HQ 959443 - Classification and country of origin determination for curtains; Section 102.21(c)(2); NAFTA; Section 12.130(c) - United States International Trade Commision Rulings

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HQ 959443

July 19, 1996

CLA-2 RR:TC:TE 959443 CAB

CATEGORY: CLASSIFICATION

F. Gordon Lee, Esq.
O'Connor & Hannan, L.L.P.
1919 Pennsylvania Avenue, N.W.
Suite 800
Washington, D.C. 20006-3483

RE: Classification and country of origin determination for curtains; Section 102.21(c)(2); NAFTA; Section 12.130(c)

Dear Mr. Lee:

This is in response to your inquiry of June 5, 1996, requesting a country of origin and tariff classification for curtains pursuant to Section 102.21, Customs Regulations, and the Harmonized Tariff Schedule of the United States Annotated, (HTSUSA). This request is on behalf of your client, Max Kahn Curtain Corporation. No sample was submitted for examination.

FACTS:

The curtains at issue will be made from various fabrics which may be of natural fibers such as cotton, man-made fibers such as polyester, or a blend of natural and man-made fibers. The fabrics will be manufactured in the United States from yarns and fibers which originate in the United States. The finishing and dyeing of the fabric will also occur in the United States. The fabric will then be exported to Mexico where it will be cut, sewn, and fully assembled into finished curtains.

ISSUES:

1. What is the proper tariff classification for the subject curtains?

2. Whether the subject curtains are eligible for preferential duty treatment under the North American Free Trade Agreement

3. What is the country of origin for the subject curtains?

4. What documentation is required to be maintained by Max Kahn, as importer of record, for purposes of confirming NAFTA preferential duty treatment, if the goods are determined to be eligible for NAFTA preferential treatment?

LAW AND ANALYSIS:

TARIFF CLASSIFICATION

Heading 6303, HTSUSA, is the provision for curtains (including drapes). As the curtains at issue fit squarely within the purview of Heading 6303, HTSUSA, this is the appropriate heading. The specific subheading cannot be determined without a sample or an exact fabric construction and fiber content.

NAFTA ELIGIBILITY

Article 401 of the NAFTA is incorporated into General Note 12 of the HTSUSA. General 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...

Accordingly, the curtains at issue will be eligible for the "Special" "MX" rate of duty provided they are NAFTA "originating" goods under General Note 12(b), HTSUSA, and they qualify to be marked as goods 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.

As the curtains at issue are wholly obtained or produced in the United States and Mexico, they meet the eligibility requirements of General Note 12(b)(i). Thus, pursuant to General Note 12(b)(i), the curtains qualify as goods originating in the territory of a NAFTA party. Assuming they qualify to be marked as goods of Mexico, they are entitled to the special "MX" duty rate, provided a Certificate of Origin is completed and submitted in accordance with 19 CFR 181.11.

COUNTRY OF ORIGIN

Pursuant to the Uruguay Round Agreements Act (codified at 19 USC Section 3592), rules of origin were effective for textile products entered, or withdrawn from warehouse, for consumption on or after July 1, 1996. These rules were published in the Federal Register, 60 Fed. Reg. 46188 (September 5, 1995). Section 102.21, Customs Regulations (19 CFR Section 102.21), sets forth the general rules to determine country of origin. Thus, the country of origin of a textile product will be determined by a hierarchy of rules set forth in paragraphs (c)(1) through (c)(5) of Section 102.21.

In order to determine the proper country of origin for NAFTA marking purposes, Section 102.21 is applicable. Customs specifically referred to this application in the Federal Register, June 6, 1996 (61 FR 28932, 28933), which contains the rules for determining the country of origin of a good for purposes of the Annex 311 of the NAFTA. Customs stated the following:

New Section 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 (b)), general origin rules...Of particular note for purposes of the present document is the definition of "textile or apparel product" in Section 102.21(b)(5) which delineates the class of goods covered by the Section 102.21 rules. That definition identifies those goods with reference to classification in the HTSUS...Thus, if a good is classifiable in an HTSUS provision listed in Section 102.21(b)(5), precedence must be given to the Section 102.21 rules over any other regulatory origin provision with regard to that good, including any origin rules contained elsewhere in part 102.

Section 102.21(b)(5) states that a textile or apparel product is any good classifiable in Chapters 50 through 63, HTSUS. As the subject curtains are classifiable under Heading 6303, HTSUSA, reference to Section 102.21 takes precedence over any other rules of origin to determine the appropriate country of origin.

Section 102.21(c)(1) sets forth the general rule for determining the country of origin of a textile or apparel product in which the good is wholly obtained or produced in a single country, territory, or insular possession. As the subject curtain is not wholly obtained or produced in a single country, territory, or insular possession, Section 102.21(c)(1) is inapplicable.

Section 102.21(c)(2) provides for instances where the country of origin of a textile or apparel product cannot be determined under paragraph (c)(1) of this section. Section 102.21(c)(2) states:

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 "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 curtains are not wholly obtained or produced in a single country, we must apply Section 102.21(c)(2) and the applicable requirement of Section 102.21(e) to the proposed scenario to determine the country of origin of the subject goods. The curtains are classifiable in Heading 6303, HTSUSA. Pursuant to the applicable provisions of Section 102.21(e), the country of origin of the curtains is the United States, the country where the fabric was formed by a fabric-making process.

However, there is an exception for 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 Treasury Decision ("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 curtains is Mexico for quota, marking, and duty purposes.

With respect to your request as to advice on the country of origin labeling requirements for the subject merchandise, Customs recently ruled in Headquarters Ruling Letter (HRL) 559625, dated January 19, 1996, that the origin rules set forth in 19 USC Section 3592 govern the labeling requirements of textile and apparel products for purposes of the country of origin marking requirements of 19 USC 1304. Also as noted above, Section 12.130(c) is still considered to be applicable for quota, marking, and duty purposes. As a result, the country of origin of the subject curtains is Mexico and they must be marked pursuant to 19 USC 1304, accordingly. However, it is important to note that the holding in HRL 559625 is currently under review regarding the manner and specificity of the marking requirements.

MAINTENANCE OF RECORDS

You request guidance as to the proper documentation required to be maintained on behalf of the importer, Max Kahn. You specifically ask whether Certificates of Origin will be required for fiber, yarn and fabric or will a statement from the fabric manufacturer confirming that the fiber, yarn and fabric originated in the United States satisfy Max Kahn's record keeping requirements as to those components of the curtains?

Pursuant to Section 181.22, Customs Regulations, Max Kahn, as the importer claiming preferential tariff treatment for a good imported into the United States shall maintain in the United States, for five years after the date of importation of the good, all documentation relating to the importation of the good. Such documentation shall include a copy of the Certificate of Origin and any other relevant documents specified in Section 162.1a(a), Customs Regulations. A specific Certificate of Origin is not required for each component of the curtains. Instead, a Certificate of Origin which confirms that the finished product, the curtains, qualify as originating goods will be sufficient. A statement from the exporter confirming the originating status of the good will not meet the requirements of Section 181.22, Customs Regulations. However, the exporter's signature on the Certificate of Origin will satisfy the cited requirements.

HOLDING:

The curtains are eligible for the NAFTA "MX" special duty rate. Also, in accordance with Section 102.21(c)(2), the country of origin of the curtains is Mexico for marking purposes.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is imported. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

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 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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