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NY J89933




November 4, 2003

CLA2-61-RR:NC:TA-359:J89933

CATEGORY: CLASSIFICATION

Mr. Patrick Yeung
Come Long Fashion Knits, Ltd.
8/F Universal Industrial Bldg.
60-62 Sha Tsui Road
Tsuen Wan, New Territories,
Hong Kong

RE: Classification and country of origin determination for 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. Yeung:

This is in reply to your letter dated October 21, 2003, requesting a classification and country of origin determination for women’s knitwear that will be imported into the United States. The sample and its component panels are retained with your permission for instructional purposes.

FACTS: The subject merchandise consists of a woman’s knitted cardigan, Style AMS 04-5315 (Missy) / APS 04-5315 (Petite) / AWS 04-5315 (Woman’s), that consists of a knitted French terry body fabric that is made from 96% cotton, 4% spandex fibers, and a 1X1 rib knit fabric trim and woven fabric trim each of which consists of 100% cotton fibers. The cardigan has a full-front opening with a zipper closure; an attached self-fabric hood; long sleeves that are finished with loose-fitting, turned back woven cuffs; a rib knit waistband; two vertical opening side pockets at the front of the waist; a half-moon woven fabric sweat patch that is sewn to the inside of the back panel at the neck; and a woven fabric lining inside the hood. The fabric of the woven cuffs, the inside hood lining and the sweat patch are all matched with respect to their fabric construction and color. The body fabric of the cardigan consists of four panels in the front of the garment and three in the back. The body fabric has more than nine stitches per two centimeters, measured in the direction in which the stitches are formed.

. You have also submitted the component panels and parts of the cardigan that show the partially assembled cardigan after processing in China under two versions. “Version 1” is the complete back panel (composed of three panels) that is sewn at the shoulders and neck to the complete front panels (two panels on each side of the opening) and to the hood. This version of the partially assembled cardigan also includes the woven fabric lining sewn to the hood, the woven sweat patch sewn to the back panel and the front pockets. There are also these separate parts which are not yet sewn to the cardigan: the sleeves, the woven fabric trim of the sleeve cuffs, the waistband, and the zipper with the zipper tape attached.

“Version 2” of the partially assembled cardigan includes the complete back panel (three panels sewn together) that is sewn at the shoulders to the complete front panels (two panels on each side). This unfinished version of the cardigan also includes the inside woven sweat patch and the front pockets which are sewn to it. These separate parts are not yet sewn to the unfinished cardigan: the hood with its lining, the sleeves, the woven fabric trim for the sleeve cuffs, the waistband, and the zipper with its zipper tape attached.

The manufacturing operations for the cardigan are as follows:

Under Version 1
In China
-cut the component panels and parts from the rolled fabric -construct front panels, back panels and hood -sew lining in hood
-sew half moon sweat patch to back panel
-sew pockets to front panels
-sew hood to join front and back panels
-sew front and back panels at shoulder seams

In the Commonwealth of the Northern Mariana Islands (CNMI) -sew cuffs to sleeves and construct sleeves -sew sleeves to body
-sew zipper with zipper tape to front panels -sew side seams
-sew waistband to body
-sew labels
-iron, inspect and pack;

Under Version 2
In China
-cut rolled fabric into component panels and parts -construct front panels, back panel and hood -sew woven fabric lining to hood
-sew woven sweat patch to back panel
-sew pockets to front panels
-sew front and back panels at the shoulder seams

In the CNMI
-sew hood to front and back panels
-sew cuffs to sleeves
-sew sleeves to body
-sew zipper and zipper tape to front panels -sew side seams
-sew waistband to body
-sew labels
-iron, inspect and pack.

ISSUE:

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

CLASSIFICATION:

The applicable subheading for the woman’s knitted, cotton cardigan, Style AMS 04-5315, APS 04-5315, AWS 04-5315, 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 rate of duty will be 16.9% ad valorem.

The cardigan 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:

Section 334 of the Uruguay Round Agreements Act (codified at 19 U.S.C. 3592), enacted on December 8, 1994, provided rules of origin for textiles and apparel entered, or withdrawn from warehouse, for consumption, on and after July 1, 1996. Section 102.21, Customs Regulations (19 C.F.R. 102.21), published September 5, 1995, in the Federal Register, implements Section 334 (60 FR 46188). Section 334 of the URAA was amended by Section 405 of the Trade and Development Act of 2000, enacted on May 18, 2000, and accordingly, Section 102.21 was amended (68 Fed. Reg. 8711). Thus, the country of origin of a textile or apparel product shall be determined by the 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 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 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 cardigan, according to your processing operations, is assembled in more than one country, territory or insular possession, it does not satisfy the conditions of the tariff shift. 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, territory or insular possession, 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 cardigan, the following constitute the most important assembly processes: -sewing the sleeves to the body
-sewing the zipper with its zipper tape to the front panels -sewing the side seams and
-sewing the waistband to the body all of which occur in the CNMI;

-sewing the hood to the front and back panels -sewing the sleeves to the body
-sewing the zipper with its zipper tape to the front panels -sewing the side seams and
-sewing the waistband to the body, all of which occur in the CNMI.

Accordingly, the country of origin of the woman’s knitted cardigan, under the two versions of the production processes that are described, is the CNMI.

General Note 3(a)(iv), HTSUSA, permits products of insular possessions of the United States, of which the CNMI is one, to be imported into the United States free of duty obligations if certain requirements are met. 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 CNMI is an insular possession of the United States, and since the good which is produced in the CNMI, namely, the cardigan, is a textile article that is subject to textile agreements, the “foreign materials” which make up the cardigan must not represent more than 50% of the article’s 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 CNMI from China are substantially transformed by the processing in the CNMI and therefore, 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 CNMI for the purpose of applying the 50% foreign value limitation under General Note 3(a)(iv), we must 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 the 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 that 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 materials produced in the insular possession.

For an example of the double substantial transformation principle as it was applied to textile wearing apparel we look to Headquarters Ruling Letter (HRL) 556214, dated March 20, 1992, in which Customs ruled that the foreign rolled fabric that was imported into the CNMI 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 CNMI. Further, in your proposed production process the cardigan undergoes partial assembly in China. Thus, 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 CNMI.

Despite the fact that the Chinese knitted and cut component panels of the cardigan are considered foreign materials when they are shipped to the CNMI, and regardless of the determination that those foreign panels do not undergo a double substantial transformation when they are processed in the insular possession, the cardigan 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 good and it is shipped directly to the United States from the insular possession. Section 7.3 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 the final determination regarding whether the foreign value limitation is satisfied for the cardigan can only be made at the time of its importation into the United States.

HOLDING:

The country of origin of the woman’s knitted cardigan under your proposed production processes is the Commonwealth of the Northern Mariana Islands. The component panels that are knitted, cut and partly 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 cardigan may still be entitled to duty free status under the same General Note to the tariff schedule provided that it is imported directly from the CNMI to the United States, and that the 50% foreign value limitation is satisfied at the time of entry of the merchandise into the United States. Since the CNMI is not a foreign country and therefore, the United States has no quota or visa agreement with it, the cardigan is neither subject to quota restraints 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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