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HQ 560180





July 28,
1997

MAR-05 RR:TC:SM 560180 BLS

CATEGORY: MARKING

Port Director
U.S. Customs Service
198 West Service Road
Champlain, New York 12919

RE: Country of origin marking of footwear; NAFTA; Article 509

Dear Sir:

This is in reference to a letter dated November 1, 1996, from Trans-Border Customs Services, Inc., on behalf of Genfoot Canada Ltd. ("Genfoot"), requesting a ruling concerning country of origin marking of certain footwear, and the tariff consequences under certain described scenarios. While the request appears to cover a prospective transaction, the concerned import specialist at Champlain has advised that the goods in question are currently being entered through your port.

FACTS:

The footwear is described as "pack" boots which consist of a rubber bottom, which completely covers the foot, a shaft of nylon, and a felt liner which is inserted into the boot. The submitted sample includes two style shafts, one with a complete eyelet lace closure, and the other with a partial eyelet closure and a velcro closure. One shaft measures approximately seven inches in length, and the other shaft approximately eight and one-half inches in length.

All three components are shipped to the U.S. for assembly into the finished boot. The completed product may be sold in the U.S. after assembly, or returned to Canada, in which case it may be re-imported into the U.S., without any further processing aside from packaging operations. You state that the components may all be of Canadian origin, or the nylon shaft may be a product of China.

A. All Components of Canadian Origin

Under this scenario, all three components are of Canadian origin and are shipped together to the U.S. for assembly. Genfoot indicates that it will be claiming NAFTA Preference upon the initial importation and inquires as to the marking requirements
after assembly in the U.S., and upon re-importation if exported to Canada and returned. The tariff consequences are also requested upon re-importation into the U.S. of the assembled footwear.

B. Nylon Shaft of Chinese Origin

In this case, the rubber bottom and felt liner are also of Canadian origin, but the nylon shaft is a product of China. In addition, the components are separately imported into the U.S. As under the first scenario, the components are assembled into the completed boot in the U.S., and may be exported to Canada where they are subject to packaging operations only before re-importation into the U.S. Genfoot believes it would not be entitled to NAFTA Preference under this scenario.

ISSUES:

1) What are the tariff consequences of the importations under the above-described scenarios?

2) What are the country of origin marking requirements for the assembled footwear under the described situations?

LAW AND ANALYSIS:

A. All Components of Canadian Origin

Nafta Preference

As indicated in the ruling request, all three components are of Canadian origin and a claim is made for NAFTA Preference.

General Note 12(b), Harmonized Tariff Schedule of the United States (HTSUS), provides in pertinent part:

[f]or 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;

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

(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) where no change in tariff classification is required, and the goods satisfy all other requirements of this note...

Since the components are stated to be of Canadian origin upon initial importation into the U.S., we will assume that they will be considered originating goods pursuant to General Note 12(b), HTSUS, and will be eligible for NAFTA Preference. (For purposes of this ruling, we will assume that any non-originating materials have been transformed in Canada in accordance with General Note 12(b)(ii).) Furthermore, upon return to the U.S., after assembly of the footwear components in the U.S. and exportation to Canada for packaging operations, based upon the assumptions above, the boots will also be eligible for NAFTA Preference since pursuant to General Note 12(b) they are considered "goods originating in the territory of a NAFTA party."

Country of Origin Marking

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 English name of 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.

Section 134.1(b), Customs Regulations (19 CFR 134.1(b), defines

"country of origin" as:

The country of manufacture, production, or growth of any article of foreign origin entering the
United States.
Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the
"country of origin" within the meaning of this part; however for a good of a NAFTA country, the NAFTA
Marking Rules will determine the country of origin.

Section 134.1(j), Customs Regulations (19 CFR 134.1(j)), provides that the "NAFTA Marking Rules" are the rules promulgated for purposes of determining whether a good is a good of a NAFTA country. Section 134.1(g) (19 CFR 134.1(g)), defines a "good of a NAFTA country" as an article for which the country of origin is Canada, Mexico, or the U.S. as determined under the NAFTA Marking Rules set out at 19 CFR Part 102.

In this case, footwear components, which are stated to be of Canadian origin, are imported into the U.S. from Canada to be assembled into a completed boot, and then either sold in the U.S. or exported to Canada for packaging operations before being returned to the U.S. Thus, in order to determine the appropriate marking requirements for the assembled footwear, we must initially determine under the NAFTA Marking Rules the country of origin of these boots upon importation into Canada. Our determination as to origin upon importation into Canada will also apply if the boots are sold in the U.S. after assembly.

