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HQ 964934




August 22, 2002

CLA-2 RR:CR:TE 964934 SK

CATEGORY: CLASSIFICATION

TARIFF NO.: 9404.90.

Mr. Jim Leonard
Burlington Industries, Inc.
3330 West Friendly Avenue
Greensboro, North Carolina 27420

RE: Classification, Status under the North American Free Trade Agreement and Country of Origin Determination for a Comforter Set; General Note 12; 19 CFR 102.21(d); Sets; 19 CFR 102.21 (c)(1) and (5); 19 CFR 102.19(b); NAFTA Preference Override.

Dear Mr. Leonard:

This letter is in reply to your letter dated December 18, 2000, concerning the classification, status under the North American Free Trade Agreement (NAFTA) and country of origin determination for a comforter set which will be imported into the United States.

FACTS:

The subject merchandise is a bedding set comprised of a comforter, bed skirt, and two pillow shams. The items will be packed together for retail sale as a comforter set in Mexico. The manufacturing operations for the comforter set are described as follows:

UNITED STATES

- Fabric for the comforter shells is woven. - Fabric for the skirt portion of the bed skirt is woven. - Fabric for the pillow shams is woven.

NON-NAFTA TERRITORY

- Fabric for the platform portion of the bed skirt is formed.

MEXICO

- Comforter is assembled.
- Bed skirt is assembled and hemmed.
- Pillow shams are assembled.

In your submission, you do not provide information as to the fiber content of the subject fabrics.

ISSUES:

How is the comforter set classified?

Is the comforter set eligible for preferential treatment under NAFTA?

What is the country of origin of the comforter set?

LAW AND ANALYSIS:

I. Classification

Classification of merchandise under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA) is in accordance with the General Rules of Interpretation (GRI), taken in order. GRI 1 provides that classification shall be determined according to the terms of the headings and any relative section or chapter notes.

The comforter is classifiable under heading 9404, HTSUSA. The bed skirt is classifiable under heading 6303, HTSUS. The pillow shams are classifiable under heading 6304, HTSUS. Since classification of the submitted merchandise under a single heading cannot be determined by applying GRI 1, we must apply the other GRI.

GRI 3 provides for goods that are, prima facie, classifiable in two or more headings. GRI 3(b) provides that goods put up in sets for retail sale shall be classified as if they consisted of the material or component that gives them their essential character. According to the Harmonized Commodity Description and Coding System Explanatory Notes, the official interpretation of the Harmonized System at the international level, "goods put up in sets for retail sale" refers to goods which:
consist of at least two different articles which are, prima facie, classifiable in different headings;
consist of products or articles put up together to meet a particular need or carry out a specific activity; and
are put up in a manner suitable for sale directly to users without repacking.

The submitted set meets the qualifications of "goods put up in sets for retail sale." The components of the set consist of three different articles that are, prima facie, classifiable in different headings. They are put up together to carry out the specific activity of furnishing a bed and they are packaged for sale directly to users without repacking. Customs has previously held that the comforter is the component that gives a comforter set its essential character. See Headquarters Ruling Letter (HQ) 959813, dated April 10, 1998. Accordingly, the comforter set is classifiable under heading 9404, HTSUSA.

Generally, comforters are classified within subheading 9404.90, HTSUSA, based on the fabric comprising the outer shell. Since no information as to the fiber content of the comforter was provided to Customs, we are unable to classify the subject comforter beyond the six-digit level.

II. Nafta Eligibility/Originating Status:

The comforter set components are individually assembled and packaged together as a retail set in Mexico. Thus, the comforter set undergoes processing operations in Mexico which is a country provided for under the North American Free Trade Agreement (NAFTA).

General Note 12, HTSUS, incorporates Article 401 of NAFTA into the HTSUSA. General 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 set forth in regulations issued by the Secretary of Treasury (whether or not the goods are marked), when such goods are imported into the customs territory of the United States 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, in accordance with section 201 of the North American Free Trade Agreement Implementation Act.

Accordingly, the comforter set at issue will be eligible for the “Special” “MX” rate of duty provided it is a NAFTA “originating” good under General Note 12(b), HTSUS, and it qualifies to be marked as a good of Mexico.

