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NY C80873




November 7, 1997

CLA-2-41:RR:NC:WA:353 C80873

CATEGORY: CLASSIFICATION

TARIFF NO.: 4107.90.3000

Mr. William A. Obenhoff
NYPAC LEATHER, LLC.
P.O. Box 3208
Gloversville, New York 12078

RE: The tariff classification and status under the North American Free Trade Agreement (NAFTA), of leather from Mexico; Article 509

Dear Mr. Obenhoff:

In your letter dated October 9, 1997, received in our office on October 16, 1997, you requested a ruling on the status of leather from Mexico under the NAFTA and inquire about the country of origin marking of the imported leather.

You request a ruling on the importation of leather from Mexico that will be produced from deerskin from the United States. The following is your stated production sequence for the imported leather.

1. Raw, salted, cured whitetailed deerskins (ODOCOILUES VIRGINIANUS) are obtained throughout the various states, within the United States, and sent to Mexico for tanning. We assume that the deerskins are all of U.S. origin.

2. At the tannery in Mexico, the hair is removed and the skins are tanned into what is known as crust or stain. A sample of this was submitted.

3. After tannage into crust, the resultant leather is shipped back to NTPAC in Gloversville, New York, for further processing into finished leather.

You request the tariff classification for the deerskins prior to exportation to Mexico and the tariff classification when imported back into the United States from Mexico. You also request clarification for the duty to be assessed and feel that assessment of any duty should be only levied against the amount of value added to the deerskin while in Mexico and that duty would not be applied to the value of the raw deerskins that were purchased in the United States and sent to Mexico.

The applicable tariff provision for the tanned leather from Mexico will be 4107.90.3000, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for "Leather of other animals, without hair on, other than leather of heading 4108 or 4109: Of other animals: Not fancy". The general rate of duty will be 4 percent ad valorem.

LAW AND ANALYSIS:

The imported leather, being wholly obtained or produced entirely in the territory of one of the NAFTA countries, will meet the requirements of HTSUSA General Note 12(b)(i), and will therefore be entitled to a one percent rate of duty under the NAFTA upon compliance with all applicable laws, regulations, and agreements. The issue of a "tariff shift" is not pertinent in this case because the leather is "wholly obtained or produced in the territory of one of the NAFTA countries".

In regards to your belief that duty be applied only to the value added to the deerskins in Mexico, please note the following:-

The provisions governing the dutiable status of U.S. products which are exported to a foreign country for processing and then returned to the United States are set forth in Chapter 98 of the Harmonized Tariff Schedule of the United States Annotated (HTSUS). U.S. Note 2(a), subchapter II, Chapter 98, HTSUSA, provides that, except as otherwise prescribed in this subchapter, products of the U.S. which are returned after having been advanced in value or improved in condition abroad by any process of manufacture or other means, shall be treated for the purposes of this Act as a foreign article, and, if subject to a duty which is wholly or partly ad valorem, shall be dutiable, except as otherwise prescribed in this part, on its full value determined in accordance with section 402 of the Tariff Act of 1930, as amended.

The U.S. raw deerskins, being advanced in value or improved in condition in Mexico into tanned leather are therefore treated as a foreign articles upon importation into the United States and dutiable at their full value.

Subheading 9802.00.80, HTSUS , which provides for a partial duty exemption for: [a]rticles assembled abroad in whole or in part of fabricated components, the product of the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape, or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process, such as cleaning, lubricating and painting does not apply to the imported leather at issue.

Marking

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or 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. Leather, except finished are among the articles listed by the Secretary of the Treasury under the authority provided in 19 U.S.C. 1304(a)(3)(J) and 19 CFR 134.33. This list, known as the "J-List", excepts from country of origin marking articles which were not required to be marked during the five year period prior to 1937.

However, under the statutory scheme such articles are not entirely excepted from marking; in almost all cases the country of origin of the imported article is required to be indicated to the ultimate purchaser on the container of the article. 19 U.S.C. 1304(b) provides that whenever an article is excepted [pursuant to the J-List], "the immediate container if any, of such article, or such other container or containers of such article as may be prescribed by the Secretary of the Treasury, shall be marked..." The marking regulations at 19 CFR 134.33 track this requirement by providing that if a J-Listed article is imported in a container, "the outermost container in which the article ordinarily reaches the ultimate purchaser is required to be marked in accordance with the requirements of Subpart C of this part." Subpart C sets forth the requirements for the marking of containers and articles repackaged after importation. Thus, the J-List reflects a recognition that some articles are themselves not susceptible of marking, but in no way diminishes the requirement of section 304 that the ultimate purchaser of an imported article be given an indication of its country of origin. The requirement is satisfied by marking the "immediate container" (in the words of the statute) in which the imported article reaches the ultimate purchaser, or (in the words of the regulation) "the outermost container" in which the article ordinarily reaches the ultimate purchaser. Section 134.1(d), Customs Regulations (19 CFR 134.1(d), provides that generally, the ultimate purchaser is the last person in the U.S. to receive the article in the form in which it was imported. The outer containers should be marked "Made in Mexico" in such a manner as to be clear, legible and permanent enough that this marking reaches the ultimate consumer.

Packing

You state that U.S. containers will also be sent to Mexico and serve as packaging for the imported leather. With respect to these containers, GRI 5(b) provides that, "[p]acking materials and packing containers presented with the goods therein shall be classified with the goods if they are of a kind normally used for the packing of such goods. However, this provision does not apply when such packing materials or packing containers are clearly suitable for repetitive use." Therefore, the value of a non-reusable container normally used for packing is dutiable at the rate of its contents. However, upon submission of satisfactory proof that a container is of U.S. origin and that it is returned without having been advanced in value or improved in condition abroad, it is entitled to duty-free treatment under subheading 9801.00.10, HTSUSA, provided the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1), are met.

This ruling is being issued under the provisions of Part 181 of the Customs Regulations (19 C.F.R. 181).

This ruling letter is binding only as to the party to whom it is issued and may be relied on only by that party.

A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Martin Weiss at 212-466-5881.

Sincerely,

Robert B. Swierupski
Director,

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