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HQ 959503

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November 22, 1996

CLA-2 RR:TC:TE 959503 ASM

CATEGORY: CLASSIFICATION

Mr. Nick Nestor
Corporate Traffic Manager
Brooklyn Bow & Ribbon Co., Inc.
2010 Seabird Way
P.O. Box 10085
Riviera Beach, FL 33404

RE: Country of origin determinations for nylon and polyester bows;
Section 102.21(c)(2); Section 12.130(c)(1); tariff shift; NAFTA not applicable; Article 509

Dear Mr. Nestor:

This is in reference to your letters of July 16, 1996, requesting country of origin determinations on nylon and polyester bows.

FACTS:

With respect to the country of origin of the subject bows, you have submitted six letters to this office detailing six different import/export and processing scenarios as follows:

Case #1

Spooled nylon and polyester ribbon from the United States, ranging from 1/8 " to 2" in width, is sent to a Foreign Trade Zone (FTZ) or to a Caribbean Basin Initiative (CBI) beneficiary country (i.e., Jamaica, Haiti). Once exported, the spooled ribbon is cut and shaped to form a bow which is secured by tying the bow to itself. The bows are then imported back into the U.S.

Case #2

Spooled nylon and polyester ribbon from the U.S., ranging from 1/8 " to 2" in width, is sent to a FTZ or to a CBI beneficiary country (i.e., Jamaica or Haiti). Once exported, the spooled ribbon is cut and shaped to form a bow which is secured by sewing the ribbon. The bows are then imported back into the

Case #3

Spooled ribbon from Taiwan or Ireland is imported into the U.S. The ribbon is made of nylon and polyester and comes in sizes ranging from 1/8" to 2" in width. Each spool contains ribbon which ranges from 100 to 1,000 yards in length. The ribbon is then exported to a FTZ or CBI beneficiary country (i.e., Jamaica or Haiti), where it is cut, shaped, and secured into a bow by sewing the ribbon to itself.

Case #4

Spooled ribbon from Taiwan or Ireland is imported into the U.S. The ribbon is made of nylon and polyester and comes in sizes ranging from 1/8" to 2" in width. Each spool contains ribbon which ranges from 100 to 1,000 yards in length. The ribbon is then exported to Mexico under your maquila dora program where it is cut, shaped, and either sewn, hot fused, or tied to itself, to hold the bow shape. The bows are then imported back into the U.S.

Case #5

Spooled ribbon from Taiwan or Ireland is imported into the U.S. The ribbon is made of nylon and polyester and comes in sizes ranging from 1/8" to 2" in width. Each spool contains ribbon which ranges from 100 to 1,000 yards in length. These spools are then put on to machines in the U.S. where the ribbon is cut, shaped, and sewn to form a bow.

Case #6

Spooled ribbon from Taiwan or Ireland is imported into the U.S. The ribbon is made of nylon and polyester and comes in sizes ranging from 1/8" to 2" in width. Each spool contains ribbon which ranges from 100 to 1,000 yards in length. In the U.S., the spools are put on domestic machines that cut the ribbons into a pre-determined length and tie it to itself to form a bow.

ISSUE:

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

2. What is the country of origin of the subject merchandise in the case scenarios which have been set forth above?

2. Whether the subject merchandise in Case #4, as set forth above, is eligible for duty free treatment under the North American Free Trade Agreement (NAFTA)?  - 3 -

LAW AND ANALYSIS:

Tariff Classification

Classification of merchandise under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA) 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 GRIs will be applied, in the order of their appearance.

In order to determine the country of origin, we must first identify the proper tariff classification of the goods under the HTSUSA. According to the information provided, the ribbons range in size from 1/8" to 2" in width, consist of nylon and polyester woven fabric, and are imported on spools that range in length from 100 yards to 1000 yards. In addition, the ribbons are constructed with a woven selvedge. Thus, the ribbon is properly classified under subheading 5806.32.1090, HTSUSA, which provides for narrow woven fabrics, of man-made fibers. It is our understanding that the finished bows would have a variety of uses; therefore, they would be classified under subheading 6307.90.9989, HTSUSA, which provides for other made-up articles.

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 apply to goods entered, or withdrawn from warehouse for consumption on or after July 1, 1996. Thus, effective July 1, 1996, the country of origin of a textile or apparel product shall be determined by sequential application of the general rules set forth in paragraphs (c)(1) through (5) of Section 102.21.

Paragraph (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, in all cases presented, is not wholly obtained or produced in a single country, territory or insular possession, paragraph (c)(1) of Section 102.21 is inapplicable.

