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NY K83960




April 1, 2004

CLA-2-RR:NC:TA:349 K83960

CATEGORY: CLASSIFICATION

Mr. Kevin W. Leonard
Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP 399 Park Avenue, 25th Floor
New York, NY 10022-4877

RE: Classification, status under the North American Free Trade Agreement (NAFTA) and country of origin determination for comforter sets and neckrolls; 19 CFR 102.21(d); sets; 19 CFR 102.21(c)(1); wholly obtained or produced in a single country; 19 CFR 102.21(c)(2); tariff shift; 19 CFR 102.21(c)(4); most important assembly or manufacturing process; 19 CFR 102.19(a); NAFTA Preference Override; Article 509

Dear Mr. Leonard:

This is in reply to your letter dated February 24, 2004, requesting a classification, status under the NAFTA and country of origin determination for comforter sets and neckrolls which will be imported into the United States. This request is made on behalf of F. Schumacher & Co.

FACTS:

The subject merchandise consists of comforter sets and neckrolls. Samples were submitted. The comforter sets contain a comforter, bed skirt and two pillow shams. The comforter shell is made from printed 100 percent cotton woven fabrics. It is stuffed with a polyester batting fabric and lightly quilted. The face side of the comforter has overlapping fabrics that are sewn to give the appearance of an opening with button closures. A 10-millemeter wide piping cord is inserted in the seam of this feature. The pillow shams are made from printed 100 percent cotton woven fabrics. They have an overlapping flap opening with self-fabric ties at each end. The bed skirt or dust ruffle has a skirt with a 17-inch drop on three sides. The skirt is made from printed 100 percent cotton woven fabric and the platform section is made from 70 polyester and 30 percent cotton woven fabric. The components of the comforter sets are packed together for retail sale in a zippered vinyl bag.

The neckrolls measure approximately 13 inches long and 6 inches in diameter. The outer shell of the cushions is made from printed 100 percent cotton woven fabrics and they are stuffed with polyester fibers. The ends of the neckroll have a ruffle, fabric covered button and a simulated drawstring opening. You have described two manufacturing scenarios for each product. The manufacturing operations for the comforter sets and neckrolls are as follows:

Comforter Sets - Scenario 1
PAKISTAN:
-cotton fabric for the comforter shell, shams and bed skirt is woven. -70/30 polyester and cotton fabric (platform section of bed skirt) is woven. -cotton fabric is printed with several different designs and finished. -fabrics are cut to size and shape.
-components are sewn creating the comforter shell, shams and bed skirt. -comforter shell, shams and bed skirt are shipped to Mexico.

MEXICO:
-polyester batting fabric is formed.
-batting is cut to size and stuffed into the comforter shell. -comforter is sewn closed and lightly quilted. -comforter, shams and bed skirt are packed for retail sale and shipped.

Comforter Sets - Scenario 2
The processing operations performed in Pakistan will instead be performed in China. The processing operations in Mexico remain the same.

Neckrolls - Scenario 1
PAKISTAN:
-cotton fabric is woven.
-cotton fabric is printed with several different designs and finished. -fabrics are cut to size and shape.
-components are sewn creating the neckroll shell. -cushion shell is shipped to Mexico.

MEXICO:
-loose polyester fill is formed.
-fill is stuffed into the neckroll shell. -neckroll is sewn closed.
-neckroll is packed and shipped.

Neckrolls - Scenario 2
The processing operations performed in Pakistan will instead be performed in China. The processing operations in Mexico remain the same.

ISSUE:

What are the classification, eligibility under NAFTA and country of origin for the subject merchandise?

CLASSIFICATION:

The comforter sets meet the qualifications of "goods put up in sets for retail sale". The components of the sets consist of at least two different articles which are, prima facie, classifiable in different headings. They are put together to meet a particular need or carry out a specific activity and they are packed for sale directly to users without repacking. The comforter imparts the essential character of the sets.

The applicable subheading for the comforter sets will be 9404.90.8505, Harmonized Tariff Schedule of the United States Annotated (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: quilts, eiderdowns, comforters and similar articles with outer shell of cotton. The general rate of duty will be 12.8 percent ad valorem.

The applicable subheading for the neckrolls will be 9404.90.1000, 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: pillows, cushions and similar furnishings: of cotton. The general rate of duty will be 5.3 percent ad valorem.

Although classified as a set the individual components of the comforter sets are subject to textile category numbers as if they were classified separately. The comforters fall within textile category designation 362. The pillow shams and bed skirts fall within textile category designation 369. The neckrolls fall within textile category designation 369.