With respect to the “originating” requirement, General 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 --
they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or
they have been transformed in the territory of Canada, Mexico and/or the United States so that –
except as provided in subsection (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,

Since the comforter set is not wholly obtained or produced entirely in Mexico, it will only qualify as an originating good of Mexico if it has been transformed in Mexico such that the non-originating materials undergo the applicable change in tariff classification.

The first question presented is whether all of the items in the set must meet the terms of General Note 12(b), or, if only the item that imparts the essential character to the set (i.e., the comforter) must meet the terms of General Note 12(b). Customs has consistently held that all the items in the set must meet the terms of General Note 12(b). See HQ 956970, dated December 12, 1994; HQ 559421, dated September 16, 1996; HQ 560081, dated March 13, 1997; HQ 560577, dated August 4, 1997; HQ 560456, dated September 26, 1997; HQ 560992, dated July 6, 1998; and HQ 561326, dated April 26, 1999. Customs decision is consistent with the NAFTA which explicitly requires that each of the non-originating materials used in the production of the good undergo the applicable change in tariff classification.

Therefore, we must ascertain whether the non-originating material (fabric comprising the platform component of the bed skirt) is transformed in Mexico pursuant to General Note 12(b)(ii)(A). To qualify under this provision, the non-originating material must undergo the change in tariff classification set forth in General Note 12(t), HTSUSA. The comforter set is classifiable in subheading 9404.90, HTSUSA. The NAFTA rule of origin for subheading 9404.90, HTSUSA, states:

A change to subheading 9404.90 from any other chapter, except from heading 5007, 5111 through 5113, 5208 through 5212, 5309 through 5311, 5407 through 5408 or 5512 through 5516.

At the time the platform fabric for the bed skirt is exported from the non-NAFTA territory, it is believed that the fabric is classifiable under HTSUSA headings 5208 through 5212, 5407, 5408, or 5512 through 5516, which provides for various types of woven fabrics. As these headings are excepted by subdivision (t), it would initially appear that the non-originating material does not undergo the requisite change in tariff classification.

It is noted, however, that the Appendix to Part 181 of the Customs Regulations (19 CFR Part 181), which set forth the NAFTA rules of origin regulations, specifies rules for determining whether certain non-originating materials undergo an applicable change in tariff classification when used in self-made goods. The Appendix to Part 181, Part II, Section 4 (“Originating Goods”)(8), states:

For purposes of determining whether non-originating materials undergo an applicable change in tariff classification, a self-produced material may, at the choice of the producer of the good into which the self-produced material is incorporated, be considered as an originating material or non-originating material, as the case may be, used in the production of that good. On the basis of the foregoing, the producer of the comforter set (“the good”) has the option of designating the bed skirt (“the self-produced material”) as a non-originating material. If this designation is made, the bed skirt, which is classifiable under heading 6303, HTSUS, falls within a tariff provision that is not excepted by the tariff shift rule set forth in subdivision (t). Accordingly, the bed skirt, incorporating its non-originating material, is deemed as undergoing the requisite change in tariff classification.

The fact that the bed skirt is merely packaged together with the originating comforter and pillow shams in Mexico does not disqualify the set from being considered an originating good. This issue has been addressed in HQ 561326, dated April 26, 1999. In comparing the NAFTA to the United States-Canada Free-Trade Agreement and 19 CFR 102.17, Customs explained that there is no language in General Note 12, HTSUS, which would disqualify a good from obtaining originating status by virtue of merely having undergone simple packaging or combining operations. Thus, non-originating items may undergo the requisite tariff shift under General Note 12(t), HTSUS, when packaged in Mexico with NAFTA originating items.

The comforter set qualifies as an originating good under General Note 12(b), HTSUS. Accordingly, the comforter set will be entitled to the special “MX” rate of duty if the comforter set qualifies to be marked as a good of Mexico and provided that all other NAFTA requirements are met.

III. Country of Origin/NAFTA Marking Rules

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 § 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 § 102.21(c)(1) through (5).

Additionally, § 102.21(d) addresses the treatment of sets for country of origin purposes. Section 102.21(d) provides the following:

Where a good classifiable in the HTSUS as a set includes one or more components that are textile or apparel products and a single country of origin for all of the components of the set cannot be determined under paragraph (c) of this section, the country of origin of each component of the set that is a textile or apparel product shall be determined separately under paragraph (c) of this section.

