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NY L81660




January 28, 2005

CLA2-61:RR:NC:WA 361 L81660

CATEGORY: CLASSIFICATION

Ms. Yoo Won Jung
Sae-A Trading America Corporation
100 West 33rd Street #855
New York, NY 10001

RE: Classification and country of origin determination for a woman’s knit top; 19 CFR 102.21(c)(2); Commonwealth of the Northern Mariana Islands; General Note 3(a)(iv), HTSUSA.

Dear Ms. Jung:

This is in reply to your letter that we received on January 4, 2005, requesting a classification and country of origin determination for a woman’s knit top. The submitted sample and partially assembled components will be returned, as requested.

FACTS:

The submitted top CSMT5555 will be constructed from either 100 percent tencel knit fabric. The sleeveless top has ¼ inch shoulder straps, a v-shaped neckline in front, a shelf bra liner with an elastic bottom, and a hemmed bottom with three-inch side slits. The upper back of the garment extends straight across from side seam to side seam from the lowest part of the armhole opening. The garment is constructed from the following parts – one front panel, one back panel, shoulder straps, one front shelf bra panel, one back shelf bra panel, and elastic. You have indicated that the garment will be manufactured in China and the Commonwealth of the Northern Mariana Islands.

The manufacturing operations are as follows:

CHINA
Cut the fabric into component parts
Embroider the front panel

COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS Attach front and back shelf bra components to front and back panels at side seams Attach elastic to front and back panels of shelf bra Sew side seams
Form elastic portion of shoulder straps and attach slide adjusters Attach shelf bra to top of garment, attaching back shoulder straps at the same time Form front portion of straps (self fabric) Attach straps to front of the garment
Attach self fabric portion of shoulder straps to elastic portion Form side vents
Hem bottom
Attach main label to center back panel
Trimming, Inspection, and packing

ISSUE:

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

CLASSIFICATION:

The applicable subheading of style CSMT5555 will be 6114.30.1020, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for other garments, knitted or crocheted: Of man-made fibers: Tops: women’s. The general rate of duty is 28.2% ad valorem.

Style CSMT5555 falls within textile category designation 639. 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.

Section 102.21(b)(6) defines "wholly assembled" as follows

The term "wholly assembled" when used with reference to a good means that all components, of which there must be at least two, preexisted in essentially the same condition as found in the finished good and were combined to form the finished good in a single country, territory, or insular possession. Minor attachments and minor embellishments (for example, appliques, beads, spangles, embroidery, buttons) not appreciably affecting the identity of the good, and minor subassemblies (for example, collars, cuffs, plackets, pockets), will not affect the status of a good as "wholly assembled" in a single country, territory, or insular possession.

The top is classified in the above range, is not knit to shape, and consists of two or more components. Except for the embroidery in China, the garment is wholly assembled in the Commonwealth of the Northern Mariana Islands, thus the tariff shift is met. Accordingly, the country of origin is the Commonwealth of the Northern Mariana Islands, the country, territory, or insular possession in which the garment is wholly assembled.

STATUS AS A PRODUCT OF THE COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS

General Note 3 (a) (iv), HTSUSA, permits products of insular possessions of the United States (of which the 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 top 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 of the top 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 top 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 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 top is the Commonwealth of the Northern Mariana Islands. The 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 top 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 top 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 Angela De Gaetano at 646-733-3052.

Sincerely,

Robert B. Swierupski
Director,

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