Part 102 of the Customs Regulations (19 CFR Part 102), 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 regulations sets forth the required hierarchy for determining country of origin for marking purposes. Section 102.11(a) provides 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 applicable requirements of these rules are satisfied.

When imported into Canada, the good assembled in the U.S. is neither wholly obtained or produced (in the U.S.), nor is it produced exclusively from domestic (U.S.) materials. Therefore, for purposes of determining the origin of the good, section 102.11(a)(3) is the applicable rule that first must be applied. Under this rule, 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 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 (Canadian) materials contained in the good. Thus, in the instant case, we must determine whether as a result of the operations in the U.S., the Canadian origin components undergo a change in classification as set out under the specific rule for the good. Accordingly, we must first ascertain the classification of the assembled good.

As noted, there are two sample shafts, comprised of a nylon material, a liner, and the rubber bottom which completely covers the foot. In this instance, the classification of the footwear will depend upon whether the predominant material of the upper, which includes the shaft, is nylon or rubber. (See Note 4(a) of Chapter 64, Harmonized Tariff Schedule of the United States (HTSUS), which provides that "The material of the upper shall be taken to be the constituent material having the greatest external surface area...) Thus, if the material comprising the upper is predominantly of nylon, the boot will be properly classifiable as protective footwear under subheading 6404.19.50, HTSUS, which provides for footwear with outer soles of rubber and uppers of textile materials, other, designed to be worn over or in lieu of, other footwear as a protection against water, oil, grease or chemicals or cold or inclement weather. If the predominant material of the upper is rubber, the boot is properly classifiable under subheading 6402.91.20, as other footwear with outer soles and uppers of rubber or plastics, covering the ankle, other, footwear designed to be worn over, or in lieu of, other footwear as a protection against water, oil, grease or chemicals or cold or inclement weather.

Without laboratory analysis, we cannot definitely ascertain whether the predominant material of the upper is nylon or rubber. However, to ensure that both possible scenarios are covered, the inquirer has orally requested that our ruling extend to footwear where the predominant material comprising the upper is nylon and also where it is rubber. Accordingly, we will assume for these purposes only that the predominant material of one upper is of nylon and the other is of rubber.

The specific tariff rule set out in section 102.20(k), Section XII, Chapters 64 through 67, 6401-6405 of the regulations, which covers the footwear with either textile or rubber uppers, provides:

6401-6405 .... A change to heading 6401 through 6405 from any other heading outside that group, except from formed uppers.

Noting that the subject merchandise, in its condition upon initial importation into the U.S., is composed of unassembled components that when assembled form a complete boot, we must refer to General Rules of Interpretation (GRI) 2(a), HTSUS, which provides as follows:

(a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as entered, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), entered unassembled or disassembled.

Accordingly, when imported from Canada, the unassembled footwear components are properly classifiable under either subheadings 6402.91.20 or 6404.19.50, as noted, the same subheadings as the complete and assembled articles. Therefore, there is no tariff shift under the applicable rule, and we must proceed to the next rule in the hierarchy, section 102.11(b), to determine the country of origin of the footwear imported into Canada.

Section 102.11(b) of the regulations (19 CFR 102.11(b) provides in pertinent part that:

Except for a good that is specifically described in the
Harmonized System as a set, or is classified as a set pursuant to General Rule of Interpretation 3, where the country of origin cannot be determined under paragraph
(a) of this section:

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

Considering the criteria and factors set forth in section 102.18(b)(1) and (b)(2), we find that the single material that imparts the essential character to the footwear in this case is the rubber bottoms. In this regard, we note that the bottoms have substantial upper portions, and look and function very much like rubber galoshes and, although not complete, provide a total covering for the foot. Accordingly, since the rubber bottoms are of Canadian origin, the country of origin of the footwear assembled in the U.S. is Canada, and must be marked accordingly. In this regard, we note that the marking "assembled in the U.S. of foreign components" is not an acceptable marking for the assembled footwear as such marking would be acceptable only when the country of assembly is the country of origin. See 19 CFR 134.43(e).

Re-Importation into the U.S.

