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NY K87632




August 6, 2004
CLA2-61:RR:NC:WA 361 K87632

CATEGORY: CLASSIFICATION

Mr. Roy Ian Delbyck
American Attorneys-At-Law
186 Corte Madera Avenue
Mill Valley, California 94941

RE: Classification and country of origin determination for three styles of women’s knit pants and a knit pullover; 19 CFR 102.21(c)(4); Commonwealth of the Northern Mariana Islands; General Note 3(a)(iv), HTSUSA.

Dear Mr. Delbyck:

This is in reply to your letter dated July 5, 2004, requesting a classification and country of origin determination for a pair of women’s knit pants and a knit pullover that will be imported into the United States. Samples of the completed garments, as well as the components, in their partially assembled condition, were submitted with your request.

FACTS:

The three styles of pants may be made from knit fabric that is either 100 percent cotton or 90 percent cotton and 10 percent polyester, or 80 percent cotton and 20 percent polyester, or 100 percent polyester. Each of the garments also has a small decorative plastic patch near the waistband.

Style 4618 is a pair of women’s pull-on velour pants with an elasticized waistband, side seam inserts and piping, and hemmed leg openings. The garment is constructed from the following parts - four leg panels, two side seam inserts, side seam piping, a waistband component, and waistband elastic.

Styles 4264 and 4196 are women’s pull-on pants with an elasticized waistband and a drawstring, two applique strips on each side seam, and hemmed leg openings. The garment is constructed from the following parts - four leg panels, side seam strips, a waistband component, waistband elastic, and a drawstring.

The pullover will be imported under style number 2485 and will be made from 80 percent cotton, 20 percent polyester knit pile fabric. The pullover has a rounded neckline, long sleeves, and a hemmed bottom with side slits. At the front of the neckline, there is a V shaped applique in satin fabric. The pullover also has a small decorative plastic patch. The pullover has the following parts: one front panel, one back panel, two sleeve panels, a neckband, a V shaped applique, and satin trim for the side slits.

The manufacturing operations are as follows:

PANTS-STYLES 4264 AND 4196

CHINA
Cut the fabric to component parts
Create waistband by attaching elastic; inserting drawstring Sew applique strips

SAIPAN
Sew front and back rises
Attach waistband
Sew side seams
Sew inseams
Attach plastic label
Hem leg openings
Pressing, packing

PANTS-STYLES 4618*

CHINA
Cut the fabric to component parts
Create waistband by attaching elastic
Attach side seam inserts and piping to front and back panels, closing side seams

SAIPAN
Sew front and back rises
Attach waistband
Sew inseams
Attach plastic label
Hem leg openings
Pressing, packing
* Note, no production arrangement was provided for this style, therefore the above information is based on the submitted partially assembled garment.

PULLOVER

CHINA
Cut body fabric
Attach V-shaped applique
Hem sleeve panels
Create neckband
Create side vents, tack the side seams

SAIPAN
Attach neckband to front and back panels
Attach sleeves to front and back panels
Join side seams; close sleeves
Join shoulder seams
Pressing, packing

ISSUE:

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

CLASSIFICATION:

The applicable subheading for all three styles of pants, if made either of 100 percent cotton or 90 percent cotton and 10 percent polyester, or 80 percent cotton and 20 percent polyester will be 6104.62.2011, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for women’strousersknitted or crocheted: Of cotton. The general rate of duty is 14.9% ad valorem.

The applicable subheading for all three styles of pants, if made of 100 percent polyester will be 6104.63.2011, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for women’strousersknitted or crocheted: Of synthetic fibers. The general rate of duty is 28.2% ad valorem.

The applicable subheading for the pullover will be 6110.20.2075, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for pulloversknitted or crocheted: Of cotton: women’s. The general rate of duty is 16.5% ad valorem.

The cotton pants fall within textile category designation 348; the synthetic pants fall within textile category designation 638; 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.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.

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. If the good is not knit to shape and does not consist of two or more component parts, a change to heading 6101 through 6117 from any heading outside that group, except from heading 5007, 5111 through 5113, 5208 through 5212, 5309 through 5311, 5407 through 5408, 5512 through 5516, 5806, 5809 through 5811, 5903, 5906 through 5907, and 6001 through 6002, and subheading 6307.90, and provided that the change is the result of a fabric-making process. If the good is knit to shape, a change to heading 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.

The pants and pullover are classified in the above range; are not knit to shape; and consist of two or more components. Since the garments are assembled in more than one country, territory or insular possession, the terms of the tariff shift are not met and (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".

For styles 4264 and 4196, the most important assembly operations occur at the time that the front and back rises are sewn, the waistband is attached, the side seams are sewn and the inseams are sewn. For style 4618, the most important assembly operations occur at the time that the front and back rises are sewn, the waistband is attached, and the inseams are sewn. For style the pullover, the most important assembly operations occur at the time that the neckband is attached, the sleeves are attached, the side seams are joined and the shoulder seams are joined. Accordingly, the country of origin for all of the garments is Saipan, the country in which these operations occur.

General Note 3 (a) (iv), HTSUSA, permits products of insular possessions of the United States (of which Saipan, 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 percent 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 is a textile article that is subject to textile agreements, the “foreign materials” which make up the garment must not represent more than 50 percent 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 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 materials produced in the Commonwealth of the Northern Mariana Islands for the purpose of applying the 50 percent foreign value limitation under General Note 3(a)(iv), we must consider whether the component panels undergo a double substantial transformation during 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, 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 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 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. 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 cut component panels are considered foreign materials when they are shipped to the Commonwealth of the Northern Mariana Islands, and regardless of the determination that these panels do not undergo a double substantial transformation when they are processed in the insular possession, the garment 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 garments is the Commonwealth of the Northern Mariana Islands. Component panels cut in China are considered foreign materials for the purpose of calculating the 50 percent foreign value limitation under General Note 3(a)(iv), HTSUSA. However, the garments may still be entitled to duty free status under General Note 3(a)(iv), HTSUSA, provided that it is imported directly from the Commonwealth of the Northern Mariana Islands to the United States, and that the 50 percent 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 garments are 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 Angela De Gaetano at 646-733-3052.

Sincerely,

Robert B. Swierupski
Director,

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