Paragraph (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."

Case #1

In this case, it is stated that the U.S. ribbon will be sent for processing to either a FTZ or a CBI beneficiary country. A FTZ is a secured area within a nation but legally outside a nation's Customs territory. Thus, where the ribbon is exported to a FTZ or a CBI beneficiary country for processing, the subject merchandise is not wholly obtained or produced in a single country, territory, or insular possession, and Section 102.20(c)(1) is inapplicable. In such a case, Section 102.21(c)(2) provides for instances where the country of origin of a textile or apparel product cannot be determined under section 102.21(c)(1).

As previously stated, the ribbon of U.S. origin is exported and receives additional processing into a bow in a FTZ or a CBI beneficiary country. Upon importation back into the U.S., the final product, a bow, would be classified as "other made-up articles" under subheading 6307.90.9989, HTSUSA. As such, Section 102.21(e) provides, in pertinent part:

6307.90 The country of origin of a good classifiable under subheading 6307.90 is the country, territory, or insular possession in which the fabric comprising the good was formed by a fabric-making process.

In this case, the fabric comprising these bows has been formed in the U.S., and applying section 102.21(e) the country of origin would be the United States. However, there is an exception for U.S. articles exported for processing and returned which is contained at 19 CFR 12.130(c)(1). Specifically, Section 12.130(c)(1) states that "Chapter 98, Subchapter II, Note 2, Harmonized Tariff Schedule of the United States, provides that any product of the U.S. which is returned after having been advanced in value or improved in condition abroad, or assembled abroad, shall be a foreign article for the purposes of the Tariff Act of 1930, as amended." [Emphasis supplied]. Thus, the country of origin for this product would not be the U.S. but the CBI beneficiary country (i.e., Jamaica, or Haiti) where it has been advanced in value or improved in condition.

With respect to the country of origin of the spooled U.S. ribbon that was exported to a FTZ, you have stated that the FTZ would most likely be in the Caribbean, specifically, Montego Bay, Jamaica. In Customs Service Decision (C.S.D.) 81-44, dated August 4, 1980, we determined that "Manufacturing in a foreign-trade zone in the United States is manufacturing in the United States for purposes of the drawback law." Thus, by analogy to C.S.D. 81-44, we have determined that for the purposes of country of origin, where the product has been advanced in value and improved in condition in a FTZ, the country where the FTZ is located shall be identified as the country where this processing occurred. In the present case, where U.S. articles have been exported for processing to a FTZ in a foreign country and returned to the U.S., the exception contained at Section 12.130(c)(1) would apply and the country of origin would be the country where the FTZ is located (Jamaica).

Case #2

The facts of this case are almost identical to "Case #1" except that the additional processing of the U.S. ribbon while in the FTZ or CBI beneficiary country results in a bow which has been secured by sewing rather than tying the bow to itself. In this instance, however, the analysis is the same and the country of origin for the final product would be the CBI beneficiary country (i.e., Jamaica, Haiti) where the U.S. ribbon has been advanced in value or improved in condition. Where the spooled ribbon of U.S. origin has been exported to a FTZ located in a foreign country, the country of origin would be the country where the FTZ is located, in this case, Jamaica.

Case #3

In this case, foreign ribbon produced in Taiwan or Ireland is imported into the U.S. and then exported to a FTZ or CBI beneficiary country for additional processing into a bow. 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) requires that we determine whether or not the good has undergone a tariff shift pursuant to paragraph (e) of this section.

The tariff classification for the bow after receiving additional processing in the FTZ or CBI beneficiary country would be under subheading 6307.90.9989, HTSUSA. Accordingly, 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:"

6307.90 The country of origin of a good classifiable under subheading 6307.90 is the country, territory, or insular possession in which the fabric comprising the good was formed by a fabric-making process.

In this case, the fabric comprising these bows has been formed in either Taiwan or Ireland. Therefore, the country of origin would be the country where the fabric-making process occurred, i.e., Taiwan or Ireland.

Case #5

Foreign ribbon produced in Taiwan or Ireland is imported into the United States where it undergoes additional processing to produce a bow. 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."

The tariff classification for the bow after receiving additional processing in the U.S. would be under subheading 6307.90.9989, HTSUSA. Accordingly, 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:"

6307.90 The country of origin of a good classifiable under subheading 6307.90 is the country, territory, or insular possession in which the fabric comprising the good was formed by a fabric-making process.

In this case, the fabric comprising these bows has been formed in either Taiwan or Ireland. Therefore, the country of origin would be the country where the fabric-making process occurred, i.e., Taiwan or Ireland.

