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HQ 966132




April 11, 2003

CLA-2 RR:CR:TE 966132 SG

CATEGORY: CLASSIFICATION MARKING

TARIFF NO: 6115.92.9000

Ms. Yvonne Sherri Lopez
AFI (California), Inc
2381 Rosecrans Avenue, #100
El Segundo, CA 90245

RE: Country of origin determination for socks; NAFTA; 19 CFR 102.21; 19 CFR 102.19(b); 19 CFR 12.130(c).

Dear Ms. Lopez:

This is in response to your letter of October 16, 2002, and follow-up letter of November 13, 2002, requesting classification, duty, country of origin and marking determinations for socks manufactured by your client, Cyrus Hosiery Manufacturing, Inc. You have submitted samples of socks, two before being sent to Mexico and two after their return to the United States, for our review.

FACTS:

Your client, Cyrus Hosiery Manufacturing, Inc. (Cyrus), is an American manufacturer of hosiery. Cyrus knits socks to shape from United States ("U.S.")-origin yarn. The socks are then sent to Mexico for finishing-sewing the toe closed, bleaching, ironing, and finishing. Lastly, the socks are packaged and returned to the U.S. The socks are 80 percent cotton and 20 percent polyester. You advise that the socks' packaging will state "Made in USA/Assembled in Mexico." You ask if this is sufficient for Customs.

ISSUES:

1) How are the socks classified?
2) Are the imported socks entitled to NAFTA preference? 3) What is the country of origin of the socks? 4) What is the acceptable marking for the socks?

LAW AND ANALYSIS:

CLASSIFICATION

Classification of goods under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA) is governed by the General Rules of Interpretation (GRI's). GRI 1 provides that classification shall be determined according to the terms of the headings and any relative section or chapter notes. Merchandise that cannot be classified in accordance with GRI 1 is to be classified in accordance with subsequent GRI's taken in order.

Therefore, merchandise is to be classified under the heading that most specifically describes or identifies the merchandise.

Heading 6115, HTSUS provides for "panty hose, tights, stockings, socks and other hosiery, including stockings for varicose veins, and footwear without applied soles, knitted or crocheted."

Pursuant to GRI 1, the socks are classified in heading 6115. The applicable subheading for the socks will be 6115.92.9000, HTSUSA, which provides for "Panty hose, tights, stockings, socks and other hosiery, including stockings for varicose veins, and footwear without applied soles, knitted or crocheted: Other: Of cotton: Other: Other."

NAFTA PREFERENCE

General Note 12, HTSUS, incorporates Article 401 of the North American Free Trade Agreement ("NAFTA") into the HTSUS. Note 12(a)(ii) 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 the Treasury ([without regard to] whether 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...

Accordingly, the socks at issue will be eligible for the "Special" "MX" rate of duty provided they are a NAFTA "originating" good under General Note 12(b), HTSUS, and they qualify as products of Mexico under the marking rules. 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; or

(iii) they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials; ...

The knit-to-shape socks are manufactured exclusively in the U.S. and Mexico.

You have not provided information as to the country of origin of the fibers making up the yarn of which the socks are knit-to-shape. Without that information we are unable to ascertain whether they are wholly obtained or produced entirely in the territory of Canada, Mexico and/or the U.S. We therefore offer the following scenarios:

1. If the fibers that make up the yarn are obtained from the U.S, Mexico, or Canada, the socks are considered goods wholly obtained or produced in the territory of a NAFTA party and meet the eligibility requirements of GN 12(b)(i). Thus pursuant to GN 12(b)(i), the socks would qualify as socks originating in the territory of a NAFTA party.

