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HQ 965068

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September 20, 2002

CLA-2 RR:CR:TE 965068 mbg

CATEGORY : Classification

TARIFF NO: 9404.90.8505; 9404.90.8020

Mr. Dave Pentland
Carson International
17735 First Avenue
Suite 260
Surrey, British Columbia
Canada V35 951

RE: Reconsideration of NY G89300; Request for NAFTA Origin of Duvets and Quilts under Self-Produced Material Rule; Article 509

Dear Mr. Pentland:

This is in response to a letter dated May 23, 2001, submitted by Livingston International Consulting Group on behalf of Daniadown Quilts, requesting reconsideration of New York Ruling Letter G89300, dated April 19, 2001, regarding the classification of quilts and duvets under the Harmonized Tariff Schedule of the United States Annotated (“HTSUSA”) and their eligibility for duty free treatment under the North American Free Trade Agreement (NAFTA). We note that since the submission of this request Daniadown has designated Carson International as the customs broker for the company.

FACTS:

Daniadown manufactures quilts and duvets in Canada and specifically requested a binding ruling regarding two factual scenarios for the origin of the subject merchandise. Customs issued NY G89300, dated April 19, 2001, for Daniadown regarding these factual scenarios. However, reconsideration of NY G89300 has been requested in order to further clarify your questions regarding the eligibility of the subject merchandise under specific provisions of the NAFTA.

The original customs broker has provided that rolls of fabrics and stuffing materials are imported by Daniadown and/or purchased from Canadian distributors and that the country of origin of fabrics purchased from Canadian distributors varies with
each roll of fabric. Daniadown manufactures quilts and duvets by two different manufacturing processes.

In all of the scenarios, the fabrics and stuffings (the down, feathers or synthetic materials) will be made in various non-NAFTA countries. You have stated that the fabrics may be from Israel or possibly China.

Manufacturing Process 1

Quilts and duvets are manufactured by stuffing down, feather or synthetic materials into pre-formed fabric shells. The pre-formed fabric shells are manufactured in either Asia or Israel, or manufactured by Daniadown from rolls of cotton material. The pre-formed fabric shells may be plain white, colored or patterned. The pre-formed fabric shells for the quilts and duvets are filled with stuffing material. The filled fabric shells are sewn along the edges and lengthwise at six inch intervals to contain the stuffing materials.

Manufacturing Process 2

Quilts and duvets are manufactured by sewing together two pieces of quilted textile materials. Based on your information, quilted textile material is a multi-layered product composed of two fabrics separated by a thick layer of polyester filament commercially known as Dacron. A third party supplier in Canada processes the quilted textile material. Daniadown imports and sends fabric rolls of cotton ticking to the Canadian supplier. The Canadian supplier sews a layer of batting and a second layer of fabric to the cotton ticking to form the quilted textile material. The three layers of fabric are held together by sewing lengthwise at six inch intervals. Daniadown sews two pieces of the quilted textile material together to form the quilt or duvet cover. The cotton ticking side of the quilted textile material forms the outside surface of the quilt or duvet cover.

ISSUES:

1) What is the proper classification of the subject quilts and duvets under the HTSUSA?

2) Whether the subject quilts and duvets are eligible for duty free treatment under the NAFTA?

LAW AND ANALYSIS:

I. CLASSIFICATION

Classification under the HTSUSA is made in accordance with the General Rules of Interpretation (GRI). GRI 1 provides that the classification of goods shall be determined according to the terms of the headings of the tariff schedule and any relative Section or Chapter Notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRI may then be applied.

The Harmonized Commodity Description and Coding System Explanatory Notes (“EN”) represent the official interpretation of the Harmonized System at the international level (for the 4 digit headings and the 6 digit subheadings) and facilitate classification under the HTSUSA by offering guidance in understanding the scope of the headings and GRI. The EN, although not dispositive or legally binding, provide a commentary on the scope of each heading of the HTSUS, and are generally indicative of the proper interpretation of these headings. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).

Heading 9404, HTSUSA, provides for, among other things, articles of bedding and similar furnishing. The Explanatory Notes to heading 9404, HTSUSA, state:

This heading covers:

(B) Articles of bedding and similar furnishing which are sprung or stuffed or internally fitted with any material (cotton, wool, horsehair, down, synthetic fibres, etc.), or are of cellular rubber or plastics (whether or not covered with woven fabric, plastics, etc.). For example:

(2) Quilts and bedspreads (including counterpanes, and also quilts for baby carriages), eiderdowns and duvets (whether of down or any other filling), mattress-protectors (a kind of thin mattress placed between the mattress itself and the mattress support), bolsters, pillows, cushions, pouffes, etc.

