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NY M87217




November 7, 2006

CLA2-RR:NC:TA:361 M87217

CATEGORY: CLASSIFICATION

Ms. Rhoda A. Salus
Sandler Travis & Rosenberg, P.A.
Attorneys at Law
The Waterford 5200 Blue Lagoon Drive
Miami, Florida 33126-2022

RE: Classification and country of origin determination for two women’s knit upper body garments; 19 CFR 102.21(c)(4); Commonwealth of the Northern Mariana Islands; General Note 3(a)(iv), HTSUS.

Dear Ms. Salus:

This is in reply to your letter dated October 13, 2006, requesting a classification and country of origin determination on behalf of United International Corporation, Ltd. The submitted samples and partially assembled components will be returned, as requested.

FACTS:

Style K0710X21J is a woman’s top made from 100 percent cotton knit fabric. The top has ¼ inch shoulder straps, a U shaped front neckline, a knit openwork insert at the bust, and a plain, hemmed bottom. The upper back of the garment extends straight across from side seam to side seam, exposing the upper back.

Style K0710L21WT is a woman’s top made from 97 percent rayon, 3 percent spandex knit fabric. The top has 1½-inch shoulder straps, a V shaped front neckline, a shelf-bra lining with a ¾ inch elasticized bottom, and a plain, hemmed bottom. The upper back of the garment extends straight across from side seam to side seam, exposing the upper back.

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

Style K0710X21J

Country A - China
Cut fabric into component parts
Sew the knit openwork component to the front panel Sew the binding to the front neckline; the binding extends to form the shoulder straps Pack parts and ship to Country B – Saipan for further assembly

Country B - SAIPAN, COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS Join the front and back panels at the side seams Fold and hem the bottom
Sew binding to upper back panel and armholes Join the straps to the upper back panel
Attach the labels
Trim, wash, Inspect, and pack garments for export directly to the US

Style K0710L21WT

Country A - China
Cut fabric into component parts
Sew shirring at the bottom of the front shelf-bra Join the V-Neck panel to the front neckline Sew the upper back of the shelf-bra lining to the back straps Pack parts and ship to Country B – Saipan for further assembly

Country B - SAIPAN, COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS Join the front and back panels of the shelf-bra at the right side seam Sew the elastic to the bottom end of the shelf-bra Join the front and back panels of the shelf-bra at the left side seam Join the front and back panels at the side seams; attach the care label to the inside left side seam Fold and hem the bottom end
Attach the straps to the front and back panels Sew the straps at the back
Attach the labels
Trim, wash, Inspect, and pack garments for export directly to the US

ISSUE:

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

CLASSIFICATION:

The applicable subheading for style K0710X21J will be 6114.20.0010, Harmonized Tariff Schedule of the United States (HTSUS), which provides for Other garments, knitted or crocheted: Of Cotton: Tops: Women’s or girls’. The general rate of duty is 10.8% 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/.

Style K0710X21J falls within textile category 339. With the exception of certain products of China, quota/visa requirements are no longer applicable for merchandise which is the product of World Trade Organization (WTO) member countries. The textile category number above applies to merchandise produced in non-WTO member-countries. Quota and visa requirements are the result of international agreements that are subject to frequent renegotiations and changes. To obtain the most current information on quota and visa requirements applicable to this merchandise, we suggest you check, close to the time of shipment, the “Textile Status Report for Absolute Quotas” which is available on our web site at www.cbp.gov. For current information regarding possible textile safeguard actions on goods from China and related issues, we refer you to the web site of the Office of Textiles and Apparel of the Department of Commerce at otexa.ita.doc.gov.

We are unable to provide a classification ruling for style K0710L21WT. Section 177.7 of the Customs Regulations (19 C.F.R. §177.7) provides that rulings will not be issued in certain circumstances. Specifically, § 177.7(b) reads, in pertinent part::

No ruling letter will be issued with respect to any issue which is pending before the United States Court of International Trade, the United States Court of Appeals for the Federal Circuit or any court of appeal therefrom.

Beginning June, 2005, the issue of the classification of an upper body garment with a shelf bra has been filed with the United States Court of International trade by several different importers. Thus, the issuance of a classification ruling would be inconsistent with 19 C.F.R. §177.7(b).

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.

Style K0710X21J is classified within the above range, is not knit to shape, and consists of two or more components. As the garment is 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.

For style K0710L21WT, although we are unable to provide a classification for the garment at this time, it would be classified in either chapter 61 or 62. In both chapters, the rule, generally, requires that if the good consists of two or more components, the origin is based upon the country in which the good is wholly assembled. Chapter 61 contains an additional rule for goods that are knit to shape. Style K0710L21WT is not knit to shape, and consists of two or more components. As the garment is 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 style K0710X21J, the most important assembly operations are joining the front and back panels at the side seams, sewing the binding to the upper back panel and armholes, and joining the straps to the upper back panel. For style K0710L21WT, the most important assembly operations are joining the front and back panel of the shelf-bra at the side seams, sewing the elastic to the bottom of the shelf-bra, joining the front and back panels at the side seams, and joining the front and back panels of the shell and lining with the straps. Accordingly, the country of origin is Country B, which may be the Commonwealth of the Northern Mariana Islands, the country in which these operations occurs.

The following information is provided if Country B 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. 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 woman’s garment is Country B, which may be 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), 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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