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NY I87329




November 18, 2002

CLA2-RR:NC: 61: N3: I87329

CATEGORY: CLASSIFICATION

Mr. Eric Flicker
President
S.C. Trader, Inc.
1143 East Janis St.
Carson, California 90746

RE: Classification and country of origin determination for a sample of women’s knitwear; 19 CFR 102.21(c)(4); Commonwealth of the Northern Mariana Islands; General Note 3(a)(iv), HTSUSA; 19 CFR 7.3(d)

Dear Mr. Flicker:

This is in reply to your letter dated October 9, 2002, requesting a classification and country of origin determination for a sample of women’s knitwear which will be imported into the United States.

FACTS:

The subject merchandise consists of a woman’s knitted, short sleeved pullover that is made from 100% cotton fabric. The pullover features a v-shaped neckline with a shirt collar. The fabric of the garment has more than nine stitches per two centimeters, measured in the direction in which the stitches were formed. The pullover has no style number.

The manufacturing operations for the pullover are as follows:

In China
-cut fabric into component panels
-sew interlining to collar
-sew collar
-sew collar to front panel
-sew placket to front panel
-sew side seams at lower third only
-hem bottom

In the Commonwealth of the Northern Mariana Islands -sew front and back panels at shoulder seams -sew collar to body
-sew sleeves to body
-hem sleeves
-sew side seams at remainder of seams

ISSUE:

What are the classification and country of origin of the subject merchandise?

CLASSIFICATION:

The applicable subheading for the woman’s knit pullover will be 6110.20.2075, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for sweaters, pullovers, ---and similar articles, knitted or crocheted: of cotton: other: other: other: women’s. The general rate of duty will be 17.3% ad valorem.

The pullover falls within textile category designation 339. The designated textile and apparel categories and their quota and visa status are the result of international agreements that are subject to frequent renegotiations and changes. To obtain the most current information, we suggest that you check, close to the time of shipment, the U.S. Customs Service Textile Status Report, an internal issuance of the U.S. Customs Service, which is available at the Customs Web Site at WWW.CUSTOMS.GOV. In addition, the designated textile and apparel categories may be subdivided into parts. If so, visa and quota requirements applicable to the subject merchandise may be affected and should also be verified at the time of shipment.

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

6110.20.20 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 heading 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 good must be assembled in a single country, territory or insular possession. Accordingly, as the pullover is assembled in more than one country, territory or insular possession, it does not satisify the conditions of the tariff shift and therefore, 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.

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 woman’s knitted pullover, the sewing of the front and back at the shoulder seams, the attaching of the collar to the body, the attaching of the sleeves to the body and the sewing of the remainder of the side seams, all of which occur in the Commonwealth of the Northern Mariana Islands, constitute the most important assembly processes. Accordingly, the country of origin of the pullover is the Commonwealth of the Northern Mariana Islands.

General Note 3(a)(iv), HTSUSA, permits products of insular possessions of the United States (of which the Commonwealth of the Northern Mariana Islands is one) to be imported into the United States free of duty obligations if certain requirements are fulfilled. Duty free status is granted to those goods which
are the growth or product of the possession; or are manufactured or produced in any such possession from materials which are the growth, product or manufacture of any such possession or of the customs territory of the United States, or of both: and do not contain foreign materials which represent more than 50% of the goods’ total value (for textile and apparel articles subject to textile agreements); and are shipped directly to the customs territory of the United States from the insular possession.

Since the Commonwealth of the Northern Mariana Islands is an insular possession of the United States, and since the good which is produced in the Commonwealth of the Northern Mariana Islands, namely, the woman’s knitted pullover, is a textile article that is subject to textile agreements, the “foreign materials” which make up the pullover must not represent more than 50% of the article’s appraised value.

In order to meet the requirements of General Note 3(a)(iv), HTSUSA, we must determine whether the component panels which are imported into the Commonwealth of the Northern Mariana Islands from China are substantially transformed by processing in the Commonwealth and thereby become a product of that insular possession. A substantial transformation occurs when an item emerges from a process with a new name, character or use that is different from that possessed by the item prior to processing.

In determining whether the cost or the value of the Chinese component panels should be considered part of the cost of the “foreign materials” or of the cost of the materials produced in the Commonwealth of the Northern Mariana Islands for the purpose of applying the 50% foreign value limitation under General Note 3(a)(iv), we must first consider whether the component panels undergo a double substantial transformation during the processing in the insular possession. Treasury Decision (T.D.) 88-17, effective April 13, 1988, determined that the concept of double substantial transformation should be used in deciding whether foreign material that does not originate in the insular possession may nevertheless qualify as part of the value of material produced in the insular possession. To do this the foreign material must be substantially transformed in the insular possession into a new and different product and then that product must be transformed yet again into another new and different product which is exported directly to the United States. If this happens to the foreign material, then its cost can be considered part of the value of the materials produced in the insular possession.

As an example of the double substantial transformation principle as it was applied to textile wearing apparel see Headquarters Ruling Letter (HRL) 556214, March 20, 1992, in which Customs ruled that foreign rolled fabric that was imported into the Commonwealth of the Northern Mariana Islands where it was cut to shape and then assembled into golf shirts and pullovers did undergo a double substantial transformation. In contrast, the present question involves component panels that are cut in China, not in the Commonwealth of the Northern Mariana Islands. Further, these panels are partially assembled in China. Therefore, the component panels do not undergo a double substantial transformation in the insular possession and their cost may not be included as part of the value of materials produced in the Northern Mariana Islands.

Despite the fact that the Chinese knitted and cut component panels of the pullover are considered foreign materials when they are shipped to the Commonwealth, and regardless of the determination that these panels do not undergo a double substantial transformation when they are processed in the insular possession, the pullover may still qualify for duty free tariff status as long as it does not contain foreign materials which represent more than 50% of the total value of the goods and it is shipped directly to the United States from the insular possession. Section 7.3(d) of the Customs Regulations (C.R.) states that such a determination must be based on a cost comparison between:

The manufacturer’s actual materials cost plus the cost of transporting those materials to the insular possession (excluding duties, taxes and charges after landing) Versus the final appraised value of the imported goods under Section 402a Tariff Act of 1930, as amended.
We note that a final determination regarding whether the foreign value limitation is satisfied for the instant merchandise can only be made at the time of entry of the goods into the United States

HOLDING:

The country of origin of the woman’s pullover is the Commonwealth of the Northern Mariana Islands. The component panels knitted and partially assembled in China are considered foreign materials for the purpose of calculating the 50% foreign value limitation under General Note 3(a)(iv), HTSUSA. However, the pullover may still be eligible for duty free status provided that it is imported directly from the Commonwealth to the United States, and that the 50% foreign value limitation is satisfied at the time of entry. Since the Commonwealth of the Northern Mariana Islands is not a foreign country and, therefore, the United States has no bilateral quota or visa agreement with it, the pullover is neither subject to quota nor to the requirement of a visa.

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 177.9(b)(1). 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 177 of the Customs Regulations (19 C.F.R. 177). Should it be subsequently determined that the information furnished is not complete and does not comply with 19 CFR 177.9(b)(1), 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 in accordance with 19 CFR 177.2.

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 646-733-3049.

Sincerely,

Robert B. Swierupski
Director,

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