Therefore, the subject quilts and duvets are provided for pursuant to GRI 1 in heading 9404, HTSUSA, which provides for inter alia quilts and stuffed bed linen.

II. NAFTA ELIGIBILITY

The subject duvets and quilts undergo processing operations in Canada and therefore may be eligible for the NAFTA preferential duty free status if they are considered ”originating goods” and qualify to be marked as a good of Canada.

To be eligible for the duty preference provided under the NAFTA, goods must be “originating goods” within the rules of origin in General Note 12(b), HTSUSA. 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—

(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 [.]

As both the quilts and duvets contain fabrics that were made outside of the NAFTA territories, they are not considered “wholly obtained or produced” as required by General Note 12(b)(i), HTSUSA. However, if the non-originating materials (i.e., the fabrics from foreign sources) undergo a change in tariff classification described in subdivision (t) to GN 12, the subject duvets and quilts would be eligible for the preferential rate.

General Note 12(t) for Chapter 94, HTSUSA, the tariff shift rules applicable to the subject quilts and duvets, state in pertinent part that non-originating materials are allowed provided there is:

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

In applying this rule to the subject duvets and quilts, you have stated that most of the fabrics purchased by Daniadown are classifiable in the aforementioned headings of the HTSUSA which are excluded from the tariff shift rule. Therefore, in your opinion, the subject quilts and duvets do not directly meet the NAFTA tariff shift requirements of GN12(t) to Chapter 94, HTSUSA. However, you have presented a claim that the fabric shells and the quilted textile fabric used in the manufacture of the subject quilts and duvets should be considered “self-produced materials” under the NAFTA.

Daniadown has explicitly requested reconsideration of NY G89300 in order to seek clarification on the use of the “self-produced material” rule under NAFTA to the subject quilts and duvets. Under the NAFTA rules of origin, “Self Produced Material” is defined as “a material that is produced by the producer of a good and used in the production of that good.” See 19 CFR 181, App., Part 1, Sect. 2

In furtherance of the application of the “self-produced material” rule, the NAFTA regulations further provide:

SELF-PRODUCED MATERIAL MAY BE A MATERIAL FOR DETERMINING APPLICABILITY OF RULES OF ORIGIN

(8) 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 a 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.

(9) The following example is an “Example” as referred to in [the NAFTA Rules of Origin.]

Example: section 4(8), Self-Produced Materials as Materials for Purposes of Determining Whether Non-Originating Materials Undergo an Applicable Change in Tariff Classification.

Producer A, located in a NAFTA country, produces Good A. In the production process, Producer A uses originating Material X and non-originating Material Y to produce Material Z. Material Z is a self-produced material that will be used to produce Good A.

The rule set out in Schedule I for the heading under which Good A is classified specifies a change in tariff classification from any other heading. In this case, both Good A and the non-originating Material Y are of the same heading. However, the self-produced Material Z is of a heading different than that of Good A.

For purposes of determining whether the non-originating materials that are used in the production of Good A undergo the applicable change in tariff classification, Producer A has the option to consider the self produced Material Z as the material that must undergo a change in tariff classification. As Material Z is of a heading different than that of Good A, Material Z satisfies the applicable change in tariff classification and Good A would qualify as an originating good.

Customs agrees with your analysis concerning the application of GN12(t) to Chapter 94 and also on the application of the “self-produced material” rule. The fabric shells which are manufactured prior to the completed duvets and quilts will meet the requirements of the tariff shift rule of GN12(t) of heading 9404, HTSUSA. Customs has consistently classified unfinished fabric shells in heading 6307, HTSUSA, as other made up textile articles. (See e.g. HQ 952492, dated January 29, 1993; HQ 953004, dated February 24, 1993; and HQ 952753, dated January 12, 1993). Therefore, quilts or duvets constructed from pre-formed shells manufactured in either Asia or Israel will qualify for NAFTA eligibility by virtue of the Chapter 94 tariff shift under the HTSUSA. Likewise by application of the self-produced material rule, the pre-formed shells produced by Daniadown from rolls of cotton fabric and classifiable in subheading 6307.90, HTSUSA, will meet the tariff shift rules. Daniadown may chose to identify the pre-formed shells as self-produced materials in accordance with the NAFTA Rules of Origin Regulations and therefore, the pre-formed shells will meet the tariff shift rules.

Similarly, the quilted textile fabric meets the tariff shift requirements because the fabric is classifiable in heading 5811, HTSUSA. Customs has consistently classified quilted textile fabric such as that submitted by Daniadown in heading 5811, HTSUSA, for quilted textile products in the piece. See e.g., NY 811756, dated July 12, 1995; NY H89845, dated April 12, 2002; and HQ 961887, dated June 11, 1998.) As was previously stated, the completed quilts and duvets manufactured by Daniadown are classified in heading 9404, HTSUSA.

You have explicitly requested information on this NAFTA rule and the application of this rule to your textile products. Upon application of the self-produced material rule to the subject duvets and quilts, Customs finds that as a producer you may choose a material which can be a self-produced material and therefore used to determine NAFTA eligibility for the subject merchandise.

III. Country of Origin

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.

A. EXCEPTION FOR TEXTILE GOODS PROCESSED IN ISRAEL

Section 102.21(a) specifically states that the rules in Section 102.21 shall not apply "for purposes of determining whether goods originate in Israel or are the growth, product, or manufacture of Israel." The basis for the Israeli exception is Section 334(b)(5) of the Uruguay Round Agreements Act. Section 334(b)(5) provides that:

This section shall not affect, for purposes of the customs laws and administration of quantitative restrictions, the status of goods that, under rulings and administrative practices in effect immediately before the enactment of this Act, would have originated in, or been the growth, product, or manufacture of, a country that is a party to an agreement with the United States establishing a free trade area, which entered into force before January 1, 1987. For such purposes, such rulings and administrative practices that were applied, immediately before the enactment of this Act, to determine the origin of textile and apparel products covered by such agreement shall continue to apply after the enactment of this Act, and on and after the effective date described in subsection (c), unless such rulings and practices are modified by the mutual consent of the parties to the agreement.

In cases where the fabric used in the manufacture of the subject duvets and quilts is made in Israel, this analysis applies.

Israel is the only country which qualifies under the terms of Section 334(b)(5). As the Section 334 rules of origin for textiles and apparel products do not apply to Israel, we refer to the 19 CFR 12.130 rules of origin, the rules of origin applicable to textiles and textile products before the enactment of Section 334. Section 334(b)(5) makes clear that if origin was conferred in Israel under Section 12.130, Israel will now be accorded the same treatment. This interpretation of Section 334(b)(5) was confirmed in a Notice of a general statement of policy, Treasury Decision 96-58, appearing in the Federal Register, Vol. 61, No. 148, dated July 31, 1996.

Accordingly, applying Section 12.130(b), the standard of substantial transformation governs the country of origin determination where textiles and textile products are processed in more than one country. The country of origin of textile products is deemed to be that foreign territory or country where the article last underwent a substantial transformation. Substantial transformation is said to occur
when the article has been transformed into a new and different article of commerce by means of substantial manufacturing or processing.

Section 12.130(d) sets forth criteria for determining whether a substantial transformation of a textile product has taken place. This regulation states that these criteria are not exhaustive; one or any combination of criteria may be determinative, and additional factors may be considered. Section 12.130(d)(1) states that a new and different article of commerce will usually result from a manufacturing or processing operation if there is a change in: (i) Commercial designation or identity, (ii) Fundamental character or (iii) Commercial use.

The factors to be applied in determining whether or not a manufacturing operation is substantial are set forth in Section 12.130(d)(2). The following will be considered:

(i) The physical change in the material or article; (ii) The time involved in the manufacturing or processing; (iii) The complexity of the manufacturing or processing; (iv) The level or degree of skill and/or technology required in the manufacturing or processing operations; (v) The value added to the article or material[.]

The fabric used to make the duvets and quilts in both scenario one and scenario two was woven and printed in Israel. The fabric was shipped to Canada where it was cut and assembled with other fabrics or stuffings into the subject quilts and duvet covers.

Section 12.130(e)(1) describes manufacturing operations from which an article will usually be considered a product of the country in which those operations occurred:

(iv) Cutting of fabric into parts and the assembly of those parts into the completed article;

In the case of the instant merchandise, the origin of the subject merchandise is not conferred in Israel. Accordingly, as origin is not conferred in Israel pursuant to Section 12.130, we then apply the rules in Section 102.21 to determine the country of origin.