Thus, although the classification and NAFTA originating status of the comforter set is based on the comforter, per the terms of § 102.21(d), the country of origin of each item in the set must be determined separately if there is not a single country of origin for the entire set.

Section 102.21(c)(1) states that “[t]he 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.” Since none of the components in the subject comforter set were wholly obtained or produced in a single country, territory or insular possession, § 102.21(c)(1) is inapplicable in this instance.

Section 102.21(c)(2) states that “[w]here 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 “[t]he 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

6301 – 6306 The country of origin of a good classifiable under heading 6301 through 6306 is the country, territory, or insular possession in which the fabric comprising the good was formed by a fabric-making process.

9404.90 The country of origin of a good classifiable under subheading 9404.90 is the country, territory, or insular possession in which the fabric comprising the good was formed by a fabric-making process.

The fabric comprising the pillow shams and comforter is formed in the United States.

We assume for purposes of this ruling that all the fabrics (i.e., batting, etc.) used in the comforter are formed in the United States. Therefore, pursuant to § 102.21(c)(2), origin is conferred to these items in the United States.

However, the NAFTA Preference Override set forth in § 102.19(b) of the Customs Regulations (19 CFR 102.19(b)), is applicable to the subject merchandise. Specifically, § 102.19(b) states:

If, under any provision of this part, the country of origin of a good which is originating . is determined to be the United States and that good has been exported from, and returned to, the United States after having been advanced in value or improved in condition in another NAFTA country, the country of origin of such good for Customs duty purposes is the last NAFTA country is which that good was advanced in value or improved in condition.

Based on the facts presented, the subject pillow shams and comforter are originating goods under the NAFTA and are deemed goods of U.S. origin pursuant to § 102.21(c)(2). Because these articles were returned to the United States after having been advanced in value or improved in condition in Mexico by virtue of being assembled into finished pillow shams and comforters, the country of origin for these items for Customs duty purposes is Mexico, pursuant to § 102.19(b). Accordingly, the “MX” NAFTA duty rate will be applicable to the pillow shams and comforter.

As the bed skirt is comprised of fabrics formed in two different countries, § 102.21(c)(2) is inapplicable to this good.

Section 102.21(c)(3) states that, “[w]here 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 bed skirt is not knit and heading 6303, HTSUSA, is excepted from provision (ii), § 102.21(c)(3) is not determinative of origin for this item.

Section 102.21(c)(4) states, “[w]here 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 fabric making process is deemed the most important manufacturing process. As the fabrics for the bed skirt are sourced in more than one country, and no one fabric is more important than the other, a single country of origin determination for the bed skirt cannot be made based on § 102.21(c)(4).

Section 102.21(c)(5) states, “[w]here 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, territory or insular possession in which an important assembly or manufacturing process occurred.”

After the fabric comprising the bed skirt’s components is formed in the United States and a non-NAFTA territory, the bed skirt is assembled in Mexico. Therefore, the bed skirt is a product of Mexico as per § 102.21(c)(5).

As each item in the comforter set has been found to be originating and qualifies to be marked “MX”, the comforter set is entitled to the special “MX” duty rate, provided that all other requirements of the NAFTA are met.

HOLDING:

The subject comforter is classifiable within subheading 9404.90, HTSUS, based on the fabric comprising the comforter’s outer shell.

By virtue of the comforter and pillow shams being wholly obtained or produced entirely in Mexico and the bed skirt meeting the applicable tariff shift rule, the comforter set is originating for NAFTA purposes.

The comforter, pillow sham and bed skirt are not subject to quota or visa restrictions.

By virtue of the NAFTA override in 19 CFR 102.19(b), the country of origin of the comforter and pillow shams is Mexico for duty purposes. However, the country of origin of these items for marking purposes is the United States. Therefore, they are not subject to the marking requirements of 19 U.S.C. 1304. The country of origin of the bed skirt is Mexico for marking and duty purposes.

All of the items in the set are entitled to the NAFTA “MX” special duty rate.

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 181.100(a)(2). This section states that a ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect.

This ruling is being issued under the provisions of Part 181 of the Customs Regulations (19 C.F.R. 181). Should it be subsequently determined that the information furnished is not complete and does not comply with 19 CFR 181.100(a)(2), 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.

Sincerely,

Myles B. Harmon, Acting Director
Commercial Rulings Division

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