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HQ 959565




October 11, 1996
CLA-2 RR:TC:TE 959565 jb

CATEGORY: CLASSIFICATION

Daniel K. Astin, Esq.
Donohue and Donohue
232 South Fourth Street
Philadelphia, PA. 19106

RE: Country of origin determination for rope; Section 102.21(c)(1); wholly obtained or produced; Section 102.21(c)(4); most important manufacturing process; NAFTA

Dear Mr. Astin:

This is in reply to your letter dated July 18, 1996, supplemented by additional information on August 28 and September 10, 1996, on behalf of your client, American Manufacturing Co. Inc., requesting a country of origin determination for rope which will be imported into the United States.

FACTS:

The subject merchandise consists of a variety of ropes made of either a blend of spun poly-cotton yarn (100 percent cotton fibers spun with 100 percent synthetic staple fibers into a single yarn) and synthetic filament yarn or 100 percent filament yarn, virtually all of which are braided. The rope has a variety of industrial, marine or household uses; the end use will dictate both the component materials used in the finished product and the method of manufacture. Rope made from the poly-cotton and synthetic blend and rope made from wholly synthetic yarn is manufactured in Mexico. Rope made of wholly synthetic yarn in manufactured in Canada. You state that for the purposes of this request, poly-cotton will not be utilized in the Canadian operations but may be utilized in the Mexican plant. The input raw materials, that is, the poly-cotton and synthetic blend yarns or the wholly synthetic yarns will come from either the United States, Canada, Country X, Country Y, Country Z or Mexico. Any reference to Country X, Y and Z does not include Israel.

The manufacturing operations for the subject merchandise are as follows:

Scenario I- Wholly synthetic rope

CANADA
a) wholly synthetic yarn (either polyester, monofilament polypropylene, or filament nylon) is formed as a result of an extrusion process; b) this raw material is placed in tubes known as a "single end package"; c) yarns from a number of packages are grouped together to form a larger strand and then transferred to a bobbin; d) at this point one or several operations could occur:

1. no modification of the yarn, that is, the yarn is fed into a braiding machine; 2. yarns are twisted and braided;
3. yarns are twisted, a polyurethane coating is applied, and braiding occurs;
4. strands could be added to others to form larger strands then braided;
5. strands could be added to others to form larger strands, twisted again and then braided.
e) further processing to meet an identified industrial use, for example, rope for recreational marine use is spliced to form eyes to facilitate the tying up of the vessel at dockside; ropes for industrial and utility industry may feature a urethane coating to improve abrasion resistance.

You state that there are a variety of braiding machines that will produce different numbers of strands or strand patterns and that individual braiding machines can be configured to produce a variety of pick lengths. The pick length will affect the strength, abrasion resistance and elasticity of the end product.

Scenario II- Wholly synthetic rope

UNITED STATES

- wholly synthetic yarn ( either polyester, monofilament polypropylene, or filament nylon) is formed as a result of an extrusion process;
- this raw material is placed in tubes and is either sent to Canada or Mexico for manufacture.

CANADA or MEXICO

- same operations as Scenario (c)-(e).

Scenario III- Wholly synthetic rope

UNITED STATES AND COUNTRY X or COUNTRY Y

- multi-filament high modulus polyethylene filament is extruded in Country X or Country Y;
- multi-filament polypropylene, filament polyester or filament nylon is extruded in the United States; - this raw material is placed on tubes and is either sent to Canada or Mexico for manufacture.

CANADA or MEXICO

- same operations as Scenario I (c)-(e).

Scenario IV- Wholly synthetic rope

COUNTRY X or COUNTRY Y

- multi-filament high modulus polyethylene is extruded; - this raw material is placed on tubes and is either sent to Canada or Mexico for manufacture.

CANADA or MEXICO

- same operations as Scenario I (c)-(e).