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 Textile Status Report for Absolute Quotas, which is available at our Web site at www.cbp.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.

NAFTA ELIGIBILITY:

In both scenarios the comforters and neckrolls undergo processing operations in Mexico. Additionally, the comforters are packaged with the shams and bed skirts in Mexico. Mexico is a country provided for under the North American Free Trade Agreement. These products will be eligible for the NAFTA preference if they qualify to be marked as a good of Mexico and if they are wholly obtained or produced in the NAFTA territories or transformed in Mexico so that the non-originating material undergoes a change in tariff classification described in subdivision (t) to General Note 12, HTSUSA. All of the components of the set, not just the item that imparts the essential character to the set, must meet the terms of General Note 12(b). For heading 9404, HTSUSA, the appropriate subdivision (t) rule state that:

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.

When the non-originating comforter shells and neckroll shells from Pakistan or China enter Mexico, they are classified in heading 6307, HTSUSA. As heading 6307, HTSUSA is not excepted by subdivision (t), the merchandise undergoes the requisite change in tariff classification and the comforters and neckrolls qualify for NAFTA preference.

The bed skirts and pillow shams in both scenarios are finished products when they leave Pakistan or China and are imported into Mexico. The bed skirts are classifiable under heading 6303, HTSUSA, the pillow shams are classifiable under heading 6304, HTSUSA. As neither of these headings are excepted by subdivision (t), each of these items undergoes the requisite change in tariff classification and they qualify for NAFTA preference.

The fact that the bed skirts and pillow shams are merely packaged together with the originating comforter in Mexico does not disqualify the comforter sets from being considered as originating goods. The issue was addressed in Headquarters Ruling letter (HQ) 561326, dated April, 26, 1999. In that ruling, Customs and Border protection explained that there is no language in General Note 12, HTSUSA, which would disqualify a good from obtaining originating status by virtue of merely having undergone simple packaging or combining operations. Thus, non-originating items may undergo the requisite tariff shift under General Note 12 (t), HTSUSA, when packaged in Mexico with originating items.

Pursuant to the analysis set forth above, all of the items in the two comforter set scenarios and the neckrolls in both scenarios qualify as originating goods. Accordingly, they will be entitled to the special "MX" rate of duty if they qualify to be marked as a good of Mexico and provided that all other NAFTA requirements are met.

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.

Section 102.21(d) addresses the treatment of sets for country of origin purposes. Section 102.21(d) provides the following:

Where a good classifiable in the HTSUS as a set includes one or more components that are textile or apparel products and a single country of origin for all of the components of the set cannot be determined under paragraph (c) of this section, the country of origin of each component of the set that is a textile or apparel product shall be determined separately under paragraph (c) of this section.

The classification of the subject comforter sets, as per an essential character determination, are based on the comforter, however, per the terms of Section 102.21(d), one must determine whether or not a single country of origin exists for the entire set.

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 bed skirts and pillow shams in both scenarios were wholly obtained or produced in China or Pakistan. Thus the country of origin initially appears to be Pakistan for scenario 1 and China for scenario 2. Since the comforter and neckrolls were not wholly obtained or produced in a single country, territory or insular possession, paragraph (c)(1) of Section 102.21 is inapplicable for those items.

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

9404.90 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 a fabric-making process.

Subheading 9404.90.10 (neckrolls) is not included in the paragraph (e)(2) exception to the above tariff shift rule. The neckrolls are made from a fabric that was formed in a single country. As the fabrics comprising the neckrolls are formed in a single country, that is, Pakistan in scenario 1 and China in scenario 2, as per the terms of the tariff shift requirement, country of origin is conferred in Pakistan in scenario 1 and China in scenario 2. Subheading 9404.90.85 (comforter sets) is included in paragraph (e)(2) however, goods classified in that subheading as of cotton or which consist of fiber blends containing 16 percent or more by weight cotton are excepted from paragraph (e)(2). The comforters are made from shell fabrics and a batting fabric. As the fabrics comprising the comforters in both scenarios are formed in more than one country, 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 comforters are not knit and subheading 9404.90, HTSUSA, is excepted from provision (ii), 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 most important manufacturing process occurs at the time of fabric making. Basing the country of origin determination on the fabric making process as opposed to the assembly process carries out the clear intent of Section 334 as expressed in Section 334 (b)(2) and Part 102.21(c)(3)(ii). In the case of the subject comforters, the fabric making process of the outer shell constitutes the most important manufacturing process. The outer shell of the comforters in both scenarios is made from fabrics formed in a single country. Accordingly, the fabric making process in Pakistan or China, where the fabrics for the outer shell is formed, constitutes the most important manufacturing process and the country of origin for the comforters is Pakistan in scenario 1 and China in scenario 2.

