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NY M80232





March 2, 2006

CLA2-RR:NC:TA:361 M80232

CATEGORY: CLASSIFICATION

Mr. Ego Leung, Chief Financial Officer
Come Long Fashion Knits Limited
2/F Yick Shiu Industrial Building
No. 1 San On Street
Tuen Mun, N.T. Hong Kong

RE: Classification and country of origin determination for a women’s knit cardigan, pants and a garment similar to a tank top; 19 CFR 102.21(c)(4); Commonwealth of the Northern Mariana Islands; General Note 3(a)(iv), HTSUS.

Dear Mr. Leung:

This is in reply to your letter dated January 27, 2006, requesting a classification and country of origin determination for a 3 piece women’s knit set that will be imported into the United States. The submitted sample and partially assembled components will be returned, as requested.

FACTS:

The submitted sample, style A71819, is composed of three women’s knit garments made from 100 percent cotton knit fabric. The garments are a cardigan, pants, and a garment similar to a tank top. The cardigan has a full front opening with a zipper closure, a hood, short sleeves, front kangaroo pockets, and a hemmed bottom with side slits. The pull-on pants have an elasticized waistband and hemmed leg openings with side slits The garment similar to a tank top has 2 ½ inch shoulder straps, a U-shaped neckline in front and back, capped neckline and armholes, and a plain, hemmed bottom.

Although you have referred to the garments as a set, they will be classified as three separate garments as required by note 13 to Section XI of the, Harmonized Tariff Schedule of the United States (HTSUS). That note states: Unless the context otherwise requires, textile garments of different headings are to be classified in their own headings even if put up in sets for retail sale. For the purposes of this note, the expression "textile garments" means garments of headings 6101 to 6114 and headings 6201 to 6211.

You also submitted the partially assembled component panels as they will be exported from China. The manufacturing processes for these garments are as follows:

Cardigan, Version A

CHINA
Cut fabric into component parts
Attach labels to back panel
Sew shoulder seams to join front and back panel Sew hood to front and back panels
Sew pocket on front panels
Attach zipper to the front panels
Sew the twill tape to the neck seam and zipper Attach the embroidery and beading to the front panel

COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS Attach the sleeves to the body
Hem the sleeves
Sew the underarm seam
Sew the side seams
Hem the bottom
Inspect, Iron and pack garments for export

Cardigan, Version B

CHINA
Cut fabric into component parts
Attach labels to back panel
Sew shoulder seams to join front and back panel Sew hood to front and back panels
Sew pocket on front panels
Attach the embroidery and beading to the front panel

COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS Attach the sleeves to the body
Hem the sleeves
Sew the underarm seam
Attach zipper to the front panels
Sew the twill tape to the neck seam and zipper Sew the side seams
Hem the bottom
Inspect, Iron and pack garments for export

Pants

CHINA
Cut fabric into component parts
Attach labels to back panel
Join the out seam and sew the side slit
Hem the leg openings

COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS Attach the waistband
Sew the inseam
Sew the front and back rises
Inspect, Iron and pack garments for export

Garment similar to a tank top

CHINA
Cut fabric into component parts
Attach labels to back panel
Sew shoulder seams to join front and back panel Attach the neck and armhole capping
Sew beading and sequins onto front neck binding

COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS Sew the side seams
Hem the bottom
Inspect, Iron and pack garments for export

ISSUE:

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

CLASSIFICATION:

The applicable subheading for the cardigan of style A71819 will be 6110.20.2079, Harmonized Tariff Schedule of the United States (HTSUS), which provides for Sweatersand similar articles, knitted or crocheted: Of cotton: Women’s or girls’: Other. The general rate of duty is 16.5% ad valorem.

The applicable subheading for the pants of style A71819 will be 6104.62.2011, Harmonized Tariff Schedule of the United States (HTSUS), which provides for Women’strousersknitted or crocheted: Of cotton. The general rate of duty is 14.9% ad valorem.

The applicable subheading for the garment similar to a tank top of style A71819 will be 6109.10.0070, Harmonized Tariff Schedule of the United States (HTSUS), which provides for Tank topsand similar garments, knitted or crocheted: Of cotton. The general rate of duty is 16.5% ad valorem.

Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on World Wide Web at http://www.usitc.gov/tata/hts/.

The cardigan, and the garment similar to a tank top of style A71819 fall within textile category designation 339; the pants of style A71819 fall within textile category designation 348. 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 submitted garments are not knit to shape. All of the garments consist of two or more components. As all of the garments are assembled in more than one country, territory or insular possession, the terms of the tariff shift are not met, and, 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".

For the cardigan, in Version A, the most important assembly operations are sewing the shoulder seams to join front and back panels, sewing the hood to the front and back panels, and attaching the zipper to the front panels. Accordingly, the country of origin for the cardigan under version A of the manufacturing process is China.

For the cardigan, in Version B, the most important assembly operations are attach the sleeves to the body, attaching the zipper to the front panels, and sewing the side seams. Accordingly, the country of origin for the cardigan under version B of the manufacturing process is the Commonwealth of the Northern Mariana Islands.

For the pants, the most important assembly operations are attaching the waistband, sewing the inseam, and sewing the front and back rises. Accordingly, the country of origin for the pants is the Commonwealth of the Northern Mariana Islands.

For the garment similar to a tank top, the most important assembly operations is sewing the side seams. Accordingly, the country of origin for the garment is the Commonwealth of the Northern Mariana Islands.

General Note 3 (a) (iv), HTSUS, 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 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), HTSUS, 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. Further, these panels are partially assembled in China. 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 knitted and cut component panels of the garment 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 cardigan produced under Version A is China.

The country of origin of the cardigan produced under Version B, of the pants, and of the garment similar to a tank top is the Commonwealth of the Northern Mariana Islands. The component panels knitted and partially assembled in China, are considered foreign materials for the purpose of calculating the 50 percent foreign value limitation under General Note 3(a)(iv), HTSUS. However, the garment may still be entitled to duty free status under General Note 3(a)(iv), HTSUS, 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 garment 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 DeGaetano at 646-733-3052.

Sincerely,

Robert B. Swierupski
Director,

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