Scenario V- Blend of spun poly-cotton and synthetic filament yarn rope

* You state that the total weight, each, of the poly-cotton component and the synthetic yarn component, for the poly-cotton synthetic blend, is not less than seven percent of the total weight of the rope.
a. UNITED STATES and MEXICO

- poly-cotton fibers are spun into yarn in the United States and synthetic filament yarns are extruded in Mexico.

MEXICO

- same operations as Scenario I(c)-(e).
b. UNITED STATES and COUNTRY Z

- poly-cotton fibers are spun into yarn in the United States and synthetic filament yarns are extruded in Country Z.

MEXICO

- same operations as Scenario I(c)-(e).

ISSUE:

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

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

LAW AND ANALYSIS:

NAFTA Eligibility

The subject rope undergoes processing operations in Canada or 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:

(i) Goods that originate in the territory of a NAFTA party under the terms of subdivision (b) of this note and that qualify to be marked as goods of Canada 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 "CA" in parentheses, are eligible for such duty rate... . [Emphasis added]

(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 rope at issue will be eligible for the "Special" "CA" or "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 Canada or 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

In scenario I, when the subject rope is constructed in Canada of materials wholly obtained or produced in the territory of Canada; in scenario II, when the rope is constructed in Canada or Mexico of materials wholly obtained or produced in the United States; and in scenario V(a), when the rope is constructed in Mexico of materials wholly obtained or produced in the territory of the United States and Mexico, the rope meets the criteria set out in General Note 12(b)(i). Accordingly, the rope qualifies as a good originating in the territory of a NAFTA party. Assuming that the rope qualifies to be marked as a good of Canada (or Mexico), it is entitled to the special "CA" (or "MX") duty rate, provided that a Certificate of Origin is completed and submitted in accordance with 19 CFR 181.11.

In scenarios III, IV and V(b), the subject merchandise qualifies for NAFTA treatment only if the provisions of General Note 12(b)(ii)(A) are met, that is, if the merchandise is transformed in the territory of Canada or Mexico so that the non-originating material (the yarn formed in Country X, Country Y, or Country Z) undergoes a change in tariff classification as described in subdivision (t).

For the rope, subdivision (t), Chapter 56, states that:

A change to headings 5601 through 5609 from any other chapter, except from headings 5106 through 5113, 5204 through 5212, 5307 through 5308 or 5310 through 5311, or chapters 54 through 55.

In scenarios III, IV and V(b), when the yarn for the subject rope leaves Country X, Country Y and Country Z, it is classifiable as goods of heading 5401 through 5406, HTSUS (synthetic filament yarns). As headings of Chapter 54 are excepted by subdivision (t), Chapter 56, rule cited above, the non-originating material from Country X, Country Y and Country Z does not undergo the requisite change in tariff classification. Accordingly, the merchandise is not eligible for the NAFTA preference.

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, codified at 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. 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 merchandise is classified in various subheadings of 5607, HTSUS, textile articles 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". In scenario I, as the subject rope is wholly obtained or produced in a single country, Canada, the country of origin is Canada.

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":

5607 If the good is of continuous filaments, including strips, a change of those filaments, including strips, to heading 5607 from any other heading, except from heading 5001 through 5007, 5401 through 5406, and 5501 through 5511, and provided that the change is the result of an extrusion process; or

If the good is of staple fibers, a change of those fibers to heading 5607 from any other heading, except from heading 5106 through 5110, 5204 through 5207, 5306 through 5308, and 5508 through 5511, and provided that the change is the result of a spinning process.

In the remaining scenarios, the wholly synthetic rope does not meet the terms of the tariff shift because headings 5401 through 5406 are excepted by the terms of section 102.21(e). Additionally, the poly-cotton synthetic rope, consisting of a blend of continuous filaments and staple fibers, is not covered by the terms of the tariff shift.

