Country of Origin

HQ 083295 April 13 1989 CLA2 CO:R:C:G DFC CATEGORY: Classification TARIFF NO.: 6505.90.7060; 6204.42.30; 6204.43.40 Mr. Edward Davis President MilleFeuilles 2220 Rue Parthenais Montreal, Quebec H2K 3T4 RE: Country of Origin Dear Mr. Davis: In a letter dated December 21, 1988, you asked for a country of origin ruling on certain hat bodies manufactured in Taiwan which will be further processed in Canada. You have also requested, in a telephone conversation with a member of my staff, a ruling as to the dutiable status of these hats which after processing in Canada will be combined with dresses and sold as sets to customers in the United States. FACTS: A sample of the unfinished hat produced in Taiwan and a sample of the hat after the processing operations were completed in Canada were submitted for examination. Both hats are manufactured of circular sewed braid which is manufactured of yarns and visca under 5mm in width. It is our understanding that the dresses which will be exported to the United States with the hats will be made wholly of cotton or manmade fibers. ISSUE: Can the hats subjected to further processing in Canada be eligible for treatment as "goods originating in the territory of Canada" for the purposes of the U.S Canada FTA?   2  Can the hats and dresses which will be exported and marketed in combinations be considered as sets for tariff purposes? LAW AND ANALYSIS: Under the U.S.Canada FTA the hats will be considered to be of Canadian origin if the processing performed in Canada results in a change in classification to headings 6503 through 6507, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), from any other heading outside that group. The Explanatory Note to heading 6503 relating to felt hats and other felt headgear reads in pertinent part as follows: The hats and headgear of this heading are normally blocked to shape, i.e., the crowns are formed to shape (usually oval) and size by manipulation on a wooden block. At this or any subsequent stage in manu facture the articles are regarded as hats or headgear and fall into this heading. During the process of block ing the crowns, the brims are also usually formed to the extent that they can be identified as distinct parts of the hats, e.g., they project at approximately right angles to the crowns. An examination of the samples indicates that the processed hat was blocked at least twice and trimmed with a bow and chin strap. The unfinished hat appears to have been blocked and sized in Taiwan. It is our view that a substantial transformation has not been effected here. It appears from an examination of the unfinished hat coming from Taiwan that its crown was formed to shape and size by manipulation on a wooden block. Thus, following the principle set out in the Explanatory Note to heading 6503, supra, the article must be considered a hat or headgear. Inasmuch as the hats coming into Canada were considered hats or headgear, there was no change to headings 65036507 from any heading outside that group by virtue of the processing in Canada. In applying the HTSUSA, the Customs Service must follow the terms of the statute. Classification of goods under the HTSUSA is governed by the General Rules of Interpretation (GRI's.) GRI 1 provides that "classification shall be determined according to the terms of the headings and any relative section or chapter notes, and, provided such headings or notes do not otherwise require, according to /the remaining GRI's taken in order/." In other words classification is governed first by the terms of the headings of the tariff and any relative section o   3  or chapter notes GRI 3, HTSUSA, provides special rules to be applied in the classification of, inter alia, merchandise which meets the criteria for a set for tariff purposes. It provides as follows: 3. When, by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: (a) the heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to * * * part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one gives a more complete or precise description of the goods. (b) Mixtures, composite goods consisting of different materials or madeup of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable. The Explanatory Note to GRI 3(b), HTSUSA, provides in pertinent part as follows: (X) For the purposes of the Rule, the term "goods put up in sets for retail sale" shall be taken to mean goods which: (a) consist of at least two different articles which are, prima facie, classifiable in different headings. Therefore, for example, six fondue  forks cannot be regarded as a set within the meaning of this Rule; (b) consist of products or articles put up together to meet a particular need or carry out a specific activity; and  4  (c) are put up in a manner suitable for sale directly to users without repacking (e.g., in boxes or cases or on boards). It is our understanding that these combinations will be shipped to retailers in the United States in quantities as requested. There is no indication that each individual combination consisting of a hat and dress will be packaged for retail sale at the time of exportation. Consequently, the combinations cannot be considered sets for tariff purposes. HOLDING: The hats are classifiable under subheading 6505.90.7060, HTSUSA, as hats and other headgear, knitted or crocheted, or made up from lace, felt or other textile fabric, other, wholly or in part of braid, other with duty at the rate of 7.2 percent ad valorem. The applicable textile category is 659. The cotton dresses are separately classifiable under subheading 6204.42.30, HTSUSA, as women's or girls' dresses, of cotton, other with duty at the rate of 12.6 percent ad valorem. The applicable textile category is 336. The dresses of manmade fibers are separately classifiable under subheading 6204.43.40, HTSUSA, as women's or girls' dresses of synthetic fibers, other, other with duty at the rate of 17 percent ad valorem. The applicable textile category is 636. Due to the changeable nature of the statistical annotation (the ninth and tenth digits of the classification) and the restraint (quota/visa) categories, you should contact your local Customs office prior to importation of this merchandise to determine the current status of any import restraints or requirements. Sincerely, John Durant, Director, Commercial Rulings Division