However, the comforter sets and the neckrolls qualify as a NAFTA originating good. As stated in Section 102.19(a):

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 the neckrolls qualify as a NAFTA originating good, applying the terms of Section 102.19(a), the country of origin of the neckrolls is Mexico. The neckrolls in both scenarios will be entitled to the special "MX" duty rate, provided that all other requirements of the NAFTA are met.

We have previously determined that the items in the comforter set are "originating" for purposes of the NAFTA preference rule applicable to the set. It is the belief of Customs and Border Protection that Section 102.19(a) operates as an override for all of the items in the set and that all of the items are entitled to be marked as country of origin Mexico. Although packing is considered a non-qualifying operation under Section 102.17, the assembly of the comforter (both scenarios) in Mexico meets the requirement that the good underwent production other than minor processing. Customs and Border Protection has previously stated that as long as one item in the set undergoes production other than minor processing, the remaining items in the set will receive the benefit of the NAFTA override. See HQ 559421, dated September 16, 1996; HQ 560577, dated August 4, 1997; HQ 560456, dated September 26, 1997; and HQ 560992, dated July 6, 1998. Thus, each item in the comforter sets in both scenarios qualifies to be marked as country of origin Mexico.

As each item in the comforter sets has been found to be originating and qualifies to be marked Mexico, the comforter sets in both scenarios are entitled to the special "MX" duty rate, provided that all other requirements of the NAFTA are met.

Although part of a set for classification purposes, the comforter, pillow shams and bed skirts are treated for quota and visa purposes as if they are imported separately. Section 204 of the Agricultural Act of 1956, 7 U.S.C. 1854, as amended, authorizes the President to limit importation into the United States of any textile or textile product. The President, in Executive Order 11651, 37 Fed. Reg. 4699 (Mar. 4, 1972), delegated the authority to supervise and implement all textile agreements and arrangements negotiated pursuant to Section 204 to the Committee for the Implementation of Textile Agreements (CITA).

CITA requires, as originally set forth in 53 Fed. Reg. 52765 (Dec. 29, 1988), clarified in 54 Fed. Reg. (Aug. 24, 1989) and reconfirmed in 67 Fed. Reg. 12977 (Mar. 20, 2002) that:
all applicable visa and quota requirements will apply for textiles and their products which are classified as parts of a set. The rule applies to all items which, if imported separately, would require a visa and the reporting of quota.

The comforters, if imported separately, are a NAFTA "originating" good and qualify to be marked as country of origin Mexico by operation of the NAFTA override of Section 102.19(a). Thus the country of origin for the comforters in both scenarios is Mexico for duty, marking and quota/visa purposes. However, if the bed skirts and pillow shams had been imported separately they would not have qualified as originating goods and would not receive the benefit of the NAFTA override. The country of origin for the bed skirts and pillow shams for duty and marking purposes is Mexico. The country of origin of the scenario 1 pillow shams and bed skirts for quota/visa purposes is Pakistan and the country of origin for quota/visa purposes for the scenario 2 bed skirts and pillow shams is China. The country of origin for the neckrolls in both scenarios is Mexico for duty, marking and quota/visa purposes.

HOLDING:

The country of origin of the comforter sets in both scenarios for marking and duty purposes is Mexico. The comforter sets will be entitled to the NAFTA “MX” duty rate of Free upon compliance with all applicable laws, regulations and agreements. For quota and visa purposes the country of origin of the comforters is Mexico and the origin of the shams and bed skirts is China or Pakistan. Based upon international textile agreements, products of China or Pakistan falling within textile category designation 369 are not subject to quota or visa restrictions.

The country of origin of the neckrolls in both scenarios for duty, marking and quota/visa purposes is Mexico. The neckrolls will be entitled to the NAFTA “MX” duty rate of Free upon compliance with all applicable laws, regulations and agreements. The neckrolls are not subject to quota or visa restrictions.

This ruling is being issued under the provisions of Part 181 of the Customs Regulations (19 C.F.R. 181). Should it be subsequently determined that the information furnished is not complete and does not comply with 19 CFR 181.100(a)(2), 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.

This ruling letter is binding only as to the party to whom it is issued and may be relied on only by that party.

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 John Hansen at 646-733-3043.

Sincerely,

Robert B. Swierupski
Director,

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