United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 1997 HQ Rulings > HQ 959805 - HQ 959939 > HQ 959863

Previous Ruling Next Ruling
HQ 959863





October 31, 1996
CLA-2 RR:TC:TE 959863 jb

CATEGORY: CLASSIFICATION

Sara Gradilla
R.L. Jones
P.O. Box 488
San Luis, Arizona 85349

RE: Country of origin determination for a cloth covered hanger; Section 102.21(c)(2); De Minimis; General Note 12(f)(vi); Section 102.13; NAFTA not applicable

Dear Ms. Gradilla:

This is in reply to your letter dated October 7, 1996, on behalf of your client, M.G.T. Industries, Inc., requesting a country of origin determination for a cloth covered hanger which will be imported into the United States.

FACTS:

The subject merchandise consists of a cloth covered hanger consisting of a wooden hanger with foam padding covered by 100 percent woven polyester fabric and featuring a ribbon and two buttons.

KOREA

- fabric for cover is formed.

CHINA

- ribbon is sourced.

UNITED STATES

- wooden hanger, foam padding and buttons are sourced; - fabric is cut.

MEXICO

- assembly into completed hanger.

You note in your letter that the fabric and ribbon weigh less than seven percent of the total weight of the good.

ISSUE:

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

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

LAW AND ANALYSIS:

NAFTA Eligibility

The subject cloth covered hanger undergoes processing operations in the United States and 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:

(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 cloth covered hanger at issue will be eligible for the "Special" "MX" rate of duty provided it is a NAFTA "originating" good under General Note 12(b), Harmonized Tariff Schedule of the Unites States Annotated (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

General Note 12(f), HTSUSA, sets out the terms of De Minimis for NAFTA. As the subject merchandise is classified in subheading 6307.90, HTSUSA, General Note 12(f)(vi) provides:

A good provided for in chapters 50 through 63, inclusive, of this schedule that does not originate because certain fibers or yarns used in the production of the component of the good that determines the tariff classification of the good do not undergo an applicable change in tariff classification, provided for in subdivisions (r), (s) and (t) of this note, shall nonetheless be considered to originate if the total weight of all such fibers or yarns in that component is not more than 7 percent of the total weight of that component.

Although you note in your letter that the fabric and the ribbon constitute less than seven percent of the total weight of the good, this is a misunderstanding of the De Minimis rule as it applies to NAFTA. The subject merchandise is a cloth covered hanger and as such, it is classifiable in a textile provision (subheading 6307.90, HTSUS) by virtue of the textile component, that is, the fabric from Korea. The De Minimis rule stipulates that although seven percent of the component that determines the classification of the good can be disregarded, the component in its entirety, cannot be disregarded. Thus, in the case at hand, although the non-originating component (Korean fabric) weighs less than seven percent of the total weight of the good, it cannot be disregarded because it is the component which determines the tariff classification of the subject good. The ribbon on the other hand, may be disregarded as it does not determine the classification.

Accordingly, the subject cloth covered hanger 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 Mexico so that the non-originating material (the fabric formed in Korea) undergoes a change in tariff classification as described in subdivision (t).

As the cloth covered hanger is classifiable in subheading 6307.90.9989, HTSUSA, subdivision (t), Chapter 63, rule 4, applies. That note states:

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.

When the fabric for the subject hanger leaves Korea it is classifiable as a woven man-made fiber fabric in either chapter 54 or 55, HTSUS. As chapters 54 and 55, HTSUS, are excepted by subdivision (t), chapter 63, rule 4, the fabric does not meet the terms of the note. Accordingly, the subject merchandise is not eligible for NAFTA treatment.

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 will 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 cloth covered hanger is classified in heading 6307, HTSUS, a textile article identified by ?102.21(b)(5), the ?102.21 rules take precedence over any other 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, territory, or insular possession, 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":

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.

General Rule (c) of Part 102.21 states that "Subject to paragraph (d) of this section, the country of origin of a textile or apparel product shall be determined by sequential application of paragraphs (c)(1) through (c)(5) of this section and, in each case where appropriate to the specific context, by application of the additional requirements or conditions of ??102.12 through 102.19 of this part." Section 102.13, which sets out the De Minimis rule states, in relevant part:

(c) Foreign components or materials that do not undergo the applicable change in tariff classification set out in product covered by that section shall be disregarded in determining the country of origin of the good if the total weight of those components or materials is not more than 7 percent of the total weight of the good.

The subject cloth covered hanger is classified in subheading 6307.90, HTSUS. There are two "foreign components" that comprise this merchandise, that is, the fabric from Korea and the ribbon from China. As stated previously, although you state that the weight of the foreign components is less than seven percent of the total weight of the cloth covered hanger, this does not take into consideration the fact that the classification of this merchandise is based on its textile component, that is the Korean fabric. The Korean fabric is not merely "incorporated" into the cloth covered hanger but is the essence of its classification. As such, although the ribbon from China may be disregarded, the fabric from Korea cannot be disregarded as it imparts the classification to the merchandise. Additionally, the fabric from Kora satisfies the terms set out by the tariff shift. Accordingly, as the fabric comprising the hanger was formed by a fabric making process in a single country, Korea, the country of origin is Korea.

HOLDING:

The country of origin of the subject cloth covered hanger is Korea.

The cloth covered hanger is not eligible for the NAFTA preference.

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

Previous Ruling Next Ruling

See also: