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HQ 965691





September 20, 2002

CLA-2 RR:CR:TE 965691 mbg

CATEGORY : Classification

TARIFF NO: 5407.52.2020

Dr. Randy E. Meirowitz
Nextec Applications, Inc.
2611 Commerce Way
Vista, CA 92083

RE: Reconsideration of NY I80118; Classification and country of origin of “encapsulated” fabric

Dear Dr. Meirowitz:

This is in response to your letter dated May 15, 2002, on behalf of Nextec Applications, Inc. (“Nextec”), requesting reconsideration of New York Ruling Letter (“NY”) I80118, dated April 15, 2002, regarding the classification of a product commercially known as “Guardian” which is a treated textile fabric under the Harmonized Tariff Schedule of the United States Annotated (“HTSUSA”).

You have requested reconsideration of NY I80118 because the classification rendered therein does not accurately reflect the technological advancements that Nextec has developed and applied to the subject fabric. However, Customs must administer the Legal Notes and terms of the Harmonized System as they are written and agreed to by the World Customs Organization. The subject merchandise is precluded from classification as a “plastic” or a “coated fabric” by virtue of the Legal Notes of the HTSUSA. While we regret that the current tariff schedule does not recognize the technological advancements which your company has created, U.S. Customs is unable to unilaterally change the terms of the tariff and thereby reclassify the subject merchandise. Therefore, NY I80118 is upheld for the reasons set forth herein.

FACTS:

Two samples of woven fabric have been submitted for review. The first sample is designated as style “Guardian Polyester, Raw” and is a dyed plain woven fabric composed of 100 percent textured filament polyester. It contains 58 single yarns per centimeter in the warp and 28 single yarns per centimeter in the filling. This product is manufactured using 75 denier yarns in the warp and 150 denier yarns in the filling. Weighing approximately 100 grams per meter squared (“g/m2”), the subject merchandise is imported in 157 centimeter widths.

The second sample is designated as style “Guardian Polyester, Encapsulated” and is a dyed plain woven fabric composed of 100 percent textured filament polyester. It contains 58 single yarns per centimeter in the warp and 28 single yarns per centimeter in the filling. This product is manufactured using 75 denier yarns in the warp and 150 denier yarns in the filling. Weighing approximately 132 g/m2, this product will be imported in 157 centimeter widths. This product has been coated or impregnated with a plastic material however, the coating or impregnation is not visible to the naked eye except by a change of color.

You have provided that the “encapsulation” process used by Nextec is the result of a new technology which involves three distinct levels of technology: 1) individual fibers and filaments are encapsulated with an ultra thin polymer film 2) a durable barrier film is placed between the fiber bundles 3) the performance properties are enhanced using additives which control the surface chemistry of the polymer film, e.g. water resistance, fluid impermeability, and adhesive characteristics.

You claim that the “encapsulation” process changes the fabric substantially and enhances the “performance properties” of the fabric. You have requested reconsideration of NY I80118 because you believe the classification of the subject merchandise under the HTSUSA does not reflect the advancement in technology that your company has patented and performed on the subject fabric. You claim that if Nextec were to put 15 percent of your liquid silicone rubber on the surface of the fabric then there would be no doubt that this would meet the definition of a coated fabric, however, since Nextec uses 15 percent liquid silicone in conjunction with the substantially improved process, the classification of the fabric is different under the HTSUSA.

You have provided that the manufacturing operations for the two fabrics are as follows:

1. The yarns are extruded in Malaysia from Malaysian polyester plastic resin. 2. The yarns are texturized in Malaysia.
3. Both of the fabrics are woven in Malaysia including warping, sizing, and weaving.
4. Both of the fabrics are finished in Malaysia by desizing, dyeing and finishing. 5. Style Guardian Polyester, Raw is then exported to the United Sates, where it undergoes a coating process before being sold to the ultimate purchaser. 6. Style Guardian Polyester, Encapsulated is shipped to Singapore where it is coated or impregnated with plastic in an encapsulating process that both coats the fiber with plastic and produces a plastic barrier in the voids between the yarns.
7. The encapsulated fabric of style Guardian Polyester, Encapsulated is then exported to the United States for sale to the ultimate purchaser.

ISSUE:

1) What is the proper classification of the subject merchandise under the HTSUSA?

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

LAW AND ANALYSIS:

I. Classification under the HTSUSA

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).

There are three competing chapters under the HTSUSA which must be considered for classification of the merchandise under consideration: Chapter 39 which covers plastics and articles of plastics; Chapter 54 which provides for fabrics of man-made filaments; and Chapter 59 which provides for impregnated or coated fabrics.
a. Chapter 39, HTSUSA

Nextec has suggested classification in heading 3921 which provides for “other plates, sheets, films, foil, and strip, of plastics.” Section XI, note 1(h) directs the classification of plastic coated textiles to Chapter 39, HTS. This section note provides that Section XI does not cover:

Woven, knitted or crocheted fabrics, felt or nonwovens, impregnated, coated, covered or laminated with plastics, or articles thereof, of Chapter 39.

The ENs to Chapter 39, HTSUSA, state in pertinent part,

[T]he classification of plastics and textile combinations is essentially governed by Note 1(h) to Section XI, Note 3 to Chapter 56 and Note 2 to Chapter 59. The following products are also covered by this Chapter:

(b) Textile fabrics and nonwovens either completely embedded in plastics or entirely coated or covered on both sides with such material, provided that such coating or covering can be seen with the naked eye with no account being taken of any resulting change of colour.

(See also, Legal Note 3 (b) to Chapter 56, HTS, and Legal Note 2 (a)(3) to Chapter 59, HTS, which direct classification of a textile fabric, completely embedded in plastics or entirely coated or covered on both sides when the coating is visible with the naked eye, to Chapter 39, HTS.)

Furthermore, Legal Note 2(m) to Chapter 39, HTSUSA, provides that this chapter does not apply to “Goods of Section XI (textile and textile articles).”

Despite the technologically innovative process which Nextec has patented and applied to this fabric, the subject merchandise does not have a plastics coating which is visible to the naked eye and falls outside of the scope of Chapter 39. Therefore, the subject merchandise must be regarded as a textile material of Section XI, HTSUSA, for classification purposes.
b. Chapter 59, HTSUSA

Legal Note 2(a) to Chapter 59, HTSUSA, which states that Heading 5903 applies to:

Textile fabrics impregnated, coated, covered or laminated with plastics, whatever the weight per square meter and whatever the nature of the plastic material (compact or cellular) other than:

(1) Fabrics in which the impregnation, coating or covering cannot be seen with the naked eye (usually chapters 50 to 55, 58 or 60): for the purposes of this provision, no account should be taken of any resulting change in color;

(2) Products which cannot, without fracturing, be bent manually around a cylinder of a diameter of 7 mm, at a temperature between 15 C and 30 C (usually chapter 39);

(3) Products in which the textile fabric is either completely embedded in plastics or entirely coated or covered on both sides with such material, provided that such coating or covering can be seen with the naked eye with no account being taken of any resulting change of color (chapter 39);

(4) Fabrics partially coated or partially covered with plastic and bearing designs resulting from these treatments (usually chapters 50 to 55, 58 or 60);

(emphasis added.)

The intent of Legal Note 2(a)(3) to Chapter 59 is to classify those fabrics “embedded in” or “completely covered” with plastics under the headings that provide for plastics or articles of plastics because they have acquired the characteristics of plastics. However, the Legal Note specifically excludes those fabrics in which the coating or impregnation cannot be seen with the naked eye, or in which the only resulting property change is that of a change of color and specifically directs that classification is proper in chapters 50 to 55, HTSUSA.
c. Chapter 54, HTSUSA

Chapter 54, HTSUSA, provides for fabrics made of man-made filaments. Heading 5407 specifically provides for woven fabrics of synthetic filament yarn which is applicable to the subject merchandise. Based on the relevant Legal Notes, Customs finds that both of the fabrics are specifically provided for within heading 5407, HTSUSA, pursuant to GRI 1.

II. 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.

T.D. 01-36 amended the Customs Regulations on an interim basis to align the country of origin rules for textiles and apparel with the statutory changes made to section 334 of the Uruguay Round Agreements Act as set forth in section 405 Title IV of the Trade and Development Act of 2000.

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." The subject woven fabric, designated as Guardian Polyester, Raw is wholly obtained and produced in Malaysia and therefore the country of origin is Malaysia. As the product designated as Guardian, Polyester, Encapsulated 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

(1) A change from greige goods of heading 5407 through 5408 to finished fabric of heading 5407 through 5408 by both dyeing and printing when accompanied by two or more of the following finishing operations: bleaching, shrinking, fulling, napping, decating, permanent stiffening, weighting, permanent embossing, or moireing; or

(2) If the country of origin cannot be determined under (1) above, a change to heading 5407 through 5408 from any heading outside that group, provided that the change is the result of a fabric making process.

The subject woven fabric designated as Guardian Polyester, Encapsulated, is formed by a fabric making process in a single country, Malaysia and therefore, under the terms of the tariff shift requirement, the country of origin is conferred in Malaysia.

HOLDING:

We affirm the classification and country of origin rendered in NY I80118, dated April 15, 2002.

The country of origin is Malaysia.

The subject merchandise is classified in subheading 5407.52.2020, HTSUSA, which provides for “Woven fabrics of synthetic filament yarn, including woven fabrics obtained from materials of heading 5404: Other woven fabrics, containing 85 percent or more by weight of textured polyester filaments: Dyed: Other: Weighing not more than 170 g/m2: Flat fabrics.” The applicable general column one rate of duty is 20 cents per kilogram plus 15.3 percent ad valorem and the textile restraint category is 619.

The designated textile and apparel category may be subdivided into parts. If so, visa and quota requirements applicable to the subject merchandise may be affected. Since part categories are the result of international bilateral agreements which are subject to frequent negotiations and changes, we suggest that you check, close to the time of shipment, the Status Report On Current Import Quotas (Restraint Levels), an internal issuance of the U.S. Customs Service, which is updated weekly and is available for inspection at the local Customs office. The Status Report on Current Import Quotas (Restraint Levels) is also available on the Customs Electronic Bulletin Board (CEBB) which can be found on the U.S. Customs website at .

Due to the changeable nature of the statistical annotation (the ninth and tenth digits of the classification) and the restraint (quota/visa) categories, you should contact the local Customs office prior to importing the merchandise to determine the current status of any import restraints or requirements.

Sincerely,

Myles Harmon, Acting Director
Commercial Rulings Division

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