for the good in paragraph (e) of this section."

Section 102.21(e) states that, "The following rules shall apply for purposes of determining the country of origin of a textile or apparel product under paragraph (c)(2) of this section":

6301-6306 The country of origin of a good classifiable under heading 6301 through
6306 is the country, territory, or insular possession in which the fabric comprising the good was formed by a fabric-making process.

As the fabric comprising the subject curtain panel was formed in the United States by a fabric-making process, country of origin is conferred in the United States.

However, there is an exception to products from the United States that are sent abroad for processing. Section 12.130(c), Customs Regulations, provides that any product of the United States which is returned after having been advanced in value or improved in condition abroad, or assembled abroad, shall be a foreign article.

Section 12.130 which remains in effect was originally intended to be used to determine the country of origin of textiles and textile products for quota/visa requirements. In T.D. 90-17, issued February 23, 1990, Customs announced a change in practice and position. This change resulted in Customs using Section 12.130 for quota, duty, and marking purposes when making country of origin determinations for textile goods. Therefore, in accordance with T.D. 90-17 and Section 12.130(c), the country of origin of the subject curtain panel is Mexico, for quota, marking, and duty purposes.

Value

Merchandise imported into the United States is appraised in accordance with section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. ?1401a). The preferred method of appraisement is transaction value, which is defined as the "price actually paid or payable for merchandise when sold for exportation to the United States," plus certain statutorily enumerated additions. 19 U.S.C. ?1401a (b)(1).

When imported merchandise cannot be appraised on the basis of transaction value, it is appraised in accordance with the remaining methods of valuation, applied in sequential order. 19 U.S.C. ?1401a(a)(1). The alternative basis of appraisement, in order of precedence, are: the transaction value of identical or similar merchandise (19 U.S.C. ?1401a(c)); deductive value (19 U.S.C. ?1401a(d)); computed value (19 U.S.C. ?1401a(e)); and the "fallback" method (19 U.S.C. ?1401a(f)).

The transaction value of identical or similar merchandise is based on sales at the same commercial level and in substantially the same quantity, of merchandise exported to the United States at or about the same time as that being appraised. 19 U.S.C.

Under the deductive value method, merchandise is appraised on the basis of the price at which it is sold in the U.S. in its condition as imported and in the greatest aggregate quantity either at or about the time of importation, or before the close of the ninetieth day after the date of importation. 19 U.S.C. enumerated deductions. 19 U.S.C. ?1401a(d)(3). However, merchandise that is not sold in its condition as imported, nor before the close of the ninetieth day can still be appraised under deductive value, provided the importer so elects. 19

Under the computed value method, merchandise is appraised on the basis of the material and processing costs incurred in the production of imported merchandise, plus an amount for profit and general expenses equal to that usually reflected in sales of merchandise of the same class or kind, and the value of any assists and packing costs. 19 U.S.C. ?1401a(e)(1).

Where merchandise cannot be appraised under the methods set forth in 19 U.S.C. ?1401a(b)-(e), its value is to be determined in accordance with the "fallback" method of section 402(f) of the TAA. The fallback method provides that merchandise should be appraised on the basis of a value derived from one of the prior methods reasonably adjusted to the extent necessary to arrive at a value. 19 U.S.C. ?1401a(f)(1).

Based on the information you have submitted to us, we cannot determine the appropriate method of appraisement at this time. If you would like more specific information or have additional questions, you must submit a separate request addressing value appraisement to the Value Branch, Office of Regulations and Rulings. They will issue you a separate letter addressing value.

HOLDING:

The subject curtain panel, referenced style Donegal, is classified in subheading 6303.91.0000, HTSUSA, which provides for, curtains (including drapes) and interior blinds; curtain or bed valances: other: of cotton.

The curtain panel is eligible for the NAFTA "MX" special duty rate of "Free". Also, in accordance with Section 12.130(c), the country of origin of the curtain panel is Mexico.

The holding set forth above applies only to the specific factual situation and merchandise identified in the ruling request. This position is clearly set forth in section 19 CFR 177.9(b)(1). This section states that a ruling letter is issued on the assumption that all of the information furnished in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect.

Should it be subsequently determined that the information furnished is not complete and does not comply with 19 CFR 177.9(b)(1), the ruling will be subject to modification or revocation. In the event there is a change in the facts previously furnished, this may affect the determination of country of origin. Accordingly, if there is any change in the facts submitted to Customs, it is recommended that a new ruling request be submitted in accordance with 19 CFR 177.2.

Sincerely,

John Durant, Director
Tariff Classification Appeals

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