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HQ 959746




October 11, 1996
CLA-2 RR:TC:TE 959746 jb

CATEGORY: CLASSIFICATION

William J. LeClair
Trans-Border Customs Services, Inc.
P.O. Box 800
Champlain, NY 12919

RE: Country of origin determination for sewing thread; Section 102.21(c)(4); most important manufacturing process; NAFTA not applicable

Dear Mr. LeClair:

This is in reply to your letter dated September 6, 1996, on behalf of your client, Cansew, Inc., requesting a country of origin and NAFTA eligibility determination for sewing thread which will be imported into the United States.

FACTS:

The subject merchandise consists of sewing thread made of either 100 percent cotton or synthetic staple fibers. The manufacturing operations are as follows:

EGYPT or other countries (not including a NAFTA party or Israel):

- cotton yarn or synthetic staple fiber yarn is formed (by spinning and twisting).

CANADA

- yarn is inspected and wound on dye tubes for bleaching and/or dyeing;
- hydro extraction;
- drying process.
- lab verification;
- dressed;
- rewinding;
- labeling.

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:

The subject sewing thread undergoes processing operations in Canada 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:

(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]

Accordingly, the sewing thread at issue will be eligible for the "Special" "CA" 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. 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

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 so that the non-originating material (the yarn formed in Egypt or other countries) undergoes a change in tariff classification as described in subdivision (t).

The sewing thread made of cotton is classifiable in heading 5204, Harmonized Tariff Schedule of the United States (HTSUS). For sewing thread made of cotton, subdivision (t), Chapter 52, rule 1, states that:

A change to headings 5201 through 5207 from any other chapter, except from headings 5401 through 5405 or 5501 through 5507.

The sewing thread made of synthetic staple fibers is classified in subheading 5508.10, HTSUS. For the sewing thread made of synthetic staple fibers, subdivision (t), Chapter 55, rule 1, states:

A change to headings 5501 through 5511 from any other chapter, except from headings 5201 through 5203 or 5401 through 5405.

When the yarn for the subject sewing thread leaves Egypt (or other countries), it is classifiable as either cotton yarn of subheading 5205.44, HTSUS, or yarn of synthetic staple fibers of subheading 5509.22, HTSUS. As yarns of heading 5205 and heading 5509 are excepted by subdivision (t) for both headings 5204 and 5508, HTSUS, the non-originating material from Egypt (or other country) 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, 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. 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 headings 5204, HTSUS, and 5508, 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". 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":

5204-5207 A change to heading 5204 through 5207 from any heading outside that group, provided that the change is the result of a spinning process.

5508-5511 A change to heading 5508 through 5511 from any heading outside that group, provided that the change is the result of a spinning process.

Section 102.21(e) states that for articles of heading 5204, HTSUS, yarns of heading 5205, HTSUS, are excepted by Section 102.21(c)(2). Similarly, for articles of heading 5508, HTSUS, yarns of heading 5509, HTSUS are excepted. Accordingly, as the yarn for the subject cotton and synthetic staple fiber sewing thread does not undergo the requisite change in tariff classification, Section 102.21(c)(2) is inapplicable.

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.

As the subject merchandise is not knit to shape and the sewing thread does not undergo an assembly process, Section 102.21(c)(3) is not applicable.

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". In the case of the subject sewing thread, the most important manufacturing process occurs at the time of the spinning of the yarn. Consequently, the country of origin of the subject sewing thread is Egypt (or other countries).

HOLDING:

The subject merchandise is not eligible for the NAFTA preference.

The country of origin of the subject sewing thread is Egypt (or other countries).

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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