2. If the fibers making up the yarn is not wholly obtained in the U.S., Mexico or Canada, it will only qualify as an originating good if it has been transformed in the territory of Canada, Mexico and/or the U.S. such that the non-originating material used in the production of the goods undergoes a change in tariff classification. Therefore, we must ascertain whether the non-originating material (fiber making up the yarn) is transformed in the U.S. pursuant to GN 12(b)(ii)(A). To qualify under this provision, the non-originating fiber must undergo the change in tariff classification set forth in GN

12(t), HTSUSA. The sock is classifiable in heading 6115, HTSUS. The NAFTA change in tariff classification rule for heading 6113 through 6117 states:

A change to heading 6113 through 6117 from any other chapter, except from headings 5106 through 5113, 5204 through 5212, 5307 through 5308 or 5310 through 5311, chapter 54, or heading 5508 through 5516 or 6001 through 6006, provided that the good is both cut (or knit to shape) and sewn or otherwise assembled in the territory of one or more of the NAFTA parties.

At the time the cotton fiber is exported from the non-NAFTA territory, it is believed that it is classifiable under heading 5201, HTSUS, which provides for "Cotton, not carded or combed" or heading 5203, HTSUS, which provides for "Cotton, carded or combed". As these headings are not excepted by subdivision (t), the non-originating material undergoes the requisite change in tariff classification. Thus pursuant to GN 12(b)(ii), the socks would also qualify as goods originating in the territory of a NAFTA party.

Accordingly, the socks qualify as an originating good under GN 12(b), HTSUS, whether the fibers that make up the yarn from which they are knit to shape was wholly produced in the U.S. or is of foreign material.

COUNTRY OF ORIGIN

Pursuant to section 334 of the Uruguay Round Agreements Act (codified at 19 USC Section 3592), rules of origin were effective for textile products entered, or withdrawn from warehouse, for consumption on or after July 1, 1996. These rules were published in the Federal Register, 60 Fed. Reg. 46188 (September 5, 1995). Section 102.21, Customs Regulations (19 CFR Section 102.21), sets forth the general rules to determine country of origin of textile and apparel products. Thus, the country of origin of a textile product will be determined by a hierarchy of rules set forth in paragraphs (c)(1) through (c)(5) of Section 102.21. Section 334 was amended by section 405 of the Trade and Development Act of 2000 and the implementing regulations, 19 CFR 102.21, have been amended accordingly (see 68 FR 8711).

In order to determine the proper country of origin for NAFTA marking purposes, Section 102.21 is applicable. Customs specifically referred to this application in the Federal Register, June 6, 1996 (61 FR 28932, 28933), which contains the rules for determining the country of origin of a good for purposes of the Annex 311 of the NAFTA. Customs stated the following:

New Section 102.21 was modeled on the approach taken in the interim Part 102 texts as published in T.D. 94-4 and thus incorporates a general statement of applicability...(paragraph (b)), general origin rules...Of particular note for purposes of the present document is the definition of "textile or apparel product"
in Section 102.21(b)(5) that delineates the class of goods covered by the Section 102.21 rules. That definition identifies those goods with reference to classification in the HTSUS...Thus, if a good is classifiable in an HTSUS provision listed in Section 102.21(b)(5), precedence must be given to the Section 102.21 rules over any other regulatory origin provision with regard to that good, including any origin rules contained elsewhere in part 102.

Section 102.21(c)(1) sets forth the general rule for determining the country of origin of a textile or apparel product in which the good is wholly obtained or produced in a single country, territory, or insular possession. As the subject merchandise is knit-to-shape in the U.S., and sewn, bleached, ironed, and packaged in Mexico, it is not wholly obtained or produced in a single country. Thus, section 102.21(c)(1) is inapplicable.

Section 102.21(c)(2) provides for instances where the country of origin of a textile or apparel product cannot be determined under paragraph (c)(1) of this section. Section 102.21(c)(2) states:

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 foreign material 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.

Section 102.21(e)(1) states "The following rules will apply for purposes of determining the country of origin of a textile or apparel product under paragraph (c)(2) of this section:"

6101-6117 (3) If the good is knit to shape, except for goods of subheading 6117.10, provided in paragraph (e)(2) of this section, a change to 6101 through 6117 from any heading outside that group, provided that the knit to shape components are knit in a single country, territory, or insular possession.