The operations in Canada consist only of simple packaging of the Canadian origin completed footwear, and return to the U.S. Therefore, when re-imported into the U.S., the footwear continues to be classifiable under subheadings 6402.91.20 or 6404.19.50, HTSUS. (See also 19 CFR 102.17, which does not allow a classification change as a result of simple packaging operations.) Therefore, we find that there is no tariff shift under the applicable rule, and we must proceed to the next rule in the hierarchy, section 102.11(b), to determine the country of origin of the footwear imported into Canada. Under the same analysis used for the good imported into Canada, above, we find that the single material that imparts the essential character to the good is the rubber bottoms. Accordingly, since this component is of Canadian origin, the country of origin of the re-imported footwear is Canada.

B. Nylon Shaft of Chinese Origin

Under this scenario, the rubber bottom and felt lining are of Canadian origin, and the nylon shaft is a product of China. The three components are imported separately into the U.S. where they are assembled into the completed boot, and either sold in the U.S., or exported to Canada, packaged, and returned to the U.S.

NAFTA Preference

Since the returned assembled boots are comprised in part of a nylon shaft of Chinese origin, the footwear will be considered "goods originating in the territory of a NAFTA party" pursuant to General Note 12(b), HTSUS, only if this non-originating component has undergone a change in classification as a result of the assembly process in the U.S., in accordance with General Note

As noted, the footwear is classifiable under subheadings 6402.91.20 or 6404.19.50. The nylon shaft is classifiable under subheading 6406.10, HTSUS, which provides for parts of footwear; uppers and parts thereof. The rule applicable to goods of subheading 6402.91 and 6404.19, HTSUS, is provided for in General Note 12(t)/63--12(t)65, HTSUS, Chapter 64, which provides the following:

1. A change to headings 6401 through 6405 from any heading outside that group, except from subheading 6406.10, provided there is a regional value content of not less than 55 percent under the net cost method.

Since the shaft is classifiable under subheading 6406.10, it does not undergo a change in classification as a result of the assembly process in the U.S. Furthermore, since there will be no change in classification of the good as a result of the simple packaging of the boots in Canada, the same rule will apply and upon re-importation into the U.S., the footwear will not be eligible for preferential treatment under the NAFTA.

Country of Origin Marking

In order to determine the appropriate marking requirements for the footwear imported into Canada for packaging and returned to the U.S., we must again determine under the NAFTA Marking Rules the country of origin of these boots assembled in the U.S. Our initial inquiry must focus on the boots as imported into Canada. Since the assembled good is produced from Chinese and Canadian origin materials, it is neither wholly obtained or produced in the U.S., nor produced from domestic (U.S.) materials. Therefore, we must determine under 19 CFR 102.11(a)(3) whether each of the foreign components undergo the required change in classification as a result of the operations performed in the U.S. As noted, the assembled footwear is properly classifiable under subheading 6404.19.50 and 6402.91.20. The specific tariff rule set out in section 102.20(k), Section XII, Chapters 64 through 67, 6401-6405 of the regulations, which
covers the footwear with either textile or rubber uppers, provides:

6401-6405 .... A change to heading 6401 through 6405 from any other heading outside that group. except from formed uppers.

The rubber bottoms in this case have substantial upper portions. These bottoms in their condition as imported have the essential character of footwear. Specifically, they look and function very much like rubber galoshes and, although not complete, provide a total covering for the foot. They would in fact be useful in their imported condition as waterproof footwear if one added some form of closure to keep them on the foot. We find that the rubber boot bottoms are classifiable under subheading 6401.99, HTSUS, as waterproof footwear with outer soles and uppers of rubber or plastics, the uppers of which are neither fixed to the sole nor assembled by stitching, riveting, nailing, screwing, plugging or similar processes, other footwear, other, other. As previously noted, the nylon shaft is classifiable under subheading 6406.10, HTSUS, which provides for parts of footwear, uppers and parts thereof. The felt liner is also classified under this provision.

Since the rubber bottoms do not undergo a tariff shift, we must proceed to the next rule under the hierarchy, 19 CFR 102.11(b), in order to determine the country of origin of the assembled good. Under this rule, as noted above, where the country of origin cannot be determined under paragraph (a), the country of origin of the good is the country or countries of origin of the single material that imparts the essential character to the good. For purposes of identifying the material that imparts the essential character to a good, section 102.18(b)(1) provides that the only materials that shall be taken into consideration are those domestic or foreign materials that are classified in a tariff provision from which a change in tariff classification is not allowed under the section 102.20 specific rule or other requirements applicable to the good. If only one material meets this criteria, then that material will represent the single material that imparts the essential character to the good.