B. SECTION 102.21 RULES OF ORIGIN FOR TEXTILE AND APPAREL PRODUCTS

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 neither the duvet covers nor the quilts are 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." The following rule is applicable for the subject merchandise:

Except for goods of subheading 9404.90 provided for in paragraph (e)(2) of this section, 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 the fabric-making process.

The subject duvets and quilts for scenario one consist of fabric that is formed into pre-formed fabric shells and then sewn into quilts or duvets in Canada. Accordingly, for the subject Daniadown manufacturing scenarios where the fabric of the outer shell is formed in a single country, the country of origin is unquestionably that country. For those scenarios where the fabrics of the outer shell are from different countries then 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.

The subject duvet covers and quilts are classified in subheading 9404.90, HTSUSA. As provided in provision (ii), Section 102.21 (c)(3), goods of heading 9404.90 are excepted from application of that rule. Therefore Section 102.21(c)(3) is not applicable.

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". The fabrics for the outer shell as well as the pre-formed fabric shells of the subject duvet covers and quilts are sourced in more than one country. As no one fabric or component is more important than the other due to the combination of these materials for classification as articles of bedding in heading 9404, HTSUSA, a single country of origin determination for the quilts and duvet covers cannot be made based on Section 102.21(c)(4).

Paragraph (c)(5) states that "Where 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." Accordingly, in the case of the duvet covers and quilts comprised of fabrics formed in more than one country, the country of origin is conferred by the last country in which an important assembly or manufacturing process occurred and therefore, the country of origin is Canada.

When the fabric of the outer shell of the duvets or quilts originates in a single country other than Canada, as discussed above, the origin is the country in which the fabric of the outer shell was formed. Since the fabrics used in the production of the duvets and quilts originate outside of Canada, by application of 102.21, the origin of duvets and quilts of fabric from a single country is other than Canada. However, section 102.19(a) provides:

Except in the case of goods covered by paragraph (b) of this section, if a good which is originating within the meaning of §181.1(q) of this chapter is not determined under §102.11(a) or (b) or §102.21 to be a good of a single NAFTA country, the country of origin of such good is the last NAFTA country in which that good underwent production other than minor processing, provided that a Certificate of Origin (see §181.11 of this chapter) has been completed and signed for the good.

As this merchandise qualifies as a NAFTA originating good, applying the terms of section 102.19(a), the country of origin of the subject merchandise is Canada.

HOLDING:

The subject duvets and quilts are eligible for duty free treatment under the North American Free Trade Agreement.

Assuming that the merchandise does not contain embroidery, lace, braid, edging, trimming, piping or applique work, the subject duvets and quilts manufactured of cotton fabric and internally stuffed are classified in subheading 9404.90.8020, HTSUSA, which provides for “Mattress supports; articles of bedding and similar furnishing (for example, mattresses, quilts, eiderdowns, cushions, pouffes and pillows) fitted with springs or stuffed or internally fitted with any material or of cellular rubber or plastics, whether or not covered: Other: Other: Of cotton, not containing any embroidery, lace, braid, edging, trimming, piping exceeding 6.35 mm or applique work: Quilts, eiderdowns, comforters and similar articles.”

If the merchandise does contain embroidery, lace, braid, edging, trimming, piping or applique work , the subject duvets and quilts manufactured with an outer shell of cotton are classified in subheading 9404.90.8505, HTSUSA, which provides for “Mattress supports; articles of bedding and similar furnishing (for example, mattresses, quilts, eiderdowns, cushions, pouffes and pillows) fitted with springs or stuffed or internally fitted with any material or of cellular rubber or plastics, whether or not covered: Other: Other: Other: Quilts, eiderdowns, comforters and similar articles: with outer shell of cotton.”

Sincerely,

Myles Harmon, Acting Director

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See also:

• Tariff No.: 6209.20.50 - Babies' garments & clothing acc. nesoi, of cotton, incl. sunsuits & sim app, sets & parts of sets, & diapers, not knitted or crocheted
• Tariff No.: 9404.90.80 - Arts. of bedding & similar furnishings stuffed or internally fitted w/any material nesoi, of cotton, w/o embroidery/lace/braid/edging,etc
• Tariff No.: 9404.90.85 - Quilts, eiderdowns, comforters and similar articles, not of cotton