Section 102.21(c)(3) states that, "Where the country of origin of a textile or apparel product cannot be determined under paragraph (c)(1) or (2) of this section":

(i) If the good was knit to shape, the country of origin of the good is the single country, territory, or insular possession in which the good was knit; or

(ii) Except for goods of heading 5609, 5807, 5811, 6213, 6214, 6301 through 6306, and 6308, and subheadings 6209.20.5040, 6307.10, 6307.90, and 9404.90, if the good was not knit to shape and the good was wholly assembled in a single country, territory, or insular possession, the country of origin of the good is the country, territory, or insular possession in which the good was wholly assembled.

Section 102.21(b)(6) defines "wholly assembled" as:

The term "wholly assembled" when used with reference to a good means that all components, of which there must be at least two, preexisted in essentially the same condition as found in the finished good and were combined to form the finished good in a single country, territory, or insular possession. Minor attachments and minor embellishments (for example, appliques, beads, spangles, embroidery, buttons) not appreciably affecting the identity of the good, and minor subassemblies (for example, collars, cuffs, plackets, pockets) will not affect the status of a good as "wholly assembled" in a single country, territory, or insular possession.

As the subject rope is not knit to shape, provision (i) of Section 102.21(c)(3) is not applicable. Additionally, as the processes of twisting and/or braiding are considered manufacturing processes and not "assembly" operations, as per the terms of section 102.21, provision (ii) is also not applicable. Accordingly, the subject merchandise does not satisfy paragraph

Section 102.21(c)(4) states that, "Where the country of origin of a textile or apparel product cannot be determined under paragraph (c) (1), (2) or (3) of this section, the country of origin of the good is the single country, territory, or insular possession in which the most important assembly or manufacturing process occurred".

The Section 334 rules of origin for textile and apparel products state, in pertinent part, that a textile or apparel product originates in a country and is the growth, product, or manufacture of that country if:

(B) the product is a yarn, thread, twine, cordage, rope, cable, or braiding and-

(i) the constituent staple fibers are spun in that country, territory or insular possession, or

(ii) the continuous filament is extruded in that country, territory or insular possession,

As the subject merchandise is comprised of ropes, the section 334 rules make very clear what is considered "important processing" in regard to that commodity. Accordingly, we are directed to section 102.21(c)(4) and in this case, to the "most important manufacturing process". The country of origin will thus be conferred in the country in which the extrusion or spinning process occurs. In scenario II, as the synthetic yarn results from an extrusion process which occurs in the United States, 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 rope in scenario II, is Canada or Mexico, for quota, marking and duty purposes.

In scenario IV the synthetic yarn results from an extrusion process which occurs in either Country X or Country Y. As the extrusion process occurs in only one country, Country X or Country Y, country of origin is conferred in either Country X or Country Y.

In scenario III the synthetic yarn results from an extrusion process which occurs in the United States and Country X or Country Y. Similarly, in scenario V there is both a spinning process and an extrusion process occurring in the United States and Mexico or the United States and Country Z, respectively. In both scenarios III and V, the important operations of "spinning" and/or "extruding" occur in two separate countries. As such, (c)(4) cannot be used to make a determination as to the country of origin.

Section 102.21(c)(5) states that, "Where the country of origin of a textile or apparel product cannot be determined under paragraph (c)(1), (2), (3) or (4) of this section, the country of origin of the good is the last country in which an important assembly or manufacturing process occurred". Accordingly in the case of scenario III, where an extrusion process occurs in the United States and Country X or Country Y, and in scenario V, where there is both a spinning process and an extrusion process occurring in the United States and Mexico or the United States and Country Z, respectively, the country of origin is the last country in which an important manufacturing process occurs. In scenario III country of origin is conferred in Canada or Mexico, and in scenario V country of origin is conferred in Mexico.

HOLDING:

The country of origin of the subject rope in scenario I is Canada.

The country of origin of the subject rope in scenarios II and III is Canada or Mexico.
The country of origin of the subject rope in scenario IV is Country X or Country Y.

The country of origin of the subject rope in scenario V is Mexico.

The subject rope is eligible for the NAFTA preference in scenarios I, II and V(a).

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

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