Since the rubber boot bottom is the single material classified in a tariff provision from which a change in tariff classification is not allowed under the applicable 102.20 rule, this component imparts the essential character to the good. As it is a product of Canada, the country of origin of the assembled boot imported into Canada after undergoing assembly operations in the U.S. is Canada.

Reimportation to the U.S.

As in the first scenario, the operations in Canada consist only of simple packaging operations of the Canadian origin completed footwear, and return to the U.S. Therefore, when re-imported into the U.S., the footwear continues to be classifiable under subheadings 6402.91.20 or 6404.19.50, HTSUS. (See also 19 CFR 102.17. ) Therefore, we find that there is no tariff shift under the applicable rule, and we must again proceed to the next rule in the hierarchy, section 102.11(b), to determine the country of origin of the footwear re-imported into the U.S. Under the identical analysis used for the good imported into Canada, above, we find that the single material that imparts the essential character to the good is the rubber bottoms. Accordingly, since this component is of Canadian origin, the country of origin of the re-imported footwear is Canada.

Subheading 9801.00.10

Subheading 9801.00.10, HTSUS, provides for the free entry of products of the U.S. that have been exported and returned without having been advanced in value or improved in condition by any process or manufacture or other means while abroad, In this case, the returned footwear is of Canadian origin, and therefore is not entitled to the duty benefits under this provision.

HOLDING:

All Components of Canadian Origin

1) Boots assembled in the U.S. from Canadian origin components and exported to Canada for packaging operations are considered originating goods under General Note 12(b), HTSUS. Therefore, the boots are eligible for NAFTA Preference upon return from Canada.

2) Footwear components of Canadian origin imported into the U.S. for assembly into a completed boot do not undergo a tariff shift under the applicable rule in 19 CFR 102.20 as a result of the assembly operations. Under 19 CFR 102.11(b) the essential character of the footwear based on the criteria set forth in 19 CFR 102.18(b) is imparted by the rubber bottom of Canadian origin. Therefore, since the good does not undergo the applicable tariff change set forth in 19 CFR 102.20 as a result of simple packaging operations performed in Canada, the country of origin of the assembled footwear when returned to the U.S. is Canada.

Nylon Shaft of Chinese Origin

1) The Chinese origin nylon shaft does not undergo a tariff shift pursuant to General Note 12(b), HTSUS, as a result of the assembly operations performed in the U.S. Therefore, when the assembled good is returned to the U.S. after simple packaging operations in Canada, it will not be considered an originating good upon importation and will not be eligible for NAFTA Preference.

2) Footwear components consisting of a Chinese origin shaft, Canadian rubber bottom and felt liner separately imported into the U.S. for assembly into a completed boot do not undergo a tariff shift under the specific rule applicable to the good in 19 CFR 102.20. Under 19 CFR 102.11(b) the essential character of the footwear is imparted by the rubber bottom of Canadian origin, the single material that is classified under a tariff provision from which a change in tariff classification is not allowed under the applicable 102.20 rule. See 19 CFR 102.18(b)(1). Therefore, since the good does not undergo the applicable tariff change set forth in 19 CFR 102.20 as a result of simple packaging operations performed in Canada, the country of origin of the assembled footwear when returned to the U.S. is Canada.

3) Since the re-imported footwear is considered to be of Canadian origin, it will not be entitled to the duty benefits under subheading 9801.00.10, HTSUS, which provides for the free entry of products of the U.S. that have been exported and returned without having been advanced in value or improved in condition by any process or manufacture or other means while abroad.

The Federal Trade Commission ("FTC") has jurisdiction concerning the use of the phrase "Made in the U.S.A.", or similar words denoting U.S. origin. Therefore, please advise the importer that while Customs may determine under its rules in a given case that a particular good is of U.S. origin, any inquiries regarding the use of such phrases reflecting U.S. origin should be directed to the FTC, at the following address: Federal Trade Commission, Division of Enforcement, 6th & Pennsylvania Avenue, N.W., Washington, D.C. 20508.

Please provide a copy of this ruling to Mr. Rodney Ralston, Trans-Border Customs Services, Inc., One Trans-Border Drive, P.O. Box 800, Champlain, New York, 12919.

Sincerely,

John

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