Case #6

The facts of this case are almost identical to "Case #5" except that the ribbon of foreign manufacture receives additional processing in the U.S. which results in a bow which has been secured by tying the bow to itself rather than by sewing. In this instance, however, the analysis is the same and the country of origin for the final product would be the country where the fabric-making process occurred; either Taiwan or Ireland.

NAFTA Eligibility

Case #4

The subject ribbon undergoes processing operations in Mexico, which is a country 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 supplied]
Accordingly, the bow 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 bows are not wholly obtained or produced in a NAFTA country, General Note 12(b)(ii)(A) requires that we determine whether or not the goods have been transformed in Mexico by undergoing a change in tariff classification. These rules are set forth in General Note 12(t), which provide in pertinent part:

Chapter 63

Chapter rule 1: 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 that good.

4. A change to headings 6304 through 6310 from any other chapter, except from headings 5106 through 5113, 5204 through 5212, 5307 through 5308 or 5310 through 5311, chapters 54 through 55, or headings 5801 through 5802 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. - 8 -

At the time of importation into Mexico, the ribbon is classified under subheading 5806.32.1090, HTSUSA. In Mexico, the ribbon is cut, shaped, and either sewn, hot fused, or tied to itself to form the bow. Upon importation into the United States, the finished bows would be classified under subheading 6307.90.9989, HTSUSA, thereby undergoing the requisite change in tariff classification. However, General Note 12(t) for heading 6307 also requires that the goods be both cut and sewn or otherwise "assembled" in the territory of one or more of the NAFTA parties.

Under the NAFTA, the term "assembly" has generally been interpreted as the joining of components. In Headquarters Ruling Letter (HQ) 959395, dated August 6, 1996, it was noted that NAFTA eligibility should be denied when the only manufacturing process performed in the NAFTA country was hemming. The hemming process usually involves folding the fabric over and sewing the fabric to itself, rather than the joining of components. Similarly, in the subject case the manufacturing process in Mexico involves a single length of ribbon which has been sewn, heat fused, or tied to itself to form a bow, rather than the joining of separate components. Accordingly, the processing which the ribbon undergoes in Mexico does not conform to the definition of "assembly" and the merchandise would not be eligible for the NAFTA preference in this case.

With respect to the country of origin of the finished bows, 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) requires that we determine whether or not the good underwent an applicable change in tariff classification in accordance with paragraph (e) of this section.

The tariff classification for the bow after receiving additional processing in Mexico would be under subheading 6307.90.9989, HTSUSA. Accordingly, 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:"

6307.90 The country of origin of a good classifiable under subheading 6307.90 is the country, territory, or insular possession in which the fabric comprising the good was formed by a fabric-making process.

In this case, the fabric comprising these bows has been formed in either Taiwan or Ireland. Therefore, the country of origin would be the country where the fabric-making process occurred, i.e., Taiwan or Ireland.

HOLDING:

The spooled nylon/polyester ribbon is properly classified under subheading 5806.32.1090, HTSUSA, which provides for "Narrow woven fabrics, other than goods of heading 5807; narrow fabrics consisting of warp without weft assembled by means of an adhesive (bolducs): Other woven fabrics: Of man-made fibers: Ribbons: Other." The general column one rate of duty is 8.4 percent ad valorem. The quota category is 229. - 9 -

The finished bows would be classifiable under subheading 6307.90.9989, HTSUSA, which provides for "Other made up articles, including dress patterns: Other: Other: Other: Other: Other." The applicable duty under the general column one rate is 7 percent ad valorem.

The country of origin of the subject bows in Cases #1 and #2, is the CBI beneficiary country (i.e., Jamaica, or Haiti), and should be marked accordingly to reflect that origin. However, where the goods have received additional processing in a FTZ located in a foreign country, the country of origin shall be the country where the FTZ is located (Jamaica).

The country of origin of the subject bows in Cases #3, #4, #5, and #6, is either Taiwan or Ireland, depending upon where the foreign fabric for the spooled ribbon originates.

In Case #4, the subject merchandise is not eligible for the NAFTA preference.

The holding set forth above applies only to the specific factual situations, merchandise identified in the ruling request, and the issues which have been set forth in this ruling. This position is clearly set forth in section 19 CFR 177.9(b)(1). This section states that a 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

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See also:

• Tariff No.: 5806.32.10 - Woven ribbons of man-made fibers, not pile, not cont by wt 5% or more of elastomeric yarn or rubber
• Tariff No.: 6307.90.99 - National flags and other made-up articles of textile materials, nesoi