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NY F82213




July 31, 2000

CLA-2-61:RR:NC:TA: 359 F82213

CATEGORY: CLASSIFICATION

TARIFF NO.: 6110.10.2030

Mr. John N. Politis
Politis & Politis
Attorneys at Law
865 South Figueroa St., Suite 2308
Los Angeles, California 90017

RE: The tariff classification and status under the North American Free Trade Agreement (NAFTA), of a woman’s knitted cardigan sweater from Mexico; Article 509; Country of Origin Determination CFR 102.21(c) (4), and CR 12.130; Eligibility for 9802 HTS

Dear Mr. Politis:

In your letter dated January 17, 2000, submitted on behalf of your client, St. John Knits, and in subsequent telephone conversations, you requested a ruling on the tariff classification, the status under the North American Free Trade Agreement (the NAFTA), the country of origin for marking purposes, and the eligibility under heading 9802, Harmonized Tariff Schedule of the United States (HTS), of a woman’s knitted cardigan sweater.

Please note: this ruling letter responds to your inquiry on these issues by following the existing rules and policy interpretations. However, some of these are scheduled to be changed, effective October 10, 2000. Specifically, we invite your attention to a notice in the Federal Register, dated July 11, 2000; Volume 65, Number 133, Pages 42634-42637.

You submitted a sample of the cardigan sweater along with the fabric panels from which it is constructed. These panels represent the cardigan sweater’s condition in two stages of its production process, specifically, (1) at the time the panels are sent from the United States to Mexico, and (2) when they are returned from Mexico to the United States, according to the hangtags which were displayed on those panels. You also submitted a sample card swatch which shows the “sequins (as they are) exported to Mexico”.

The sample, Style 64442, is a woman’s knitted cardigan sweater with long sleeves, a full-front zippered opening and a V-shaped neckline. The cardigan sweater features two patch pockets below the waist at the front and several one inch wide fabric strips that are decorated with sequins and that are found on each side of the front opening along the placket, at the top of each front pocket and at the end of each sleeve. The garment also features inside shoulder pads. The knitted fabric of the cardigan sweater has less than nine stitches per two centimeters, measured in the direction in which the stitches were formed. The fiber content is 78% wool, 22% rayon.

The submitted component panels for this style consist of the following which are divided into two groups:

Group A, which consists of the panels as they exist prior to the addition of the fabric strips with the sequins; two sleeve panels one body panel which you call “knit bodice”, and which consists of the three body panels sewn together (that is, the rear panel and the two front panels), in addition to the placket and the two front pockets which are sewn onto the front panels. You state on the hangtag for these panels that they represent the garment panels “as sent from the U.S. to Mexico.”

Group B, which consists of the panels as they exist after the addition of the fabric strips with the sequins; two sleeve panels one body panel (the “knit bodice”), which consists of the three body panels sewn together, along with the placket and the two front pockets which are sewn onto the front panels. You state on the hangtag for these panels that they represent the garment parts “as sent from Mexico to the U.S.”

Although you had stated in your letter of inquiry that the component panels were knit to shape, the appropriate National Import Specialist (NIS) requested that you verify that statement with your client. In a subsequent telephone conversation with the NIS you reported that the panels were knitted into a blanket and then were cut to shape. Therefore, for purposes of this ruling the component panels are not considered knit to shape.

In summary, the production process can be described as follows:

Scenario I:
In the United States
wool fibers from New Zealand and rayon fibers from Germany or Japan are spun into the yarn the yarn is dyed and then it is knitted into large “blankets” the “blankets” are cut into panel shapes for use in the garment as garment parts the three panels which constitute the “knit bodice” are assembled paillettes from Switzerland are imported (you use the term “paillettes” to signify the “metal ribbons on reels which are the raw material for the sequins”) the reels are placed in special machines where the sequins are cut to the specific shapes and patterns required; these sequins are attached to tapes

In Mexico the tapes with the sequins are assembled to the component panels using a heat transfer process

In the United States the sleeves are closed and assembled to the “knit bodice” assembly of incidental trimming, buttonsetc., and final finishing

Scenario II same as the first scenario except that the sleeves are sewn closed in Mexico the sleeves and the “knit bodice” are returned to the United States where they are assembled into the cardigan sweater; final finishing

CLASSIFICATION

The applicable tariff provision for the woman’s knitted cardigan sweater, Style 64442, imported in an unassembled condition, will be 6110.10.2030, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for sweaters, pulloversand similar articles, knitted or crocheted: of wool or fine animal hair: other: sweaters: women’s. The general rate of duty will be 16.4% ad valorem.