As the socks are not wholly obtained or produced in a single country, we must apply Section 102.21(c)(2) and the applicable requirement of Section 102.21(e)(1) to the proposed scenario to determine the country of origin of the subject goods.

"Knit to shape", as that term is defined in 19 CFR 102.21(b)(3), applies to any good of which 50 percent or more of the exterior surface area is formed by major parts that have been knitted directly to the shape used in the good. Because the U.S.-origin yarn was knit in the U.S. into the socks, Customs considers them knit to shape as that term is used in section 102.21(b)(3).

The socks are classifiable in heading 6115, HTSUS. We discussed above, it appears that any non-originating material does undergo the requisite change in tariff classification. Pursuant to the applicable provisions of Section 102.21(c)(2), the country of origin of the socks is the U.S., the single country in which each foreign material incorporated in the socks underwent an applicable change in tariff classification as specified in paragraph (e).

However, the NAFTA Preference Override provision 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 before its return to the United States.

That is, NAFTA originating goods which are exported and returned to the U.S. after having been advanced in value or improved in condition in another NAFTA country and which are determined to be of U.S.-origin under Part 102, Customs Regulations, are treated, for duty purposes only, as products of the last NAFTA country where that good was advanced in value or improved in condition before its return to the U.S. Based on the facts presented, the socks 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 (another NAFTA country) by virtue of having the toes of the socks closed, bleaching, ironing, and packaging, section 102.19(b), Customs Regulations, is applicable, and the country of origin of the socks, for duty purposes is Mexico. Thus, the imported socks are entitled to NAFTA preferential treatment at the "MX" rate, assuming a Certificate of Origin (See 19 CFR 181.11) is completed and signed for the goods.

NAFTA MARKING RULES

The marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of section 1304.

The country of origin marking requirements for a "good of a NAFTA country" are also determined in accordance with Annex 311 of the NAFTA, as implemented by section 207 of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057) (December 8, 1993) and the regulations set forth in 19 CFR Parts 102, 134. The marking statute only requires articles of foreign origin to be marked with their country of origin (19 U.S.C.1304). Since the country of origin for marking purposes of the socks imported into the U.S. will be the U.S., the socks will be excepted from country of origin marking requirements. Therefore the socks need not be marked.

You have requested approval of the following marking "Made in USA/Assembled in Mexico". This indication is not acceptable. The term "assembled" is authorized, pursuant to 19 CFR §134.43(e), as an indication of an article's country of origin. Accordingly, use of that term in reference to Mexico, which is not the country of origin for the purposes of importation into the U.S., together with another phrase stating that the product is "made in" another country is confusing and contradictory. No single indication of origin is clearly given.

The Federal Trade Commission ("FTC") has jurisdiction concerning the use of the phrase "Made in the U.S.A.," or similar words denoting U.S. origin. Consequently, any inquiries regarding the use of such phrases reflecting U.S. origin should be directed to Steven Ecklund at the FTC, at the following address: Federal Trade Commission, 6th & Pennsylvania Avenue, N.W., Washington, D.C. 20508 or by telephone at (202) 326-2841

HOLDING:

CLASSIFICATION

The applicable subheading for the sock for tariff classification will be 6115.92.9000, HTSUSA, which provides for "Panty hose, tights, stockings, socks and other hosiery, including stockings for varicose veins, and footwear without applied soles, knitted or crocheted: Other: Of cotton: Other: Other."

NAFTA RATE

The imported socks are entitled to NAFTA duty preference at the "MX" rate, which is free.

COUNTRY OF ORIGIN

Based upon the information submitted, the country of origin of the socks, for marking purposes, is the United States.

ACCEPTABLE MARKING

The socks are not subject to the country of origin marking requirements of 19 U.S.C. 1304.

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 sections states that a ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect.

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 this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

Myles B. Harmon, Director
Commercial Rulings Division


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