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NY K87630




July 15, 2004

CLA2-61-RR:NC:TA:359: K87630

CATEGORY: CLASSIFICATION

Mr. Roy Ian Delbyck
Law Offices of Roy Ian Delbyck
186 Corte Madera Avenue
Mill Valley, CA 94941

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. Delbyck:

This is in reply to your letter dated July 5, 2004, requesting a classification and country of origin determination for women’s knitwear that will be imported into the United States.

FACTS:

Four samples of garments were submitted and you state that each of four garments will be made of a variety of fabrics with the following fiber contents: 100% cotton; 90% cotton and 10% polyester; or 80% cotton and 20% polyester.

Style 4616 consists of a woman’s knitted cardigan that has a full-front opening with a zippered closure; a hood, long raglan sleeves with self fabric cuffs which provide minimal tightening; side seam pockets; and a loose-fitting, self fabric hemmed bottom that provides little protection from the elements to the wearer. The knit pile fabric of the cardigan has more than nine stitches per two centimeters, measured in the direction in which the stitches are formed.

Style 4650 consists of a woman’s knitted jacket that has a full-front opening with a zippered closure; a hood lined with woven satin-like fabric; long raglan sleeves with rib knit cuffs to provide tightening at the wrists, two front welt pockets; and a rib knit bottom band that provides protection from the elements to the wearer. The knit fabric of the jacket has more than nine stitches per two centimeters, measured in the direction in which the stitches are formed.

Style 4258 consists of a woman’s knitted jacket that has a full-front opening with a zippered closure; a hood; long sleeves with rib knit cuffs to provide tightening at the wrists; kangaroo pockets; and a rib knit band hemming the bottom which provides protection against the elements.

Style 4638 consists of a woman’s knitted cardigan that has a full-front opening with a zippered closure; a hood, long raglan sleeves with self fabric cuffs which provide minimal tightening; front welt pockets; and a loose-fitting, self fabric hemmed bottom that provides little protection from the elements to the wearer. The knit pile fabric of the cardigan has more than nine stitches per two centimeters, measured in the direction in which the stitches are formed.

You have submitted the component parts for each style which show the incomplete garments’ processing in China. Also presented were the zippers.

PLEASE NOTE: In your presentation, you consolidated the processing/assembly steps for all the garments into one narrative. In this response we are being guided by the sample pieces and we are including in our description of the manufacturing processes that occur in China that process which we can deduce from the physical appearance of the component pieces as presented.

In all instances, you state that the fabric is produced in China.

The manufacturing operations for style 4616 are as follows:

CHINA:
cut the component panels and parts from the piece goods sew bias tape to the edges of the zipper sew the panels comprising each sleeve together sew the hood assemble the waistband assemble the front panels with pockets

COMMONWEALTH OF THE NORTHERN MARIANAS ISLANDS (CNMI):
attach the raglan sleeves to the front and back panels sew the side seams closed sew the zipper to the front attach the cuffs to the sleeves attach the hood attach the waistband

The manufacturing operations for style 4650 are as follows:

CHINA:
cut the component panels and parts from the piece goods sew the pockets to the front panels assemble the hood with lining and drawcord

COMMONWEALTH OF THE NORTHERN MARIANAS ISLANDS (CNMI):
attach the rib knit cuffs to the sleeves sew the back panel to the front panels (side seams) sew the zipper to the front panels attach the raglan sleeves to the front and back panels attach the hood attach the waistband

The manufacturing operations for style 4258 are as follows:

CHINA:
cut the component panels and parts from the piece goods assemble the hood assemble the front panels with the pockets assemble the cuffs and waistband attach bias tape to the edges of the zipper

COMMONWEALTH OF THE NORTHERN MARIANAS ISLANDS (CNMI):
sew the panels together (side seams) sew the shoulder seams sew the zipper to the front panels sew the sleeves to the garment body attach the hood attach the accent strips to the sleeves

The manufacturing operations for style 4638 are as follows:

CHINA:
cut the component panels and parts from the piece goods assemble the three panel sleeves with the self fabric cuffs attach the pockets to each front panel assemble the hood assemble the waistband

COMMONWEALTH OF THE NORTHERN MARIANAS ISLANDS (CNMI):
sew the back panel to the front panels (side seams) sew the zipper to the front panels sew the raglan sleeves to the front and back panels sew the self fabric waistband to the garment body attach the hood

ISSUE:

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

CLASSIFICATION:

The applicable subheading for styles 4616 and 4638 in the fiber fabrications of 100% cotton; 90% cotton and 10% polyester; or 80% cotton and 20% polyester will be 6110.20.2075, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for sweaters, pullovers, sweatshirts, waistcoats (vests) and similar articles, knitted or crocheted: Of cotton: Other: Other: Women’s or girls’. The general rate of duty is 16.5% ad valorem.

The applicable subheading for styles 4650 and 4258 in the fiber fabrications of 100% cotton; 90% cotton and 10% polyester; or 80% cotton and 20% polyester will be 6102.20.0010, HTSUSA, which provides for women’s or girls’ overcoats --- windbreakers and similar articles, knitted or crocheted, other than those of heading 6104: of cotton: women’s. The general rate of duty is 15.9% ad valorem.

Styles 4616 and 4638 fall within textile category designation 339. Styles 4650 and 4258 fall within textile category designation 335. 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

6101 - 6117 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 jacket, according to the processing operations described, 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, 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 style 4616, sewing the sleeves to the front and back panels, sewing the zipper to the front panels, sewing the front and back panels together (side seams), attaching the hood, and attaching the self fabric cuffs and waistband, constitute the most important assembly processes.

In the case of style 4650, sewing the sleeves to the front and back panels, sewing the zipper to the front panels, sewing the front and back panels together (side seams), attaching the hood, and attaching the rib knit cuffs and waistband, constitute the most important assembly processes.

In the case of style 4258, sewing the sleeves to the body, sewing the zipper to the front panels, sewing the shoulder seams, sewing the side seams closed and sewing the hood to the body, constitute the most important assembly processes.

In the case of style 4638, sewing the sleeves to the front and back panels, sewing the zipper to the front panels, sewing the front and back panels together (side seams), attaching the hood, and attaching the self fabric waistband, constitute the most important assembly processes.

Accordingly, the country of origin of all the styles of woman’s garments, under the production processes described for all of the styles 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 goods which are produced in the CNMI, namely, styles 4616, 4650, 4258 and 4638, are textile articles that are subject to textile agreements, the “foreign materials” which make up these various styles 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, the jacket 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 above named styles 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 garments may still qualify for duty free tariff status as long as they do not contain foreign materials which represent more than 50% of the total value of the good and they are 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 garments can only be made at the time of their importation into the United States.

HOLDING:

The country of origin of styles 4616, 4650, 4258, and 4638 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 garments may still be entitled to duty free status under the same General Note to the tariff schedule provided that they 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 garments are not subject to quota restraints and do not require 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 Camille R. Ferraro at 646-733-3049.

Sincerely,

Robert B. Swierupski
Director,

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