This merchandise (the woman’s knitted cardigan sweater) does not qualify for preferential treatment under the NAFTA because the filament rayon that is imported from Germany or Japan (heading 5403 HTS) does not undergo the requisite tariff classification change (the “tariff shift”) found in Rule 12(t)61.35, HTS.

COUNTRY OF ORIGIN - LAW AND ANALYSIS:

On December 8, 1994, the President signed into law the Uruguay Round Agreements Act. Section 334 of that Act (codified at 19 U.S.C. 3592) provides new rules of origin for textiles and apparel entered, or withdrawn from warehouse, for consumption, on and after July 1, 1996. On September 5, 1995, Customs published Section 102.21, Customs Regulations, in the Federal Register, implementing Section 334 (60 FR 46188). 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 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 of the foreign materials 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:"

Paragraph (e) in pertinent part 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":

HTSUS Tariff shift and/or other requirements

6110.10.2030 If the good is not knit to shape and consists of two or more component parts, a change to an assembled good of heading 6101 through 6117 from unassembled components, provided that the change is the result of the good being wholly assembled in a single country, territory or insular possession

Section 102.21(e) states that the woman’s knitted cardigan sweater must be assembled in a single country. Accordingly, as the woman’s knitted cardigan sweater is assembled in two countries, the United States and Mexico, it does not meet the requirement of paragraph (c)(2) of Section 102.21(c)(2) which 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 neither knit to shape nor wholly assembled in a single country, Section 102.21(c)(3) is inapplicable.

Section 102.21 (c)(4) states, "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 merchandise, the assembly of the component panels into the “knit bodice”, and the joining of the sleeves with the “knit bodice”, both of which occur in the United States according to both Scenario I and Scenario II, constitute the most important assembly process. Accordingly, the country of origin of the woman’s knitted cardigan sweater, under both Scenario I and Scenario II, would normally be 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 [19 C.F.R. 12.130(c)], 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 considered as a foreign article. [See also Chapter 98, Subchapter II, Note 2(a).]

Section 12.130 C.R., which remains in effect, was originally intended to be used to determine the country of origin of textiles and textile products for purposes of quota/visa requirements. In Treasury Decision (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 C.R. 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), C.R., the country of origin of the woman’s knitted cardigan sweater, Style 64442, is Mexico for quota, duty and marking purposes.

In your request you claim that the merchandise as imported into the United States from Mexico does not require any country of origin marking because the United States is the country of origin. For the reasons stated in the previous two paragraphs, we disagree with your opinion regarding the sweater’s country of origin. We note further that the marking statute (19.U.S.C. 1304) requires that articles of foreign origin imported into the United States must be marked to indicate the name of the country of origin of the article. In the case of your knitted cardigan sweater, “Made in Mexico” would be an appropriate marking. The statute also requires that the marking must be in a conspicuous place as legibly, indelibly and permanently as the nature of the garment permits to indicate to the ultimate purchaser in the U. S. the country of origin of the product. Additionally, Customs has ruled in T.D. 54640(6) dated July 15, 1958, that sweaters and similar wearing apparel must be legibly and conspicuously marked with the name of the country of origin of the product by means of a fabric label which is sewn or otherwise permanently affixed to the inside center of the neck midway between the shoulder seams.

