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NY N003319




December 1, 2006

CLA2-RR:NC:TA:359 N003319

CATEGORY: CLASSIFICATION

Ms. Kathy Chan
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 women’s knitwear; 19 CFR 102.21(c)(4); Commonwealth of the Northern Mariana Islands (CNMI); General Note 3(a)(iv), HTSUS.

Dear Ms. Chan:

This is in reply to your letter dated November 11, 2006, requesting a classification and country of origin determination for a women’s garment that will be imported into the United States.

FACTS:

The subject merchandise, Style BR-APP-059/06, is a women’s short sleeve pullover constructed of cut and sewn 100% cotton knitted fabric, the outer surface of which measures more than 9 stitches per 2 centimeters measured in the direction the stitches were formed. The garment features a rounded front neckline, a front pocket at the bust area with an embroidery design, side seams and a hemmed bottom. A number appliqué and a printed number are found on the upper back panel.

The manufacturing operations for the garment follow:

CHINA:

Cut fabric into component parts.
Sew the pocket on front panel.
Printing, embroidery, and appliqué on front and back panels. Print the labels.
Sew the shoulder seam to join front and back panels. Sew the neckband to front and back neck.
Attach the binding to cover shoulder seam and back neck seam. Sew tape to left shoulder seam.
Sew care label to side seam of the back panel. Hem sleeve opening

CNMI:

Attach the sleeves to the garment body.
Sew underarm seam (close the sleeves).
Sew the side seams.
Hem the bottom.
Iron the finished garment
Inspect and pack the garment.

ISSUE:

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

CLASSIFICATION:

The applicable subheading for the garment will be 6110.20.2079, Harmonized Tariff Schedule of the United States (HTSUS), which provides for Sweaters, pullovers, sweatshirts, waistcoats (vests) and similar articles, knitted or crocheted: Of cotton: Other . . . Other: Other: Women’s or girls’: Other. The general rate of duty will be 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 garment 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.

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 garment is assembled in more than one country, territory or insular possession, it does not satisfy the conditions of the tariff shift 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 garment is neither knit to shape nor wholly assembled in a single country, territory or insular possession in any of the scenarios described above, 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 the garment, the most important assembly processes are the attaching of the sleeves to the body and sewing the side seams.

Accordingly, the country of origin of the garment is The Commonwealth of Northern Mariana Islands, the country in which these operations occurs.

General Note 3(a)(iv), HTSUS, 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 that

-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 Unites 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 good, which is produced in the CNMI, is a textile article that is subject to textile agreements, the “foreign materials” which make up the garment must not represent more than 50% of the articles’ 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 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 cardigans did undergo a double substantial transformation. In contrast, the present question involves component panels that are cut in China, not in the CNMI. Further, those panels are partially assembled 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 subject garment 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 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 good and it is 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 above merchandise can only be made at the time of its importation into the United States.

HOLDING:

The country of origin for the garment is the Commonwealth of the Northern Mariana Islands.

When considering the status of the subject merchandise if the country or origin is the CNMI the following must be considered: The component panels that are 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), HTSUS. The knit garment may still be entitled to duty free status under the same General Note to the tariff schedule provided that they are 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. That value determination cannot be made at this time.

Since the CNMI is not a foreign country and therefore, the United States has no quota or visa agreement with it, the knit merchandise is neither subject to quota restraints nor to the requirement of a visa. However, in the case of other countries, the merchandise may be subject to quota restraints and 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 Camille Ferraro at 646-733-3049.

Sincerely,

Robert B. Swierupski
Director,

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