Lastly, you have inquired whether the component fabric panels (the sleeves and the “knit bodice”) of the woman’s knitted cardigan sweater, when joined to the decorative sequins in Mexico and then returned to the United States, qualify for a partial duty exemption under the tariff provision known as “Articles assembled abroad with components produced in the United States, tariff item numbers 9802.00.80 and 9802.00.90, HTS. The latter provision states

Textiles and apparel goods, assembled in Mexico in which all fabric components were wholly formed and cut in the United States, provided that such fabric components, in whole or in part (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.

All three requirements of subheading 9802.00.90, HTS, must be satisfied before a component may receive a duty allowance. An article entered under this tariff provision is subject to duty upon the full cost or value of the imported assembled article, less the cost or value of the U.S. components assembled therein, upon compliance with the documentary requirements of section 10.24 Customs Regulations (19 CFR 10.24).

Section 10.14 (a) Customs Regulations (19 CFR 10.14(a)) states that the components to be assembled must be in condition ready for assembly without further fabrication at the time of exportation from the United States in order to qualify for the exemption. Section 10.16(a) Customs Regulations (19 CFR 10.16(a)) provides that the assembly operation performed abroad may consist of any method used to join or fit together solid components, such as welding, soldering, riveting, force fitting, gluing, laminating, sewing or the use of fasteners.

As you describe the manufacturing process in your inquiry, the sequins “are cut to the specific shapes and patterns that are required” in the United States. Later, in Mexico, the sequins are joined onto the fabric components of the cardigan sweater (i.e. the sleeves and the “knit bodice”), by means of a heat transfer process.

In summary, the sequins and the component fabric panels are formed and cut in the United States, are exported to Mexico ready for assembly without further fabrication, retain the physical identity in the new article without change in form or shape, and were not advanced in value or improved in condition abroad except by being assembled together. We note a previous Headquarters decision, HRL 553423, dated February 15, 1985, which ruled that an entire decal, not just its design, that was transferred to fabric by a heat process, was considered a joining of two solid components, and thereby an acceptable assembly for item 807.00 TSUS, the precursor to subheadings 9802.00.80 and –90 HTS. Since the sequins in the present case are separate, solid components which are permanently affixed by means heat transfer to other separate solid components (the fabric panels), the heat transfer operation qualifies as an acceptable assembly operation for the purpose of subheading 9802.00.90 HTS. Therefore, the imported merchandise, the “knit bodice” and the sleeves of the cardigan sweater, when returned from Mexico after the sequins are assembled to them, qualifies for the reduced duty allowance of item 9802.00.90 HTS. The rate of duty which applies to this provision is FREE.

In HQ 558954, dated June 30, 1995, concerning the applicability of subheading 9802.00.90, HTS, to women’s woven jackets imported from Mexico, headquarters noted that this tariff provision “was created to provide for the duty-free and quota-free status to all goods assembled in Mexico which were previously eligible for entrance of the Special Regime Program administered under subheading 9802.00.80, HTS”. Therefore, the woman’s knitted cardigan sweater, imported from Mexico in an unassembled condition, is neither subject to the restraints of quota nor to the requirement of a visa.

FINAL SUMMARY

Style 64442, the woman’s knitted cardigan sweater, is classified as a wool knitted cardigan sweater for women in subheading 6110.10.2030 HTS. The general rate of duty is 16.4% ad valorem. The sweater does not qualify for preferential treatment under the NAFTA. The country of origin is Mexico for duty, quota and marking purposes. The sweater must be marked “Made in Mexico”. However, it qualifies for a partial duty exemption under the provision of item 9802.00.90 HTS, upon compliance with the documentary requirements of section 10.24 Customs Regulations (19 CFR 10.24). The duty rate for this tariff provision is FREE. The imported merchandise is not subject to quota restraints or a visa requirement.

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

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 Mike Crowley at 212-637-7077.

Should you wish to request an administrative review of this ruling, submit a copy of this ruling and all relevant facts and arguments within 30 days of the date of this letter, to the Director, Commercial Rulings Division, Headquarters, U.S. Customs Service, 1300 Pennsylvania Ave. N.W., Washington, D.C. 20229.

Sincerely,

Robert B. Swierupski
Director,

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